Battling pent-up dealer inventory and a sluggish market, Polaris has been reducing shipments and increasing promotions in attempts to clean up its supply line.
Polaris CEO Tom Tiller acknowledges 2006 was a disappointing year for the company, and says things will get worse before they get better.
Polaris posted a 5 percent drop in first-quarter sales (ending March 31) compared to the same period in 2006. The OEM expects sales to be down 3 to 5 percent for the second quarter, but plans to end the year with a 1 to 3 percent gain.
"The business is healthier than a year ago," says Tiller. "We continue to see progress in our dealers' efforts to lower their inventories for both ATVs and snowmobiles due to the combination of a reduction of shipments to our North American dealers and improved retail sales.
"After the first quarter," says Tiller, "retail sales are at or above plan across the business and nearly 10 percent higher than a year ago. Total dealer inventory of all products is down 20 percent in terms of units, and that's right on plan."
Dealer responses to the company's current situation depend on a number of factors.
"There is a wide variation, depending on what types of products they sell and where they are and the economic health of the community in which they do business," says Tiller. "In general, the market is sluggish — the ATV market is sluggish, the snowmobile market is sluggish and the motorcycle market is sluggish. Dealers are concerned about that, paying close attention to their costs, so I think they are being cautious. Given the macro environment, I think that's being reasonable."
Tiller says the ATV market is behaving more sluggishly than the side-by-side segment.
Polaris has been cutting shipments of "core" ATV models to help dealers reduce inventories. It's a plan Tiller says will continue.
"We have significantly reduced dealer inventory and are on plan to reach our inventory target by midyear," he says. "We suspect by this summer to have ATV inventory to be where we operate on a go-forward basis."
Polaris expects to end the year with ATV sales either flat or up as much as 3 percent. ATV shipments are expected to be down "mid-single-digit range," while side-by-side shipments are expected to experience "strong double-digit" growth, notes Tiller.
By season's end, sled sales were lower than the previous season for Polaris — as well as the overall industry, thanks mostly due to the weather.
Polaris in 2006 reduced its snowmobile production and shipments by 39 percent in an effort to help dealers. Still, Tiller says "the snowmobile business remains challenging."
"It was generally another disappointing year for snowfall. However, our dealer inventory is much, much lower today than it was a year ago, and promotions will remain elevated as dealers continue to shape inventory," he notes.
Even though the 2006-07 snowmobile season was muted by weak snowfall totals, Tiller is surprised over the number of dealers that have survived: "We could lose potentially less than 10 snowmobile dealers, which is phenomenal," he says.
Regarding the Victory Motorcycles business, Tiller tells Dealernews that he believes sales will increase to the midteen percentage range by year's end, bucking market trends in the heavyweight cruiser category.