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Posts Tagged ‘Motorcycle Sales’

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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Screen Shot 2016-08-10 at 11.42.14 AMI’m a bit late getting this information out, but you can read the company press release HERE.

From my experience you know it’s going to be a long day when the financial perspective includes statements about how we’re in challenging times…  “Political, economic and cultural forces working against the confidence and security for people everywhere in the world” — whoa, roll the eerie and scary sound effects!

Here is a quick synopsis:

The Bad:

  • Worldwide sales for the quarter were down due to significant declines in the U.S. industry which was a surprise and far weaker than expected. Worldwide retail sales of new Harley-Davidson motorcycles in Q2 were down 1.9%.  U.S. retail sales were lower than expected on surprisingly weak industry results.  Q2 retail sales in the U.S. were down 5.2% versus prior year, behind weak U.S. industry sales.
  • U.S. retail inventory was up at the end of the second quarter.
  • Manufacturing expenses were higher than expected, driven by startup costs related to the implementation of a new ERP system in Kansas City, and costs associated with plant retooling.  In addition, plant efficiencies were lower than expected due to lower production given soft sales in Q2.  This is an overly simple statement because in reality it’s complex planning and execution, including numerous down days, inventory bridges and careful new model ramp plans.
  • The motor company stated they are taking steps to lower expected 2016 shipments which is largely due to continued pressure on industry growth in the U.S.  Third quarter shipments are expected to be approximately flat to down 9% versus 2015 third quarter.

The Good:

  • Revenue was up slightly.  Net income was $280.4 million on consolidated revenue of $1.86 billion compared to net income of $299.8 million on consolidated revenue of $1.82 billion in last year’s second quarter.
  • Q2 market share of 49.5% in the U.S., was up a strong 2.0 percentage points. The gains came in all segments, Touring, Cruisers and the Street/Sportster segment size of motorcycles. And it came from all seven sales regions in the U.S. The market share gains were over double the nearest competitor and came largely at the expense of Japanese competitors.
  • Retail sales in international markets were up in Q2 in all regions except Latin America (Brazil).
  • The company added six new international dealerships in the second quarter and has a goal to add 150+ international dealers over the next 4 years.

Given this current environment one could wonder if Harley-Davidson is positioned appropriately for the flat/declining industry which seemed to surprise them in Q2 — management states they are prepared.

Full Disclosure:  I have NO personal stock holdings in HOG or plans to procure any.

Some parts of the above text are attributable to the Seeking Alpha transcript on July 28, 2016.  Photo courtesy of Harley-Davidson.

All Rights Reserved (C) Northwest Harley Blog

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Enterprise Resource Planning (ERP) was the watch word at Harley-Davidson’s Q3’12 earnings call earlier in the week.  So eloquent were the deflections it almost makes a person think they’re a SAP – for investing in SAP AG!

Harley-Davidson’s third-quarter earnings were income from continuing operations at $134.0 million on consolidated revenue of $1.25 billion, compared to income from continuing operations of $183.6 million, or $0.78 per share, on consolidated revenue of $1.40 billion in the year-ago quarter.

Through nine months, Harley-Davidson income from continuing operations increased 12.1 percent year-over-year to $553.3 million, or $2.40 per share, on consolidated revenue of $4.41 billion, compared to income from continuing operations of $493.4 million, or $2.09 per share, on consolidated revenue of $4.13 billion in the year-ago period.

“The third quarter marked a pivotal milestone in Harley-Davidson’s transformation. With the launch of the ERP production system at York, a major piece of our restructuring work is behind us. We are now focused on optimizing the system and look forward to the start of seasonal surge production early next year,” said Keith Wandell, Chairman, President and Chief Executive Officer.

Like partners in a three-legged foot race, both the management and employees were hobbled by their connection to this so-called new ERP production system at the Company’s largest assembly plant.  How ironic.  A new production system being implemented to improve manufacturing performance becomes part of the problem that resulted in comments during the call like:

  1. “Harley-Davidson’s annual new model launch was pushed to late August from late July.”
  2. “New motorcycle sales were adversely affected by a limited availability of new motorcycles in July, August and early September.” 
  3. And leaving no deflection rock unturned… “The economy remains fragile and there’s a lot of uncertainty for high-end products like a brand (Harley-Davidson) like ours.”
  4. No mention in the call about the Milwaukee HQ IT jobs outsourced in July to India (Infosys) and if that had an impact on Q3?!
  5. Nothing mention in the call whether what I feel has to be the lamest slogan (“Great Motorcycles”) on the 110th Anniversary models is creating sales issues.  It would be the first thing I’d take off the bike!

110th Anniversary Model with “Great Motorcycles” Slogan – Primary Cover

On a worldwide basis, dealers sold 61,053 new Harley-Davidson motorcycles in the third quarter of 2012 compared to 61,838 motorcycles sold in the year-ago period.  Dealers sold 40,402 new Harley-Davidson motorcycles in the U.S. compared to sales of 42,640 units in last year’s third quarter. In international markets, dealers sold 20,651 new Harley-Davidson motorcycles during the third quarter compared to sales of 19,198 units in the year-ago period.  During the quarter, retail unit sales increased 32.3 percent in the Latin America region, 9.8 percent in the Asia Pacific region and 1.8 percent in the EMEA region and decreased 4.7 percent in North America (U.S. and Canada) compared to last year’s third quarter.

