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Polaris 4Q Results: Retail Finance Penetration Ticks Up to 33%

  • Natalie Mattila
  • January 24, 2017
  • 0
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Photo by William Hoffman / Royal Media Group

Polaris Industries Inc. announced higher retail finance penetration rates — 33% — for the full-year 2016, up from 31% in 2015, thanks to successful financial promotions and the launch of Performance Finance, Mike Speetzen, Polaris’ executive vice president of finance and chief financial officer, said during the OEM’s fourth-quarter earnings call today.

Additionally, the retail credit approval rate was at 61% for 2016, up from 58% the year prior, according to the earnings release.

Performance Finance, Polaris’ private-label consumer financing program through FreedomRoad Financial that launched in September 2016, “has taken off and done well,” Speetzen said on the call. “We do anticipate [retail finance penetration] will improve,” he said, despite retail finance being “under pressure” next year, driven by flat dealer inventory, Speetzen said. However, the company still expects “more aggressive retail penetration” in 2017, as compared to 2016.

Polaris’ retail and wholesale finance portfolio “remains healthy,” according to the earnings report. Income from financial services was at $19.3 million for 4Q, up 7% from the same time a year prior. The increase is attributable to higher penetration rates in the retail credit portfolio and higher income from the sale of extended service contracts.

However, Polaris predicts its income from financial services to be down around 10% in 2017, due to lower dealer inventory levels. The OEM’s off-road vehicle dealer inventory was down 11% year over year, and total dealer inventory was down 8% — but in line with company expectations, according to the earnings. The lower inventory was due, in part, to the OEM’s numerous recalls throughout 2016.

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Photo by William Hoffman / Royal Media Group

Polaris currently has installment retail credit arrangements with FreedomRoad Financial, Sheffield Financial, Synchrony Financial, and Chrome Capital — although Chrome Capital is no longer accepting new lease applications as of Sept. 15.

The manufacturer also had a revolving retail credit arrangement with Capital One Financial Corp., which was not renewed at the end of term due to lender’s gradual exit from the powersports industry.

Citi Retail Services has since announced its entrance into powersports, partnering with both Kawasaki Motors Corp. and Bombardier Recreational Products Inc., to replace CapOne’s revolving credit product.

Polaris Industries Inc. is the only OEM formerly partnered with CapOne that has not announced their plans for a revolving credit program or partnership yet.

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