Harley-Davidson (HOG) sales declined 6.7% YOY in 2017, including 8.5% in the U.S. market; so, the company will proceed with plans to close its Kansas-City, MO based final assembly plant. The consolidation, which will cost 800 employees jobs, will save the company $170 million to $200 million over the next 2 years; with an on-going annual savings of $65 million to $75 million, by 2020. The company did not comment on the status of its Wisconsin based manufacturing facilities (Menomonee Falls & Tomahawk). While aging baby boomers and difficult economic conditions, in pockets of the country, are contributing to HOG’s sales struggles; a strong U.S. dollar has enabled foreign manufacturers with overseas facilities to sell bikes in the country at lower prices (up to $3,000 less/bike) with greater profitability.
Howie Long-Short: Net income declined a staggering 82% YOY in Q4 ’17 (to $8.3 million), as a one-time charge associated with President Trump’s tax cut and a $29.4 million expenditure on a voluntary product recall more than off-set the quarterly revenue growth (+11% to $1.23 billion). Moving forward, HOG’s plans to reduce inventory volume and tightly managing costs are sensible; but, how long does it take to develop a new generation of riders capable of turning around the company’s fortunes? Cruiser and touring motorcycle sales have been on a steady decline since 2006 (when HOG generated $252.4 million in profits).
Fan Marino: Harley put forward a strong effort to reach the younger demographic, debuting the Harley-Davidson Snow Hill Climb at X Games Aspen 2018 (occurred 1/25-1/28). The medaled event placed riders on modified H-D Sportsters, with the goal to reach the top of the SuperPipe course first. Travis Whitlock was your Gold medal winner. Harley isn’t the first motorcycle company to look to X Games for future riders, in ’17 Indian Motorcycle (PII) debuted its Scout Bobber bike at the summer X games. While still in Harley’s rear-view mirror, Indian is coming on strong. The company increased U.S. sales 17% in Q4 2017 and “continued to gain significant market share for the 2017 fourth quarter and full year on a YOY basis”