Why Polaris Is Shutting Down Victory Motorcycles

Though Polaris (NYSE:PII) is arguably known best for its flagship line of off-road vehicles,

its motorcycle division has offered a key source of supplemental growth in recent years. So it

came as a surprise to some earlier this week when Polaris announced it will immediately begin

winding down its Victory Motorcycles brand and related operations.


According to the company, the choice was clear, and should help solidify its leadership position

in the broader powersports industry.


A tough choice

But that doesn’t mean it was an easy choice to make. “This was an incredibly difficult decision for

me, my team, and the Polaris Board of Directors,” lamented Polaris 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.”


That’s also not to say Polaris will come out empty-handed. “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,” Scott added, “so I would like to express my gratitude to everyone associated with

Victory Motorcycles and celebrate your many contributions.”


A matter of market share, competition

For perspective, Polaris acquired Indian Motorcycle in early 2011 for an undisclosed sum. And in Polaris’

most recent quarter, the Victory and Indian Motorcycle brands together achieved solid low-teens

percentage growth, while the overall motorcycle industry endured a mid-single-digit percentage decline.

Meanwhile, Polaris’ Slingshot saw sales fall slightly from the same year-ago period, albeit primarily due to

shipment timing, as the company worked to aggressively reduce its backlog for Slingshot deliveries

following its first year of production.


According to Polaris’ press release this week, however, theVictory Motorcycles “has struggled to establish the

market share needed to succeed and be profitable.” Moreover, those struggles have intensified given

competitive pressures in today’s challenging motorcycle market. Add to that the combination of Indian

Motorcycle’s relative outperformance and significant incremental investments required to launch new

Victory Motorcycles platforms to adapt to consumers’ changing tastes, and the company insists “the

decision to more narrowly focus Polaris’ energy and investments became quite clear.”


To be fair, it likely didn’t help that Polaris also recently closed on its $665 million acquisition of

Transamerican Auto Parts (TAP), a deal that sapped financial resources over the near term given its

primary funding through Polaris’ existing revolver and term loan.


“Our focus is on profitable growth,” Wine added, “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.”


Read More: https://www.fool.com/investing/2017/01/10/why-polaris-is-shutting-down-victory-motorcycles.aspx

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