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Analyst’s survey finds mixed feedback from Arctic Cat dealers

December 20, 2012
Filed under News, Top Stories

A recent survey of select Arctic Cat dealers by BMO Capital Markets analyst Gerrick Johnson found “mixed, and somewhat disappointing, feedback from dealers regarding the pace of the company’s off-road vehicle and snowmobile sales.”

Johnson reports that BMO Capital Markets does “not view ACAT’s business negatively. We still believe ACAT benefits from a robust off-road vehicle (ORV) market, new product introductions.”

Johnson goes on to write that “we still believe ACAT can grow earnings by more than 10% annually over the next two years, but this expectation is a downshift from our prior expectation of 15% annual growth. The reason for our reduction in earnings expectations is mixed, and somewhat disappointing, feedback from off-road vehicle dealers, more aggressive than expected promotions on snowmobiles, possible pressure on sales from increased competition, and strained relationships with some of the OEM’s dealers.”

Additionally, Johnson says that “we recently contacted 20 ACAT dealers in the states of Arizona, New Mexico, Nevada and California, by telephone. The feedback we have received has generally been good, but not overwhelmingly so, and dealer satisfaction has not been to the level we were expecting to hear. …

“We have also contacted a substantial number of ACAT dealers in other parts of the country, and in this round of checks the feedback has been even more disappointing, with a louder chorus of dealers complaining that Wildcat sales have slowed and underperformed expectations.

“Furthermore, many dealers have expressed even greater disappointment in sales of utility side-by-sides and traditional ATVs. While the Wildcat side-by-side has been a solid introduction and had enhanced the overall Arctic Cat brand, we are disappointed that the strength has not necessarily carried over into other off-road product lines. Thus, with the lack of ‘halo sales,’ we think there could be further downside risk to our already downwardly revised estimates.”

The arrival of the four-seat Wildcat model, which is expected in February, allows Arctic Cat to compete in a growing market, Johnson said.

“Based on our analysis of monthly registration data, we find that the four-seat segment has been the fastest growing segment within the SxS category,” Johnson reports.

Other takeaways from Johnson’s report:

- ACAT vs. BRP presents “the real competition for the number two spot in recreational side-by-sides.”

- Based on a recent round of dealer checks in Minnesota and upstate New York, “we now wonder if the snowmobile business might just be tougher than we had originally anticipated. We have found significantly early-season markdowns on brand new 2013 models, in some cases almost to cost.”

- Based on his attendance at snowmobile events he has recently attended, Johnson says Ski-Doo is gaining share, and “this share appears to be coming from Yamaha and, according to some dealers we speak with, from ACAT as well. We are therefore reducing our FY2013 snowmobile sales estimate to $248 million (-1%) from $258 million (+3%).”

Comments

5 Responses to “Analyst’s survey finds mixed feedback from Arctic Cat dealers”

  1. Daniel Potts, Betsie Valley Sales & Service on December 20th, 2012 2:32 pm

    As a Dealer Principal , 19yrs experience with Cat, I own a store that has been with Arctic Cat since the late 60′s. Every manufacturer has a product issue now and then and they all take care of those issues as best they can.
    We were also a Bombardier Dealer for 20yrs and a Polaris Dealer for 9yrs.
    The “key word” here is “were”. In 2005 we decided to get back to our roots and go with the best…..Arctic Cat.

    Today we are only an Arctic Cat Dealer and I have nothing but the best opinion of their products. Arctic Cat is making the best product in the industry today.

    Where they fall short is in marketing direction. Yes, all the cute print ads over the years and the Race Program were effective. “Were” is the key word here. My opinion is they need to clean their own marketing department up and start looking for a new national marketing agency and a new marketing direction and not continue with or replace some of the current in-house staff.

    Just my $0.02.

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  2. Ex Arctic Cat dealer on December 20th, 2012 6:16 pm

    I believe that the last 5 years has been nothing but promises they can’t keep. You need a strong dealer network to sell your products and without that it doesn’t matter how good or bad your products are if you don’t appreciate your dealers. Cat is and has always rode on Polaris’s coat tail and the recent stock surge has been just that. I would stick with a company that and does appreciate the people that make them what they are. Opinions are just opinions and this one is mine but lossing the Cats was a good move for myself and my dealership.

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  3. Daniel Falcone on December 20th, 2012 10:28 pm

    I too am a Dealer Principal, Arctic Cat dealer for 34 years, a 1997 dealer of the year for the Eastern US, and a John Deere Dealer for 40 years. Our business was started in the snowmobile business upon its inception with Deere in 1972, I have to come to consider myself a glutten for punishment to still be involved with the recreational business of snowmobiles and atv’s I guess its for the love of the sport. We have flourished and survived with the lawn and gounds care side while still holding on to the hope that the recreation side will come into the new age of doing business as a partner with the dealers. This means having product available upon demand of a retail sold order. ie I sold a new F800RR in august and at this time still do not have it. The programs havent changed in decades. You order them in April to hopefully get them in November. With the Deere product line and others I deal with they have an order replenishment system that fills in stock in 7 to 10 days even in the busy season. Also there is a small window to actually make a fair profit on these machines because next years are introduced during the heart of the season even if it is only new decals. And if you dont order what they say you need to order you dont get any rebates on the current year models in stock. This is not the case with the L&G side, They accually put a cap on the amount of models you can have in stock based on sales history which is pretty fair & If a rebate is announced its accross the board no matter how many you ordered or sold. With the Wildcat the order program was an intial order of 4 to become a dealer. with the new Gator RSX we were allowed 2 to start and if you sold one you could get another. See what I’m saying. The machines themselves were always hard to pull in a consistent profit so you had the chance of making some on the accessories. Now Cat is selling the Parts, Garments and accessories out the back door with their new shopatron affiliation thus bypassing the dealer. While Cat may have a cool new Wildcat which truely is’nt for all areas, their side by sides havent really changed or improved since they were introduced which has been the hottest part of the market. They are getting run over by other manufactures. Polaris and Can-Am here have done their job. At this current state of doing business with these type of manufactures that have no care in the world for their partners you wont find many happy dealers or dealers left to handle this type of product.

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  4. Jack on December 21st, 2012 12:55 am

    Mr Potts,

    With all due respect for your tenure in our industry…you really messed up giving up Polaris and BRP in 2005.

    I am currently still in this industry, and I used to be a multi-line dealer (NOT Polaris) selling everything but snowmobiles.

    POLARIS and BRP to a certain extent have been and ARE CURRENTLY, ON FIRE!

    Brand loyalty is wonderful, but feeding your family and helping your business grow to it’s potential are every small business owner’s duties.

    See if you can get Polaris and BRP back and watch your PROFITS SOAR!

    All my best in 2013,

    Jack

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  5. Omar Kalgren on January 7th, 2013 5:07 pm

    Former Arctic Cat ATV and SS dealer. I gave them up in 2008-

    1) I have been in this business for over 20 years. Rep conned me into taking more product than I needed.

    2) I found out that AC was dumping excess product in Murfreesboro TN thruough and auction that was selling stufff cheaper than I could buy from them.

    AC is not loyal to their dealers. then none of the OEM’s are either.

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