A challenging consumer market is negatively affecting sales for the powersports vehicle manufacturer, Polaris (NYSE: PII), impacting the company’s stock performance. Polaris shares decreased by 10% by 1 p.m. ET following a disappointing earnings report.
### A Challenging Retail Environment
Polaris, known for producing off-road vehicles, boats, and motorcycles, reported third-quarter earnings of $0.73 per share on $1.72 billion in sales, missing Wall Street’s expectations of $0.88 per share and $1.77 billion in revenue. Sales decreased by 23% compared to the previous year, and the company’s gross profit margin dropped by 204 basis points to 20.6%.
The quarter was affected by reduced product volumes, an unfavorable product mix, and increased promotional activity. In response, Polaris plans to reduce dealer inventory by 15% to 20% by the end of the year.
CEO Mike Speetzen expressed expectations of a challenging retail environment lasting through the remainder of 2024 and into the following year. However, he emphasized the company’s focus on innovation and cost-reducing measures in manufacturing and operations, which he believes will eventually strengthen the company and allow it to achieve long-term growth, margin expansion, and shareholder value.
### Is Polaris Stock a Buy?
The adverse conditions are anticipated to persist, prompting Polaris to adjust its full-year revenue projection to a decline of 20%, from the previous range of 17% to 20%. Earnings per share are expected to decrease by 65% compared to 2023.
Polaris maintains a leading position in many of its segments, but investors should consider that these are cyclical businesses. With shares down more than 20% year to date, there may be a buying opportunity; however, it will likely require patience from investors.
