Big ticket discretionary goods have been in the penalty box all year given the COVID pull-forward, higher interest rates, and a normalization in pricing. Earnings this week from Polaris and Winnebago allowed for a glimpse of whether the clouds are lifting. They have not.
Polaris reported revenue down -23% and a substantial compression in profitability and cash generation. ATV revenue was down -24% and its marine segment revenue was down -36%. Within the marine segment, deck boat revenue declined in the high-forties range. However, ATV units at retail (which is retailer sell-out versus Polaris which is dealer sell-in) was down only low-single-digits (in other words, slightly improved). That better sell-out is the result of elevated promotions, which we suspect is why Bass Pro is showing stronger momentum in foot traffic. Polaris’ initial thoughts on 2025: “expect the retail environment to remain challenging…we [need more Fed rate cuts] to impact purchasing decisions.”
Winnebago reported a 7% decline in revenue, a 26% decline in gross profits, and a substantial decline in overall profitability and cash generation. Additionally, the year-end backlog was down 34% for towables. Within that backlog, units are down only -5% with the delta reflecting trade-down and massive discounting. That backlog for motorhomes on a dollar basis is down -66%. The earnings release quotes CEO Michael Happe saying, “Although the recent easing of interest rates is expected to bolster consumer demand as we move into the second half of the 2025 calendar year, near-term visibility remains limited due to the potential for further economic instability and the likelihood of continued industry-wide destocking within the motorhome RV category.”
In response to the industry’s contraction, Winnebago is consolidating manufacturing, but even those plants like in Lake Mills, Iowa (which makes motorhomes) that are taking in that work, are still operating well below the 2022 spike in demand as we show in the chart below.
Back to promotions in the outdoor equipment retail category. Below, we show a significant increase in cross visitation to Bass Pro’s sporting goods competitors like Academy Sports, Dunham, Sportsman’s Warehouse, where we suspect all are also engaging in a similar promotional shootout. Interestingly, Dick’s Sporting Goods is down because evidently, they aren’t participating in the shootout (visits to Dick’s are down 2% from last year). More interestingly is the -30% decline to Cabela’s among Bass Pro visitors and the -23% decline to Bass Pro among Cabela’s visitors. Bass Pro owns Cabela’s and these figures suggest that Bass Pro is segmenting the joint customer base of the Bass Pro brand from Cabela’s and rationalizing the market (that had been the plan when the acquisition happened back in 2017).
The combined visitation of these two in outdoor equipment retailers is 25% and Academy Sports represents another 45% as shown in the pie chart below. And so, that concentration and the promotional intensity (especially on retailer branded products) makes the industry particularly difficult for the vendors. Looking forward, on an industry rebound, Bass Pro Inc. could see itself well positioned between its Bass Pro banner customer base and file and a distinct customer base and file for Cabela’s, with it capturing more of the rebound than vendors.