Harley-Davidson Motorcycles and Related Products Segment Results Third-Quarter Results: Third-quarter operating income from motorcycles and related products was $144.8 million, a 19.9 percent decrease compared to operating income of $180.7 million in the year-ago period.

110th Anniversary Model with “Great Motorcycles” Slogan – Air Cleaner Cover

Revenue from motorcycles during the third quarter of 2012 of $774.0 million was down 16.1 percent compared to the year-ago period. The Company shipped 52,793 motorcycles to dealers and distributors worldwide during the quarter, down 14.5 percent and in line with prior guidance, compared to shipments of 61,745 motorcycles in the third quarter of 2011.

Revenue from motorcycle parts and accessories totaled $233.7 million during the quarter, down 0.8 percent, and revenue from general merchandise, which includes MotorClothes® apparel and accessories, was $75.6 million, up 9.1 percent compared to the year-ago period.

Gross margin was 34.7 percent in the third quarter of 2012, compared to 33.7 percent in the third quarter of 2011. Third-quarter operating margin from motorcycles and related products was 13.3 percent, compared to operating margin of 14.7 percent in last year’s third quarter.

For the full year 2012, Harley-Davidson continues to forecast a five-to seven-percent increase in motorcycle shipments compared to 2011.

My view is that they are not done transforming the company and it’s going to take more time to right the ship while getting the ERP humming to turn the management business vision into a reality.

Photo courtesy of SAP and H-D.

Note: In 2006 H-D selected SAP to help them manage and optimize their growth.  In June 2011, there was an article in Forbes referring to H-D involvement in SAP’s Community Network.  It’s unclear if the “new” ERP implementation is an updated rollout of a newer version of SAP or a major transition to new ERP vendor. 

Full Disclosure:  I have no investment in or hold any SAP AG or Harley-Davidson stock.

All Rights Reserved © Northwest Harley Blog

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Harley-Davidson announced this week it reached ONE-million fans on their Facebook page.  The page, launched in 2008, features daily updates on new products, events and a variety of other topics. It’s one element of the company’s brand and social media strategy. I’ve previously blogged about the relevancy of H-D’s Facebook page to riders HERE.

Chad Hockerman, H-D Project Manager of Social Networking (previously the Buell Market Outreach Project Manager), stated in the release:

We’re doing this [social media] by maintaining an ongoing dialogue with current owners and building a new one with dreamers through engaging content that revolves around our products, our culture and our company. The 1-million milestone is testament to this approach.

Now what?  HarleyVille the game?

How about establish an actual statistical correlation between social media metrics and motorcycle sales!

Answering this question is what former Secretary of Defense Donald Rumsfeld pointed out as an important principle of business intelligence in his briefings when he talked about finding unknown unknowns. Known unknowns are questions that you think of asking. You know the question, and the task is to find the answer. Unknown unknowns are far more interesting.  And the correlation of social media metrics to motorcycle sales is clearly an unknown.

One effective path to finding unknown unknowns comes through cluster analysis, a statistical technique based on Bayesian probability.  Bayesian who?  In simple terms cluster analysis turns social media into a tool to predict the future.  It’s a statistical approach to track documents which are read and words are tracked in relation to other words. The math is mind bending, but an oversimplified way to think of cluster analysis is how probable is it that this word is next to that one? How unlikely? By analyzing the shifting patterns of probabilities, new relationships emerge.  The analysis tells you about clusters of words that are getting stronger or weaker.  For example, it’s clear the probability that BP and “oil spill” appear close to each other spiked recently. You can visualize this type of analysis as a display of circles that get larger as the relationships get stronger and as the cluster is found in more and more documents. The circle gets bigger as the strength of the relationships grow.

Facebook Dropping

My suggestion today is that Harley-Davidson should get very interested in a technology startup called WiseWindow.  They have a solution which shows the predictive value of cluster analysis by applying it to social media content.  With a MILLION fans the predictive payoff comes from seeing when the circles start to get bigger and begin to provide clues to future trends.

What I find fascinating about WiseWindow is that they have connected their engine to thousands of streams of social media and found a way to examine the trajectory of the growth of clusters and turn them into leading indicators.  For example, WiseWindow is working with a client in the music industry and started analyzing 25 million comments a month with respect to the top 500 musical acts in the U.S.   The cluster analysis showed the rise and fall of intensity with respect to 84 aspects of the artists such as stage presence and music etc. The analysis indicated there is an immensely strong correlation between record sales and social media activity.  The implications for marketing tactics are profound.

I’m going to go out on limb here and say this technology will change the way Harley-Davidson does business.

Photos courtesy of MarketingProfs Research, WiseWindow and Ben Wakeling.  Full Disclosure: I have no investment in WiseWindow or MarketingProf Research.

All Rights Reserved © Northwest Harley Blog

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BarometerMy how things change.

