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Posts Tagged ‘Earnings Call’

Harley-Davidson CEO Meets POTUS

Earlier this year, the President met with Harley-Davidson exec’s and put a spotlight on the company in his address to Congress, yet there was no “Trump Bump” as the motor company reported earnings which included sharp declines in revenue and profit for the first quarter of the year.

Some of the key Q1’17 stats:
— $186.4 million in net income, or $1.05 per share, for the period ended March 26, down more than 25% from $250.5 million, or $1.36 a share, in the same period a year ago.
— Revenue was $1.5 billion, down from $1.75 billion in the first quarter of 2016.
— Motorcycle sales in the U.S. were down 5.7% in the quarter compared with a year ago and International sales fell 1.8%
— Reported motorcycle shipments fell 14.7% to 70,831 in Q1
— Market share in the 601cc-plus segment was up to 51.3%.  Execs stated that the Victory liquidation helped market share.

Nothing screams Americana more than deep vehicle discounts and Harley-Davidson jumped head first into that pool by offering its dealers financial incentives to clear out the leftover 2016 motorcycles.  And in an unusual move the company has purposely constrained the supply of its 2017 hottest-selling new models, including bikes with the new Milwaukee Eight engine, leaving some customers waiting to conquer the open road.  All of this is happening with only 4-months until the 2018 model-year launch.

If you listened to the earnings call this week there was a lot of “feel good” expressions from management about the way the company is performing yet, there are tepid sales, a downbeat outlook, and consumer confidence numbers that don’t reflect spending behavior.  Clearly households worldwide are slow to embrace new motorcycles as a way to enjoy life.

According to Harley-Davidson this is the 9th year in a row (based on IHS Market New Registrations) for motorcycles with 601+cc where they were the number one seller of new on-road motorcycles in the U.S. on both their “outreach” and “core” customers.  “Outreach” is defined as four segments — young adults ages 18-34, women, African Americans and Hispanics.  “Core” is defined as Caucasian men aged 35-plus.

Harley-Davidson reported that more people than ever before are discovering motorcycles and claimed that they are dominating the motorcycle market as well as being recognized as the leader in addressing key demographics — women, younger riders, African Americans and Hispanics, however, the patterns of growth remain elusive.

So whats going on?

Let’s drill down:
— Press and media continue to push negative motorcycle narratives (motorcycle crashes, distracted driving, club violence (last years Waco example) etc.).
— Increased pricing on new motorcycles have pushed out the average length of ownership.  For example new autos reached 6.5 years in Q1 2015.
— In the northwest along with parts of California the wet weather has limited the number of days to ride in 2017.
— Increasing Insurance rates  — on auto, home and health care biting into the discretionary funding of a motorcycle hobby.
— Income growth has declined.
— Interest rates have increased (in past years people pulled $$ from their house to buy a “toy” and now there is no where else to pull $$).
— Fewer “Outreach” customers (aged 18-34) own vehicles or don’t drive as much, they UBER.
— Apathy of the motorcycle hobby/life style as a form of entertainment

All or some elements of this could be weighing down new motorcycle purchases.  But I’m an optimist, and Harley-Davidson has a 10-year strategy to train 2 million new U.S. riders, grow international business to 50% of sales (currently about 32%) and launch 100 new “high-impact” motorcycles.

As it turns out and according to this report, about 22% of all new motorcycle purchases come from first-time buyers. This figure has remained relatively stable since 2001.  It’s very likely some of those 2M new riders will buy a new “high-impact” Harley.

Photos courtesy of CNBC and Harley-Davidson

Full Disclosure:  I don’t currently hold or intend to hold any $HOG shares.

All Rights Reserved (C) Northwest Harley Blog

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CEO, Keith E. Wandell

I’m not talking about Obama’s State of the Union address.  Unfortunately I missed that opportunity to talk back to the TV with his long speech about “investment” plans in education, technology, roads and public sector workers.

Rather, my title reference is about Harley-Davidson (NYSE: HOG) who reported fourth-quarter earnings, a loss from operations of $42.1M, or $0.18 per share, which includes the impact of a one-time, $85.2M charge from the Company’s early repurchase of senior unsecured notes during the quarter.  H-D also reported better news on the full-year 2010 income of $259.7M, or $1.11 per share, compared to income of $70.6M, or $0.30 per share, in 2009.

Mr. Wandell (CEO) stated the company faces “significant challenges” ahead as it tries to navigate the changing economic landscape marred by 9%+ unemployment and worsening home foreclosure rates.  All of this underlines the challenges awaiting H-D in 2011 as it seeks to compete.  H-D management hopes the economy will improve, they’ve changed about all they can to manage down factory shipments and invested in workers by way of transforming labor agreements.

For the 2010 year, H-D shipped 210,494 motorcycles, in line with its target range of 207,000 to 212,000 motorcycles. Full-year shipments were 5.6% lower than 2009, when the Company shipped 223,023 units. Revenue from Harley-Davidson motorcycles for the full year was $3.14 billion, a 1.2 percent decrease compared to 2009. In contrast the full year 2009 compared to 2008, motorcycle retail sales decreased 22.7% worldwide, 25.8% in the U.S. and 15.4% in international markets.

The full transcript of the earnings call can be found HERE.

Photo courtesy of H-D Annual Report.

All Rights Reserved © Northwest Harley Blog

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Sporty Burnout

Stock price performance, not your motorcycle!

Harley-Davidson (HOG) shares have been on a smokin’ hot burnout of late.  We’re talking about a 2nd gear blowing the melted tire kind — as the stock price approaches a 52-week high.  Rumors of a merger or buyout floating around the web may have contributed.  Who knows.

The motor company is set to release its Q1’2010 earnings before the opening bell on Tuesday, April 20th.  Analysts expect revenues for the quarter to be in the $1B range down from the $1.29B in Q1, 2009.

As a predominate recreational luxury motorcycle, not used as a primary method of transport, you’d have to live on an island to be unaware of how the company has suffered during this ‘great recession.’  With contracting credit markets, the uncertainty of jobs, housing values in freefall, increases in state and federal taxes and despite a younger rebellious image in marketing campaigns the fact is that H-D’s average buying customer age is getting older at a rate of 6 months every year and has been for the last 20 years.  It seems a decline in the Harley culture is inevitable if not certain.

HOG Financial Snapshot

Harley competes more on image and getting customers to buy into the lifestyle (brand), and through “nostalgic design” and quality rather than price.  This helps keep margins high which were in the 31% range for 2009.  It will be interesting to learn next week if the company’s premium priced motorcycles have attracted buyers amid a weak spending environment or they’ve been successful in pulling in a fresh batch of younger riders.

If Toyota sales increased 40% last month amid the sticking pedals and trapped mats on more than 8M vehicles maybe it’s time for H-D to announce an unintended throttle acceleration recall too!  I’m hoping for good news next week.

Full Disclosure: None.

Photo courtesy H-D Financial Reports.

All Rights Reserved © Northwest Harley Blog

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