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[Puzzled]

Wednesday, 26 July 2017
   
Harley-Davidson

More lay-offs loom at Harley as second quarter domestic U.S. sales plummet ahead of significant peak season market decline

The shocking headline news is that Harley-Davidson’s second quarter domestic U.S. sales were down a massive -9.3 percent compared to the second quarter of 2016, a result that is way worse than the one they were expecting in a peak selling season where total domestic U.S. new motorcycle sales were down by around 7 percent for the quarter.




This puts Harley’s domestic sales down by - 7.9 percent for the first half of the year and leaves their domestic market share in the 601+cc category at 48.5 percent for the second quarter (compared to 49.5 percent for Q2 in 2016) and at 49.6 percent for the first half year 2017. The company is citing “weak industry sales on soft used bike process” as among the Q2 impactors.
The company says that dealer inventory is down by approximately 7,200 motorcycles year on year and that it will further cut production with its revised unit shipments now forecast at between 241,000 and 246,000 for the full year 2017, 39,000 to 44,000 of them in Q3 – down by between 10 and 20 percent from Q3 2017. Total second quarter shipments were 81,807 units (down by -7.2 percent on Q2 2016 and are 152,638 for the half year (down by -10.8 percent of the first half of 2016).
Touring model sales were up by +13.4 percent for the quarter, at 44.8 percent of the model mix, and are 43.1 percent of the mix YTD, up by +4.4 percent; their Street/Sportster lines were 24.3 percent of Q2 shipments, but Cruisers, which includes V-Rods and CVOs as well as Softails and Dyna models, were down by -11.8 percent in terms of the overall model mix, at 30.9 percent of the total (33 percent/-4.7 percent YTD).
Originally the company had forecast that 2017 would be “flat to modestly down for them,” but they are now having to accept that the “new normal” Levatich referenced in February means “down double digits” for the year, with massive restructuring of channel inventory levels not just a first quarter fix, as originally suggested.
The cut in production will result in further lay-offs, likely of hourly paid staff, as the company continues to “aggressively manage our cost structure,” CEO Matt Levatich said, in acknowledging the “unexpected magnitude of the industry softening in the second quarter.”

[Puzzled]

"Harley shares tanked -11 percent"

Managing supply, further reducing costs, and continuing pursuit of their previously announced 10-year strategies, not least the training of 2 million new riders and introduction of 100 new models, are the three pillars of recovery that the Harley ranch is bet on at this time – with much now hinging on market reaction to the new 2018 model year introductions.
CFO John Ollin and CEO Matt Levatich both acknowledged that “our biggest opportunities for growth is outside the United States,” and both have reaffirmed their stated objective of seeing at least 50 percent of sales being made internationally within 10 years, and the recently announced plan to build an assembly plant in Thailand to service the ASEAN region – believed to be a direct response to U.S. withdrawal from the Trans Pacific Partnership (TPP) free trade deal that would have seen tariff barriers reduced; a withdrawal that Levatich is on record as saying “would have helped us a lot.”
Harley’s total worldwide motorcycle retail sales were 81,388 in the second quarter, down by -6.7 percent, with worldwide sales -5.7 percent YTD. Of that 31,720 units were international sales, which is down by -2.3 percent for the second quarter, and are -2.1 percent for the YTD.
Their Europe, Middle East and Africa region was the best performing of their export markets, with sales down by only 1.6 percent for the second quarter and -2.1 percent YTD; their European 601+cc market share was up by 0.2 percent for the second quarter at 10.3 percent, but remains -0.9 percent for the YTD at 9.4 percent.
Harley’s Asia Pacific market was down -3.2 percent (-6.0 percent YTD); Latin America -8.5 percent for Q2 (up by +5.3 percent YTD), with Canada up by 0.4 percent in Q2, but down by -1.5 percent TYD.
Harley added 13 more dealers internationally during the second quarter, and has reconfirmed its intention to grow its international dealer network by between 150 and 200 new outlets between 2016 and 2020.
In the press release that accompanied the release of their results, Matt Levatich is quoted as saying: “We are pleased with our ability to deliver strong margins in the quarter despite challenging market conditions, particularly in the U.S. Given U.S. industry challenges in the second quarter and the importance of the supply and demand balance for our premium brand, we are lowering our full-year shipment and margin guidance.
“Our long-term strategy, focused on building the next generation of Harley-Davidson riders, is our true north. Our new product investment is one pillar of our long-term strategy to build riders globally, and we are energized by the strength of our model year 2018 motorcycles coming later this summer.”
Revenue from the Motorcycles and Related Products segment was down in the second quarter of 2017 versus prior year “largely due to lower motorcycle shipments.” Operating margin as a percent of revenue increased versus the prior year quarter primarily as a result of mix favorability driven by demand for the Milwaukee-Eight powered touring motorcycles and lower SG&A [Selling, general and administrative] spending.
The company says it now expects full year 2017 operating margin to be down approximately 1 percentage point compared to 2016. The company continues to expect 2017 capital expenditures to be $200 million to $220 million.
Shares in Harley-Davidson tanked by nearly 11 percent within an hour of trading opening on the day the second quarter figures were released (July 18) in the heaviest daily trading seen in more than two years. The share price recovered slightly during the day (from a 12-month low), but were left trading some 25 percent lower than their 12-month high of $62.94 in March.


