Arctic Cat sales up, but Canadian currency quells profits, says CEO

Publish Date: 
May 16, 2014
By Vince Guerrieri

THIEF RIVER FALLS, Minn. -  Arctic Cat delivered mixed results during a financial call summarizing its fourth quarter results ending March 31. The company reported a $1.5 million net loss, even though sales were up across the board for snowmobiles, ATVs, and parts, gear and accessories.

"We had a great year across all three businesses, so we feel very good about our dealer network and we feel very good about the floor space we are getting," said CEO Claude Jordan.

In a conference call Thursday to outline fourth quarter and yearly results, company executives attributed the overall financial losses to the drop in value of the Canadian dollar. In the past year, the loonie has gone from being almost equal to the U.S. dollar to being worth about 92 cents – and Canadian economists say it could drop even farther in the upcoming year.

Canada accounted for about 32 percent of Arctic Cat’s total net sales in fiscal 2013. Jordan said the company would have posted a double-digit increase had it not been for the decline in the Canadian currency.

"As we look forward to fiscal year 2015, we will see a significant negative impact to gross margin due to a weaker Canadian dollar," Jordan said.

Additionally, the company spent $23.4 million to buy up 538,198 shares of outstanding stock.

The company’s stock price dropped $4.96 to close at $33.95 on Thursday.  

'We expect to take market share.' Arctic Cat saw a 28 percent overall sales increase for the quarter, and a 9 percent sales increase for the year. The OEM sold $6.4 million in snowmobiles in the fourth quarter, and overall reported a 7 percent sales growth for the year – which Jordan attributed in part to the 2013-14 winter that offered improved snowmobiling conditions. Dealer inventory was down 9 percent, Jordan said.

The strong winter also contributed to a 20 percent increase in accessory sales and an 18 percent increase in garment sales in the fourth quarter, Jordan said. Overall, there was a 7 percent sales increase in PG&A in the fourth quarter. Jordan estimated a 10 percent growth for PG&A in 2015.

The company introduced 10 new models and two new engines at its winter meeting, and Jordan said orders have been strong so far. Assembly started in April. Jordan predicted that North American sales will outpace market growth, estimated up to 3 percent, in 2015.

The sale of side-by-sides and all-terrain vehicles increased 21 percent in the fourth quarter and 11 percent annually, due to the introduction of the Wildcat Trail (see image), which began shipping in earnest in the fourth quarter. For the year, sales were up 11 percent to $333.2 million. Jordan said that for the first time since 2008, the company will have a dealer show this summer, where it will introduce its 2015 models for ATVs and SxS. Dealer inventory was up 5 percent, and Jordan anticipated an increase in inventory for the 2015 fiscal year to ensure dealers have a good product mix.

"With the new models launched in fiscal year 14 plus the new models in our product pipeline, we are expecting to take share again in ATV and side by side segments for fiscal year 2015.,” Jordan said.

For the year, Arctic Cat had sales of $730.5 million and earnings of $39.4 million. Jordan said the company remains on track for its goal to be a $1.2 billion business by 2019.