A year ago with gas prices jacked to the $4.00 a gallon level scooter sales exploded.  Especially the 51 cc-to-155cc category as it was a break out year.  Dealers over ordered and now inventories are high.  2009 predictions seem to indicated the scooter party is over.

And speaking of party over… That “hissing sound” from UBS analyst, Robin M. Farley was the air deflating the motorcycle maker’s tires… i.e. earnings and stock price when she stated that Harley-Davidson’s spring sales have hit a wall.  Sales plummeted 35% in April/May compared to a year ago in this critical time of the year.  UBS isn’t without its own set of issues though.  Late last year Sr. Executive Raoul Weil, head of wealth management division was indicted for helping 20,000 clients conceal assets and avoid paying taxes so, one has to keep a wary eye on these so-called banking/finance veterans!

I’m sure the skillful press and public relation folks at H-D are digesting all of this and taking some of Robert S. McNamara (Secretary of Defense during Vietnam War) advice… “Never answer the question they ask; only answer the question you want to talk about.” It’s the language of sales and selling on message.  It feels like we’ve been mugged and drugged by marketing to the point we should question any manufactures trustworthiness.  But, that’s me.

Adding insult to injury, Harley along with other motorcycle manufactures can’t catch a break by the feds and were excluded from the ‘Cash for Clunkers’ bill.  The bill looks to favor owners of pickups and SUVs…just what Detroit needs to unload those overstuffed lots.  Of course the new vehicle needs to be more fuel-efficient (2 MPG) than their old guzzler to receive the $3500 credit/coupon and if you can find something that is 5 MPG higher you’ll get $4500 credit.

Now about McNamara…

Photo courtesy Wikispaces.  Full Disclosure: Editor has no investment in H-D stock.

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hog-vs-spxHarley-Davidson is scheduled to report its first-quarter 2009 financial results April 16.

Even if you’ve been leveraging “guru” Cramer (Mad Money) to help make a fortune — who in my view has no more idea of what is going to happen tomorrow than the average chimp. Pessimism runs high especially after the motorcycle manufacture took the unusual action of reporting mid-quarter sales numbers earlier this quarter. With sales down 13 percent worldwide in January and February the chance of a sunny quarter and forecast is unlikely.

Clearly HOG deserves a great deal of skepticism. Over the past year, the stock’s decline of 66% has outpaced the 40% slide endured by the broader S&P 500 Index (SPX). As a stock underperforms you’ll naturally see an uptick in investor pessimism.  There are a number of indicators which suggest traders are looking for a sharp decline out of the stock prior to April expiration.  One of the better article’s deconstructing the HOG situation can be found HERE.

Chart courtesy of Schaeffers

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cnbcWe don’t need a psychotherapist to confirm what we feel in our gut each morning — it’s unsettling at minimum to outright rage and then add the ‘Bernie’ and AIG hysteria to the mix.

Market volatility, economic instability, double digit unemployment, bailout-i-tis, along with purchasing paralysis — it’s no wonder people are staying home under the covers — if they haven’t lost their home!

In talking with folks who have not yet received a pink slip even they feel trapped in companies where their sort of grateful to still be working, but insecure because no employer is making any type of guarantee about jobs longer than two-weeks. 

But, all of this doesn’t mean we have to slog through the rest of the year in an emotional cellar dweller funk. It’s not easy, but it is possible for motorcyclists to stay up in a beat down economy.  And with minimal $$.

Here are some thoughts on how to minimize the funk:

  1. Return to your motorcycle riding roots — remember why you first got into motorcycle riding? Bring back some of that enthusiasm — maybe even master a new riding skill — do something you’ve never done just for the sheer challenge of it. Commit to finding 10 Best Rides in your local area: 10 best waterfall rides (hint: Multnomah Falls, Bridal Veil Falls); 10 best scenic landscape rides; 10 best coffee shop rides, etc. you get the idea.
  2. Get the most from motorcycle social networking — build and extend your network of motorcycle friends and colleagues. Take full advantage of blogs, social networking opportunities via BB, Facebook, MySpace, Twitter and other online communities. Consider using your motorcycle skills to connect with the world: start a blog, build a Web site, create and post an original video on YouTube of your “10 best”, or share your legislative viewpoints or showcase new riding techniques. Write reviews for Shelfari or Amazon.com — reviews of motorcycle-specific books. Hell, learn and do all of them!
  3. Get out into the motorcycle real world — if you live near a college, check out its motorcycle technology centers. Personnel in these education-technology-transfer centers excel at helping people learn — how to repair/remove a motorcycle engine is a skill that many of us could use.
  4. Improve your motorcycle soft skills — head down to the local H-D dealer to “spar” with sales and work on your negotiation and relationship-building talents — the so-called soft skills — raise your sense of self-worth by working down the prices of motorcycle upgrades and parts. Ask the question, “Is that the very best price you can offer?” Not only will the practice help you payless for upgrades today it will keep you sharp mentally and position yourself for when the economic upturn occurs because consumer prices are increasing.

Sure this is a ride in the wind and ‘feel good’ type post, but aren’t you tired of reading about some reality TV star’s secret marriage to Elvis?!

Photo courtesy Flickr.

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