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It could be the title of Harley-Davidson CEO, Matt Levatich’s memoir on his failed 2017 year while in charge of the Motor Company.

I happen to be riding with the HOG Lewis and Clark Expedition last week when Harley-Davidson announced their disappointing Q2’17 financial results and late to weigh in:

* Harley-Davidson net income dropped 7.7%. Sales in the U.S. were down 9.3% and 6.7% worldwide.

* Harley-Davidson now expects to ship 241,000 to 246,000 motorcycles to dealers worldwide in 2017, which is down approximately 6% to 8% from 2016.

* Harley-Davidson expects to ship 39,000 to 44,000 motorcycles in Q3’17, which is down approximately 10% to 20% from 2016.

* Approx 180 U.S. based manufacturing jobs will be cut in Menomonee Falls and Kansas City.  This in addition to the 118 workers who were axed back in April this year at the York plant as some positions were being shifted to Kansas City.

For those keeping track, this is a continuation of a three-year slide by the motor company.  However, during the call Mr. Levatich described what can only be called an “alternative reality” in hopes (I assume?) to reassure the financial markets and stated “we are going to build bikers first, add 2 million new Harley-Davidson riders and launch 100 brand new models during the next 10 years while growing the international business by 50%.

Huh?

I’m being a bit snarky here, but his statement appears either woefully naïve to the point of negligence or a continuance of marketing spin.  Proclaiming an unprecedented future result of this magnitude smells like stunningly wishful thinking at best or at worst plain lying.  For reasons I can’t explain, why would Mr. Levatich climb up on a high-wire without a net given such an overly-optimistic prediction?  Even with nearly 8-million Americans that are “sleeping license holders,” — those who have motorcycle riding credentials, but don’t own a bike — it doesn’t pencil and seems unobtainable.

I don’t know if the boardroom folks in Milwaukee read the NW Harley Blog on a regular basis and/or  hang on its every word.  But, we know the motor company has been continuously producing motorcycles for more than a century,  yet seemingly everyone on the internet with a keyboard thinks they can do it better.

And it’s a well-established fact that internet bloggers and commenters are geniuses. They definitely know how to run a business better than a company that has been constantly producing motorcycles through two world wars, the Great Depression, and roughly 20 U.S. recessions.

Sure the motor company needs our help and I’ve got some feedback and plenty of comments.  But, until the motor company calls me asking for it, I’ll look for Mr. Levatich’s memoir, which will certainly be “a deeply intimate account and a cautionary tale on the world’s most iconic motorcycle brand.

Slightly modified book cover courtesy of Simon & Schuster.

All Rights Reserved (C) Northwest Harley Blog

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photos_large_5Don’t get your underwear wrapped around the axle with that title.

“Off the reservation” is a common phrase, which many people use without considering the context of its original meaning. Namely, that Native American peoples were restricted to reservations created by the U.S. government, and their freedom was severely limited by the terms of the treaties they were often forced to sign.

I’m using it in its literal sense (to deviate from what is expected) and as you might anticipate it’s a reference to Indian motorcycles rampant sales and intractable competition versus the Harley-Davidson Motor Company.

Harley-Davidson posted flat sales for Q2 2014, yet Indian/Polaris posted higher revenues for the second quarter 2014 at $1.01 billion, reflecting an increase of 20% over last year’s second quarter sales of $844.8 million.  Polaris stated that sales at its motorcycles division soared 107% year-over-year to $103.1M in large part due to strong demand for the new 2014 Indian motorcycles.  Clearly they have deviated from what was expected.  One could debate that given Polaris motorcycle revenue is much smaller than Harley’s, it’s easier for them to hit double digit growth numbers, but that would be down playing the strong demand for the Indian products.

Additionally, Harley-Davidson stated its share of the market for new heavyweight motorcycles with engines of 601 cubic centimeters or greater slipped to about 50% in Q2 2014 from 53% a year earlier.  Another indicator that competition is weighing on the company.

Financial calls with terms like ‘diluted earnings’ and ‘operating efficiencies’, don’t mean much to riders and it’s not like Harley-Davidson is hurting.  But, it’s good to see Indian doing well with North American retail sales up 15% year-over-year in the second quarter.

Congrats!

Full Disclosure:  I’ve got a riding buddy who traded his H-D Street Glide in on a new 2014 Indian back in January and loves it.  There is no dealer in Oregon yet and he went to the extra effort of buying it from a Seattle dealer.

Photo courtesy of Indian/Polaris.

All Rights Reserved © Northwest Harley Blog

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HOGchartHarley-Davidson announced it’s Q2 2014 financials, indicating that Q2 net income was $354.2M on consolidated revenue of $2.00B, compared to net income of $271.7M in the year-ago period on consolidated revenue of $1.79B.

Dealers worldwide sold 90,218 new motorcycles compared to 90,193 motorcycles in the year-ago quarter.  U.S. sales were flat/down as dealers sold 58,225 new Harley-Davidson motorcycles in the quarter, compared to sales of 58,241 motorcycles in the year-ago period.

