A weak consumer environment is eating into sales at powersports vehicle manufacturer Polaris (PII 0.17%), 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.
