A collection of stories on today’s announcement from Polaris Industries regarding the end of their Victory brand of motorcycles. In short, Polaris Industries said with that action that they can’t keep throwing good money after bad and Victory has been bleeding money for five years now. Mind you, only 11% of Polaris Industry’s 2015 $4.7B revenue came from motorcycles ($.517B) and, for context, their snowmobile market accounted for 12%. Compare that to Harley at $6.8B in 2015 revenue where $4.1B came from motorcycle sales and you get a true sense of just how much of a David vs Goliath story Polaris vs. Harley-Davidson is: graphic at right represents Polaris Industry’s business segment results for 2015.
As you’ll see in the various stories that have come out, the Victory brand just wasn’t returning on the investments made by Polaris. However, their acquisition and rebirthing of the Indian motorcycle brand and surprising strong sales of the Slingshot three-wheel roadster has been something of a success story, so that’s where their going to invest their attention and capital.
POLARIS INDUSTRIES TO WIND DOWN VICTORY MOTORCYCLES OPERATIONS STRENGTHENING ITS POSITION IN THE POWERSPORTS INDUSTRY
MINNEAPOLIS–(BUSINESS WIRE)– Polaris Industries Inc. (NYSE:PII) today announced it will immediately begin winding down its Victory Motorcycles brand and related operations. Polaris will assist dealers in liquidating existing inventories while continuing to supply parts for a period of 10 years, along with providing service and warranty coverage to Victory dealers and owners. Today’s announcement does not affect any other Polaris business units.
“This was an incredibly difficult decision for me, my team and the Polaris Board of Directors,” said Polaris Industries Chairman and CEO Scott Wine. “Over the past 18 years, we have invested not only resources, but our hearts and souls, into forging the Victory Motorcycles brand, and we are exceptionally proud of what our team has accomplished. Since inception, our teams have designed and produced nearly 60 Victory models that have been honored with 25 of the industry’s top awards. The experience, knowledge, infrastructure and capability we’ve built in those 18 years gave us the confidence to acquire and develop the Indian Motorcycle brand, so I would like to express my gratitude to everyone associated with Victory Motorcycles and celebrate your many contributions.”
Several factors influenced today’s announcement. Victory has struggled to establish the market share needed to succeed and be profitable. The competitive pressures of a challenging motorcycle market have increased the headwinds for the brand. Given the significant additional investments required for Victory to launch new global platforms that meet changing consumer preferences, and considering the strong performance and growth potential of Indian Motorcycle, the decision to more narrowly focus Polaris’ energy and investments became quite clear.
“This decision will improve the profitability of Polaris and our global motorcycle business, and will materially improve our competitive stance in the industry,” said Scott Wine. “Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”
Polaris will reduce the appropriate operating cost based on this decision, while continuing to support the future growth of the ongoing motorcycle business. Polaris remains committed to maintaining its presence in the Spirit Lake, Iowa community with Indian Motorcycle production and in the Huntsville, Alabama community with its Slingshot production.
Any one-time costs associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling, and other physical assets, and the cancellation of various supplier arrangements will be recorded in the 2017 income statement in respective sales, gross profit and operation expense. These costs will be excluded from Polaris’ provided 2017 sales and earnings guidance on a non-GAAP basis.
Polaris will release its fourth quarter and full-year 2016 financial results and provide 2017 guidance on Tuesday, January 24, 2017. A webcast and conference call will be held at 9:00 a.m. Central Time on January 24, 2017 to discuss the results. A slide presentation and link to the webcast will be posted on the Polaris Investor Relations website at ir.polaris.com. To listen to the conference call by phone, dial 877-706-7543 in the U.S. and Canada, or 478-219-0273 Internationally. The Conference ID is #45015597.
Click here for additional information related to this release.
Polaris Industries Inc. (NYSE: PII) is a global powersports leader with annual 2015 sales of $4.7 billion. Polaris fuels the passion of riders, workers and outdoor enthusiasts with our RANGER®, RZR® and POLARIS GENERAL™ side-by-side off-road vehicles; our SPORTSMAN® and POLARIS ACE® all-terrain off-road vehicles; INDIAN MOTORCYCLE® midsize and heavyweight motorcycles; SLINGSHOT® moto-roadsters; and Polaris RMK®, INDY®, SWITCHBACK® and RUSH® snowmobiles. Polaris enhances the riding experience with parts, garments and accessories sold under multiple recognizable brands, and has a growing presence globally in adjacent markets with products including military and commercial off-road vehicles, quadricycles, and electric vehicles. Please visit www.polaris.com.
Except for historical information contained herein, the matters set forth in this news release, including management’s expectations regarding expected disposition charges and future investments, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include such factors as product offerings, promotional activities and pricing strategies by competitors; costs of canceling supplier arrangements; warranty expenses; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; effects of weather; uninsured product liability claims; and overall economic conditions, including inflation and consumer confidence and spending. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the company with the Securities and Exchange Commission.
