Arctic Cat Inc. released its financial report for the fiscal 2016 fourth quarter that ended March 31, 2016. Although the OEM experienced an overall increase (22.7%) in net sales over the prior year, the end result was a net loss of $16.9 million, or $1.30 per share, on net sales of $121.4 million. In the prior-year Q4, Arctic Cat reported a net loss of $21.5 million, or $1.66 per share, on net sales of $98.9 million.
“Our fourth-quarter sales rose versus the prior-year quarter, but fell short of our expectations," said Christopher Metz, Arctic Cat’s president and chief executive officer. "A stronger fourth-quarter turnaround was hampered by lack of snowfall that constrained snow-related sales, ongoing foreign currency headwinds and a softening powersports market. A competitive retail environment also led to higher spending than planned on promotional programs, particularly in ATVs and ROVs, which reduced earnings in the quarter.”
Despite the mild winter, snowmobile sales rose 42.9% over the prior-year quarter ($7.5 million this year vs. $5.3 million last year). However, sales of parts, garments and accessories (PG&A) in Q4 were down 19.3% ($21.7 million vs. $26.8 million in the prior-year quarter).
“We have experienced two consecutive years of low snowfall that negatively impacted snowmobile sales at the retail and wholesale level, as well as unfavorable foreign currency exchange rates," said Metz. "However, at our March dealer show, we launched one of our most exciting snowmobile lines in years, with many award-winning models. We are well positioned for retail growth when snow conditions improve.”
Arctic Cat has ramped up its end-user focused new products and introduced a larger snowmobile lineup for the 2017 model year. The company entered an all-new category with the lightweight and agile SVX 450 snow bike, the industry’s first purpose-built OEM snow bike which will meet all snowmobile certification standards, according to Arctic Cat. The OEM also released a powerful turbo engine in several new 9000 Series models, including the new Arctic Cat ZR Thundercat.
The company’s other key strategies to reinvigorate growth include: dramatically improving Arctic Cat’s dealer network; pursuing strategic partnerships; and creating a brand marketing powerhouse.
“In the fourth quarter, the company continued to execute well on our strategies," said Metz. "We further strengthened and expanded our dealer base. We activated sales through important marketing sponsorships and our new event marketing team. And we continued to maintain tight inventory control to allow a return to greater wholesale and retail growth of new products in fiscal 2017.”
Arctic Cat succeeded in decreasing total inventory by $12.4 million, or 8.2%, versus the prior-year quarter, despite a softer marketplace and the lack of snow to spur snowmobile sales. Gross profit in the fiscal 2016 fourth quarter was essentially flat compared to the prior-year quarter, chiefly due to increased sales volumes, improved absorption and manufacturing productivity, partially offset by unfavorable foreign currency exchange impact. Unfavorable foreign currency exchange rates reduced gross profit by approximately $2.4 million, or $0.11 per share. Operating loss in the fiscal 2016 fourth quarter was $27.5 million versus an operating loss of $29.0 million in the same quarter last year.
Arctic Cat ended the fiscal 2016 fourth quarter with cash and cash equivalents totaling $17.7 million at March 31, 2016, compared to $40.3 million a year ago, and no long-term debt. The company continued to make investments in the business to lay the foundation for future growth and to improve efficiency.
“Our focus over the next year is to continue to rebuild and reposition the company for a return to long-term growth," said Metz. "We are confident in our strategic plans to turn the business around. Despite the challenges, we see tremendous opportunities to improve the company’s operations, expand gross margins and enhance financial performance over time. We remain excited about Arctic Cat’s long-term future.”
Kort Duce photos