PSB Q2 dealer survey shows UTV industry retail sales growth

Side-by-side industry retail sales in North America grew in the second quarter, as did heavyweight motorcycle inventories, according to data from the Powersports Business/RBC Capital Markets Q2 2014 Dealer Survey. A total of 124 dealers from 41 states and Canada, representing 49 powersports brands completed the survey. Of the dealers who completed the survey, 86 percent of them are single-store owners.

RBC Capital Markets analyst Joe Spak reports that side-by-side industry retail sales grew mid-single digits (4-5 percent) in the quarter.

“While dealers still expect NTM (next 12 months) sales growth to accelerate from 2Q levels, the level of expected acceleration has moderated versus prior surveys,” Spak writes in his research note. “Inventory concerns also have moderated versus our prior survey, but promotional activity stepped up in 2Q14 as well. We expect this to be a focus during earnings.”

“While our dealer business conditions index broadly suggested an overall sequential improvement, the new sales condition, which is most relevant for our powersports coverage, was flat sequentially. Sales growth in the quarter was mixed as SxS, snowmobiles, and PWC accelerated while motorcycle growth decelerated. However, looking ahead, dealer expectations for NTM sales in a number of key categories (SxS, ATVs, motorcycles) moderated. We expect growth to slow and the survey supports our view that industry growth (and the economy) isn’t likely to help much. Innovation becomes even more crucial.”

Here’s a look at Q2 performance by segment:

Motorcycles

“Survey respondents indicate that 2Q14 heavyweight motorcycle sales were soft. We believe there was broad expectation that some ‘pent-up’ demand from poor 1Q14 weather would pop up in 2Q14, but that doesn’t appear to have happened. Moreover, NTM sales expectations are flat and a number of dealers expressed concern over motorcycle growth. Inventory concerns stepped up meaningfully this quarter, but promotional activity appears in check. We wonder if promotional activity will need to step up in 2H14.”

ATVs

“Industry ATV 2Q14 sales growth and NTM expectations both look modest, but inventories are balanced and promotional activity modest.”

Snowmobiles

“2Q14 snowmobile sales were likely aided by the long winter. Inventories are as lean as they have been in over a decade, and as a result, little promotional activity is present.”

Polaris

“We walk away from our survey comfortable in our above-consensus EPS view for the quarter, although the mix of how we get there could be a little different than expected. Even with a solid quarter, it remains unclear to us if management raises 2014 guidance, especially considering what appears to be a moderating forward dealer view. SxS strength in the quarter may be balanced by a slightly softer motorcycle view. Expectations for Indian retail sales over the next 12 months have declined, but this is not surprising.

“PII July 27th dealer meeting expectations. New product expectations include Slingshot, broader ACE offerings (higher horsepower, longer wheelbase), a fuller suite of Indian offerings, new Ranger and RZR models, as well as new AXYS snowmobiles. We believe in sum that new product introductions could approach last year’s level.”

Harley-Davidson

“HOG appears to have outperformed the heavyweight motorcycle market — we peg retail sales up 3–4% y/y. However, with higher expected 2Q14 shipments (potentially 10%), inventory concerns are likely to rise. We see risk to HOG’s FY shipment guidance (+7–9% globally) given rising inventory and tougher 2H US retail comps (including 20% in 3Q).”

BRP

“Retail snowmobile sales were a highlight for BRP, consistent with recent commentary. Snowmobile inventories are low, supporting a solid NTM outlook. 2Q performance for ATVs was encouraging, with PWCs also surprisingly strong. Dealers indicate slowing growth in the SxS segment, with responses pointing to BRP SxS sales at/slightly below industry levels. Importantly, dealers indicated relatively solid growth for Spyder sales.”

Spak’s 26-page analysis of the PSB/RBC Capital Markets dealer survey is provided to all North American dealers who complete the survey. Dealers interested in being added to the survey list — or OEMs who would like their dealers added to the list —can send an email to PSB editor in chief Dave McMahon at dmcmahon@powersportsbusiness.com.