Aut0Blog: Victory Motorcycles closes down as Polaris focuses on Indian and Slingshot, by Domenick Yoney
Eighteen years of competing in the American cruiser market comes to an end.
After 18 years of building cruisers in the USA, Victory Motorcycles is pulling into the garage and putting down its kickstand for the final time. Parent company Polaris has announced it is closing down the brand. The decision is the result of both success and failure. Despite some recent gains – sales were up 18 percent in the 2nd quarter of 2016, for instance – Victory has struggled in its head-to-head battle with the behemothic beast that is Harley Davidson, peaking in sales back in 2012 and losing money in three of the past five years.
By contrast, acquisition and development of the classic Indian Motorcycle brand by Polaris has proven to be a brilliant decision, with booming sales and expanding distribution. Also, its three-wheeled Slingshot roadster, which the company houses in its motorcycle division, has been somewhat of a sales surprise. So, business being what is, the difficult decision was made to concentrate efforts in the areas that have been bearing more and better fruit. Polaris CEO puts the move in corporate speak thusly:
“Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”
For fans of the brand and current owners, some sort of solace may be found in the fact that the company says that it will, for the next 10 years, continue to supply parts for the Victory lineup and honor warranties. Plus, we’d bet there will soon be some good deals to be found on current inventory.
Polaris says it’s the end of the line for Victory Motorcycle brand
BRUCE BISPING, STAR TRIBUNEThe Victory display at the Progressive International Motorcycle Show at the Minneapolis Convention Center featured the new Victory Judge sport/cruiser bike.
Polaris Industries will exit the Victory Motorcycle brand it started from scratch 18 years ago, citing a mix of competitive pressures and lack of market share.
The Medina-based company’s announcement Monday will not affect Polaris’ fast growing Indian Motorcycle brand or other divisions, officials said. CEO Scott Wine said the “winding down” of the Victory brand will begin immediately.
“Victory has struggled to establish the market share needed to succeed and be profitable. The competitive pressures of a challenging motorcycle market have increased the headwinds for the brand,” Wine said in a statement.
Victory’s share of the motorcycle market slid to just 2 percent last year, from 3 percent in 2013. Wine said the company decided to focus on the Indian brand given its strong performance and growth potential and the significant additional investments that would be necessary for Victory to succeed.
Polaris will help dealers liquidate existing Victory inventory and will continue to supply parts and service for 10 years and honor warranty coverage accordingly.
Polaris said it “remains committed to maintaining its presence” in the Spirit Lake, Iowa, facility where Victory and Indian bikes are now made. It also remains committed to its new Huntsville, Ala., plant which makes the three-wheeler Slingshot motorcycle, among other products.
It is unclear how employment at the plants might be affected as Victory winds down.
Dealers are taking the news as best they can. “We sunk a lot of money into this and so we are sad to see it go,” said Jamie Kurkowski, assistant sales manager at Mies Outland in Watkins, the largest Polaris dealer in the state.
“We had years where we sold 150 Victorys a year,” Kurkowski said. “Lately it was about 75 and 100 Victorys a year. But what are you going to do? It sounds to me that it was a profit margin problem.”
While Polaris directed a lot of energy in recent years at buying and relaunching the Indian Motorcycle brand, the launch of the Victory bike came first and represented a bold attempt at product diversification.
When the first Victory Motorcycle roared off the assembly line in Spirit Lake in 1998, it broadened Polaris’ product line beyond snowmobiles, four-wheel all-terrain vehicles and personal watercraft. Since then, Polaris has designed and produced nearly 60 Victory models that won 25 industry awards.
The experience, knowledge and infrastructure gained in launching Victory gave company officials the confidence to acquire and develop the Indian Motorcycle brand, Wine said. “So I would like to express my gratitude to everyone associated with Victory Motorcycles and celebrate your many contributions.”
For the first nine months of 2016, Victory and Indian motorcycles sales were about $603 million. That’s up from roughly $192 million for the first nine months of 2012, when the bulk of sales reported in that category represented Victory motorcycles.
Motorcycles now represent about 15 percent of Polaris’ annual revenue of $4.7 billion.
Polaris’ stock fell 3.3 percent to close at $83.72 a share Monday. It’s trading at nearly half the value enjoyed in February 2015.
The decision to shut down the Victory line did not surprise Wall Street analysts. The end of Victory is just “as some in the industry had conjectured since the launch of Indian,” said UBS analyst Robin Farley.
“Sales of Victory had peaked in 2012 before the introduction of Indian in 2013. And Victory had declined each year after that, with the business being unprofitable … for three of the last five years,” she said. “We expect this to be neutral to positive” for Polaris’ earnings outlook.”
The product change comes at a tough time for Polaris, which has battled a downturn in the recreational sports industry and massive recalls of its four-wheel ATVs and Indian Motorcycles due to the potential risk of fire. Research, repairs, warranty, legal and other costs associated with the recalls have cost Polaris more than $120 million to date.
The company is expected to reveal costs for the Victory brand shutdown next week, when it reports fourth-quarter earnings.