Three weeks after gutting its earnings guidance as off-road and snowmobile vehicle sales tumbled, Polaris Industries (NYSE:PII) announced it purchased snowmobile helmet and goggles maker 509 for an undisclosed sum, adding it to its growing portfolio of gear, accessories, and clothing manufacturers.
Does it matter?
The powersports vehicle maker has made such purchases in the past, including Klim motorcycle and snowmobile riding gear maker Teton Outfitters; Kolpin Outdoors, a manufacturer of ORV accessories and lifestyle products; and Pro Armor, an aftermarket accessories company for side-by-side vehicles and ATVs.
Although Polaris Industries has generated a lot of good press for its successful resurrection of the Indian Motorcycle nameplate, off-road vehicles, and snowmobiles generate six times more money for it than do motorcycles. And parts, garments, and accessories are big business as well, generating some $226 million in revenues in the third quarter, or 3% more than it made the year before. In comparison, the motorcycle division generated $188.7 million.
While ORVs is Polaris's biggest operating segment, snowmobiles are the second-biggest vehicle segment, so padding that unit with a manufacturer of gear is smart.
Aftermarket parts and accessories are an important component of all vehicle makers. Harley-Davidson (NYSE:HOG), for example, also generates considerable revenues from such gear, or $252 million in its third quarter. Yet considering it sold over $800 million worth of motorcycles in the the period, it's obviously a more critical business for Polaris to get right.
And that was part of the powersports vehicle maker's problem in the third quarter. Although weak ORV and snowmobile sales hurt more, the gear segment of its operations was lackluster, too. It blames going up against some strong comps from the year before, as well as timing issues, but Polaris needs to strengthen the business, which is why the purchase of 509 is important, if not particularly groundbreaking on its own.