Despite declining motorcycle volume, Polaris Industries‘s income from financial services climbed 25% in the fourth quarter of 2018, the company revealed in an earnings call.
Financial services income grew to $23 million from $19 million in the year-prior period. The increase is attributable to increased retail demand, higher penetration rates, and boosted dealer inventory levels, Polaris reported.
While Polaris’s 2019 outlook for the powersports industry was positive, the OEM expects a slower growth rate due to uncertainty around market challenges such as tariffs and a potential recession.
“We’re planning for slower growth amidst a mostly stable economic environment,” Chief Executive Scott Wine said on the call. “But we are also tracking the rising risk of recession and making plans to avoid being surprised when it occurs. Tariffs and higher interest rates put pressure on the economy, and [tariffs] even more so on Polaris. Currency headwinds are further exacerbating our pressures, so the team is working full time on countermeasures to mitigate these impacts.”
In the fourth quarter of 2018, North American retail sales grew 6%, primarily driven by off-road vehicles, which include snowmobiles. Off-road vehicle sales climbed to $1.1 million for the quarter, up 7% from the prior-year period.
Specifically, snowmobile sales grew 49% due to a high number of preorder shipments. Off-road vehicle retail sales increased in the low-single digits percentage for the quarter.
Meanwhile, motorcycle sales declined 15% year over year, to $87 million. Indian Motorcycles retail sales dropped by low double digits, while Slingshot sales decreased in the mid-30% range.
Oak Brook, Ill.-based FreedomRoad Financial provides retail financing for Polaris’s Indian Motorcycles and Slingshots under the name Performance Finance. Synchrony Financial and BB&T unit Sheffield Financial also provide loans for Polaris vehicles.
Polaris’ boat segment performed slightly above expectations, the company said. Sales from that segment, which consists of the Boat Holdings acquisition that closed in July 2018, totaled $145 million in the final quarter of 2018. Polaris remains “very bullish” on its entrance into the boat market and is identifying new ways to compete, Chief Executive Scott Wine said on the call.
Polaris acquired Larson Boat Group, a line of fishing boats, for an undisclosed amount earlier this month. The company has no plans to make more acquisitions in 2019, Wine added.