Tariffs Eat Into Profits in Weak Industry, Eliminating the Hope for Breakeven Net Income at Polaris

Polaris is one of the longest-operating brands in powersports. We believe that its brands, innovative products, and lean manufacturing yield the firm a wide economic moat and that it stands to capitalize on its research and development, solid quality, operational excellence, and acquisition strategy. However, Polaris' brands do not benefit from switching costs, and with peers innovating more quickly than in the past, this could jeopardize the firm's ability to take price and share consistently, particularly during periods of aggressive industrywide discounting (a recent concern). We think the eventual end of modest market share losses in off-road will signal that the firm's competitive edge is intact.