FARGO — Driven by an increased interest in the outdoors as a result of the COVID-19 pandemic, Polaris dealerships across the Red River Valley saw sales skyrocket over the summer with much of the same expected for winter.
Polaris (NYSE: PII), the Medina, Minn.-based outdoor recreation equipment manufacturer, reported a third quarter adjusted net income of $179 million, $75 million higher than the year prior. Both second- and third-quarter earnings per share beat analyst projections by similar margins.
"Retail demand remained strong during the quarter," the firm's third quarter report read. "Both new and existing customers continued taking advantage of off-road vehicles, snowmobiles, motorcycles and boats to enjoy the outdoors while maintaining social distancing etiquette."
Throughout the Red River Valley, Polaris dealers reported similar findings.
Kyle Dux of Wheels, Inc. in Fargo said demand for products is outpacing supply as a result of the pandemic. "It's not that there aren’t buyers, there isn’t product," Dux said, referencing COVID-19-imposed shutdowns of Polaris's manufacturing facilities worldwide.
"I think that’s industry-wide," Dux continued. "I have friends in the automotive and RV industries and it's just kind of nationwide that manufacturers, because of the shutdowns, can’t supply what the consumers want to buy."
Norm Hillesland of Okeson Offtrail Sales in Detroit Lakes, Minn. said the store hasn't been able to maintain inventory after being completely wiped out in the spring and summer. Since August, Okeson has exclusively pre-sold equipment with delivery times ranging from six to eight weeks.
"We are still turning down sales because we just don’t have anything to sell," Hillesland remarked. "Overall it's probably better than a normal summer would be."
Polaris CEO Scott Wine said in the company's third quarter report that while Polaris has exceeded pre-virus targets for the year, sales were hurt by "supply chain capacity constraints." Polaris posted double-digit sales increases in its off-road vehicles, motorcycles and boats, Wine added in the report.
Off-road vehicles and snowmobiles paced sales across all segments, checking in at nearly $1.3 billion in third quarter sales. Polaris's boat segment recorded a 30% year-over-year increase in sales, the largest increase of any segment.
A spokeswoman for Polaris said the firm has seen growth in new demographics, fueling its sales spike. The company plans to begin replenishing stock throughout its dealer network in the fourth quarter and first half of 2021, she said, noting that Polaris's flexible assembly lines and employee training will allow it to ramp up factory production "reasonably quickly".
Tim Strand said sales are "massively up" compared to prior summers at Frontier Marine and Powersports in Fergus Falls, Minn, sparked by increased interest in outdoor activities. "You can’t do anything inside. Everybody is looking for absolutely anything that they can do outside," Strand said. "I don’t think this is any big surprise to anybody but the outdoor recreation market has absolutely exploded this summer."
Strand said the run on outdoor equipment emptied dealerships, saying the sharp rise was impossible to anticipate. "Honestly, it’s not a negative on Polaris, it’s not possible [to anticipate that level of demand]," Strand commented. "My understanding from Polaris is that in May, June and July, their off-road vehicle sales were up over 70%. You can't plan production for that kind of spike."
With demand "remaining strong" for the fourth quarter, Wine said, he expects Polaris’s positive sales and earning trend will continue into the winter.
Snowmobile sales have been solid, Strand reported, adding that Frontier’s "mainstay" product — the side-by-side Polaris Ranger with cab and heaters — has already sold out. With Polaris only shipping pre-sold units, Strand said he doesn't anticipate seeing some pending orders until January or February.
Hillesland indicated that whether or not the Okeson's positive trend will continue into the winter "remains to be seen," with sales going to be dictated by the snowfall.