 Posted by  DealerWorld     at  01:54       

[Toofast_28]

There's a lot of things in this release that point to flooding the market finally catching up to them and slaughtering their sales (new and used)

[muddypaws]

No surprise....Some dealers still have three year old new bikes in stock.

[scottt]

In my opinion; the only solution for Harley looking forward is to take there company back private.

Investors buy stocks in companies that are growing, there is no reason to invest into a shrinking company and/or market. Does anyone see reason to believe that Harley is going to grow? As I have read before, they aren't making more baby boomers. The next generation is not going to buy bikes like the boomers did.

Harley needs to go back to being a private company so they can focus on being a great motorcycle company not on expanding sales. Next, reduce production to one less than demand. Focus on building the most reliable, highest quality Harley's possible. Let consumer demand drive sales vs expensive advertising and marketing.

Harley did best when you felt lucky to be able to secure a new bike.

My opinion, what do you think?

[coloradotom]

They think they're doing awesome. I mean just look at the bonuses and awards the exec's take. But York plant, oh half you guys are fired.

[Phantom309]

This is great news, I love to hear when HD is hurting. They have done a good job of hurting our wallets while still continuing to sell their product with crap quality. What goes around, comes around ... glad to see it's finally biting them in the a$$. I honestly wouldn't care if the greedy MOCO closed the doors for good because my next bike is never going to be another HD anyway. I doubt that would actually happen after all these years, but no sweat off my balls if it did. 

[muddypaws]

I guess it pays great to do a crappy job. Sign me up..

[ridefar]

You guys are all right and well said!

Stock driven company and the business decisions are made to sell stock, not with emphasis on product quality.

Seems a handful of people continue to prosper at the top, and the rest of the business falls short and they do not care just so long as they get theirs.

[coloradotom]

GM operated under a "cost culture" just like HD does, with the bean counters running the show, and they knowingly sold defective vehicles and they got dragged before Congress for it. I'd like to know when its HDs turn?

[load97]

Just HD, get real. Drag all the manufacturers there if that's the case.

[J.D.]

AMF round #2.

[ultrarider123]

AMF round #2.

I don't know if it goes that far.  I'm not sure if you were around or not during those days but those were some bleak days for Harley.  Yes AMF kept them alive but just barely.  NOBODY wanted a new Harley in the 70's, specifically the mid to late 70's.  We had a dealer in our small NE Alabama town that couldn't give 'em away....they tried (local AM radio contest...another story for another thread).  It's not quite that bad today and while there may be quality issues with some design and parts suppliers, porous cases AIN'T one of em.  You had to have a dribble cloth under the new Harleys on the showroom...not something heard of these days.  It could be worse (and may get worse) but "AMF round #2"....don't think so.

However, you are entitled to your opinion and to make your point......

[J.D.]

Agreed, not exactly, but there are some eerie similarities.

[Para Bellum]

This is great news, I love to hear when HD is hurting. They have done a good job of hurting our wallets while still continuing to sell their product with crap quality. What goes around, comes around ... glad to see it's finally biting them in the a$$. I honestly wouldn't care if the greedy MOCO closed the doors for good because my next bike is never going to be another HD anyway. I doubt that would actually happen after all these years, but no sweat off my balls if it did.

While I agree completely that HD did those things, the blame lies with the past CEO--he was the one who cut the quality of every part on the bike, so the company would make more money on each part...not to mention the extra money the MoCo and dealers made from selling/installing replacement parts.  The extra profits made HD stock go up, so the CEO and his team made even more money from bonuses, stock sales, and pension increases.  The old CEO made his bundle and got out just as his cheap-product-screw-the-customer strategy started to catch up with the company.

Now the new CEO, Levatich, is stuck with trying to rebuild the product quality, reputation, and the corporate culture, all while dealing with the fallout (lower sales, loss of confidence by the public, increased competition from Indian and the metric cruisers)--while also being hounded by investors, the board, and the media wanting to know why sales are falling.  Lots of people saw the previous CEO running up profits and stock values, but didn't realize he was undercutting the company's future performance.  It makes it look like Levatich couldn't even keep a strong company going, when really he's trying to shore up a hollow company.  Bottom line, it's a chite show for Levatich.