Some interesting nuances from the analyst call:

  • Market share was down 2.6% on a year-over-year basis at 50.3%.
  • Management confirmed the Road Glide is coming back with the new 2015 product launch in August.
  • In the U.S. the Road Glide accounted for 10% of sales
  • There were self-inflicted wounds with the intro of the Street on Sportster sales which was down double-digit and compounded by lack of Street inventory.
  • Management stated Indian touring bikes have had little impact on Rushmore bikes which in the first half were up double-digits.  But, read this HERE which colors the picture a bit different.
  • The Street start-up issues are supply chain in nature and related to this being the first time H-D is manufacturing a product internationally.
  • H-D now expects to ship between 270K and 275K motorcycles worldwide which represents growth of approximately 3.5% to 5.5% versus prior year.

Despite the soft Q2 sales, H-D believes the demand fundamentals for the business remain intact and underlying growth trends are strong.  The industry has grown for three straight years coming into this year and there is more investment in the industry than Harley-Davidson management has seen in the last five years in terms of new products, marketing and advertising.

UPDATED: August 1, 2014 – Harley-Davidson officially reveals the 2015 Road Glide.

Photo courtesy of Edgar and H-D.

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HD Stock ChartI missed this a few days ago, but imagine that the first quarter results at Harley-Davidson were like eating a bag of those Krinkle Cut™ Salt & Pepper chips… a great taste with a satisfying crunch!

Yeah, I have a weakness for the hyper-engineered, overly marketed, addiction-creating potato chips.  But, I’ve digressed.

Q1’14 Financials:  Harley-Davidson reported its first-quarter 2014 retail sales in the U.S. were not as high as expected — in large part because of the brutal winter season that gripped the eastern two-thirds of the country and the absence of the Road Glide models.  Still, sales increased 3 percent in the first quarter of 2014 and the motor company maintained a 56 percent market share in the U.S.

On April 22, Harley reported it sold 57,415 motorcycles worldwide in the first quarter of 2014, a 5.8 percent increase over the same quarter last year. The increase helped boost the company’s total revenue by 10 percent, with earnings up 22 percent.  Most of that growth came from international sales as dealers sold 21,685 motorcycles, an increase of 10.9 percent compared with the first quarter of 2013. Sales in the U.S. increased by 3 percent over the same period last year.

The company had net income of $265.9 million, or $1.21 a share, for the quarter which was up from net income of $224.1 million, or 99 cents a share, in first quarter 2013.  Harley-Davidson said it expects to ship between 279,000 and 284,000 motorcycles in 2014, which would be an increase of between 7 and 9 percent from 2013.  It was noted in the financial call that the absence of the Road Glide models continues to impact the company’s bottom line which in the first quarter of 2013, sales of the Road Glides represented 10 percent of its sales.

Keith Wandell, Harley-Davidson’s CEO, chairman and president, said in a press release that “Our dealers had a solid quarter of retail motorcycle sales.”  He went on to say, “Sales in the Asia Pacific region were up strongly, and we are encouraged by the continued growth of new Harley-Davidson motorcycle sales in Europe. We’re also excited to be entering the heart of the retail selling season in the U.S., having achieved first-quarter retail growth of 3.0% in the midst of a long, cold winter.

After the earnings report was released, the company stock (HOG) went from $68 per share at close to establishing a new 52-week high of $71.99 per share.

Then there was some additional investment buzz from stock analyst’s and then with impeccable timing on April 29th, Mr. Wandell sold 45,308 shares of the company’s stock.  The stock was sold at an average price of $73.45, for a total value over $3.3 million.  The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is available at this link.

But wait, there’s more…

HBO Films

HBO Films

Loan Payback:  H-D announced that it paid off the $303 million, high-interest rate loan from Warren Buffett’s, Berkshire Hathaway Inc. during the quarter, funds that were used for Harley’s financing company.

You might recall that during the stock market crash of 2008, Harley’s finance subsidiary was unable to loan money to customers because the capital markets had shut down and liquidity was running low.  You may have read the book or watched the “Too Big To Fail” television drama film on HBO?  The money/loan helped Harley-Davidson continue financing motorcycles through its financing company, but the loan came with a hefty 15 percent interest rate.  It was a bridge that H-D desperately needed and Berkshire Hathaway was the only company from which Harley could borrow money without giving up its equity.

Harley-Davidson-Softail-Breakout-2013FXSB Recall:  The only dark cloud in all this good news hoopla was the motorcycle recall on 2013-14 FXSB and FXSBSE models manufactured from March 20, 2012, through March 10, 2014, to identify and fix a problem with the fuel level sensor signal.  The NHTSA Campaign Number is 14V185000 and effects approximately 9,100 motorcycles.

It turns out that suspension variances may affect the gas tank mounting angle, causing the fuel level sensor to read inaccurately. “The gauge inaccuracy may cause the motorcycle to run out of fuel unexpectedly, possibly even before the Low Fuel Warning lamp illuminates,” the recall stated. This would cause the motorcycle to stall, increasing the risk of a crash.  Harley-Davidson will notify owners, and dealers will update the software to recalibrate the fuel level sensor signal, free of charge.

Sometimes it’s hard to rise above in our country, because the haters are lined up to tear you down.  But, I want to say congrats to Harley-Davidson!  I’ve got a mental image that the senior leadership team is doing celebratory high-fives, along with a Wandell victory dance or a watching Mark-Hans Richer air-guitar somersault on the board room table.

Photo’s courtesy of Google Finance, H-D and HBO Films.

All Rights Reserved © Northwest Harley Blog

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