A tough consumer market leads to plunging sales.
A weak consumer environment is eating into sales at powersports vehicle manufacturer Polaris (PII -8.62%), and the company’s stock is feeling the impact.
Shares of Polaris traded down 10% as of 1 p.m. ET following a weak earnings report.
A challenging retail environment
Polaris is a maker of off-road vehicles, boats, and motorcycles. The company posted third-quarter earnings of $0.73 per share on sales of $1.72 billion, falling short of Wall Street’s $0.88 per share on revenue of $1.77 billion estimate. Sales were down 23% year over year, and the company’s gross profit margin fell 204 basis points to 20.6%.
The quarter was impacted by lower product volumes, negative product mix, and higher promotional activity. Polaris said it is responding by lowering dealer inventory by 15% to 20% by the end of the year.
CEO Mike Speetzen said in a statement:
We expect a challenging retail environment throughout the rest of 2024 and into next year. However, with our team’s unwavering commitment to industry-leading innovation, alongside the headway we’ve made in driving cost out of our manufacturing and operations, I believe the actions we are taking today will enable us to emerge stronger and deliver on our long-term targets of growth, meaningful margin expansion, and value to shareholders.
Is Polaris stock a buy?
The headwinds are not expected to subside anytime soon. Polaris cut its full-year revenue view to down 20%, from down 17% to 20%, and said it expects earnings per share to be down 65% compared to 2023.
Polaris is a market leader in many of its segments, but investors need to be aware these are cyclical businesses. With shares now down more than 20% year to date, this could be a buying opportunity, but patience will be required.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.