Harley-Davidson and Polaris, the two largest manufacturers of motorcycles in North America, both had bad news today when their fourth-quarter earnings reports were released.
For Harley-Davidson, the news was especially bad. The Motor Company had a 10.1 per cent drop in sales in the US in 2018’s Q4, when compared to 2017’s Q4 (there was a 2.4 per cent increase in Canada). Overall for 2018, Harley-Davidson saw sales drop 10.2 per cent in the US in 2018 when compared to 2017 (in Canada, sales slumped 3.9 per cent from the year before). Overall, Harley-Davidson sold 228,051 motorcycles worldwide in 2018, down 6.1 per cent from the 242,788 bikes sold in 2017.
The Harley-Davidson financial report states “On a full-year basis, the U.S. 601+cc industry was down 8.7 percent and Harley-Davidson held market share of 49.7 percent,” which means Harley-Davidson’s numbers might actually have been better than the rest of the industry, but things still aren’t good.
Those slumping sales translated to some disappointing financials. Harley-Davidson made half a million dollars of net income in 2018’s Q4; in 2017, that number was $8.3 million. The numbers weren’t all bad, though, as Harley-Davidson says cash from operations was up over $200 million when compared to 2017’s number, a 20 per cent jump, and there was a slight 0.4 per cent increase in bikes sold overseas.
However, there are very interesting details in the financial statement, including a slump in parts and accessories sales (down 5.7 per cent over the year) and “general merchandise” (down 7.9 per cent). It can’t be good to see these cash cows starting to dry up.
Also intriguing was the report’s statement “Operating margin as a percent of revenue decreased in the quarter due to restructuring charges, incremental tariffs and higher recall costs.” In other words, trade wars, recalls and overhauling the company to prepare for the future all cost the company money.
Polaris 2018 Q4 results
As for Polaris: factoring in ATV sales, the company didn’t do that poorly, but according to its financial release, sales in the motorcycle segment were $87 million in 2018’s Q4, which is down 15 per cent from 2017’s number. It wasn’t Indian’s fault; Polaris says Indian actually saw an increase in sales, but sales of Slingshot three-wheelers declined. As a result, the motorcycle arm of the company saw $2 million profit in Q4, down from 2017’s $8 million.
Polaris also says Indian gained market share in 2018’s Q4, when compared to 2017’s Q4.
But wait, there’s more! According to Polaris, “The decrease in gross profit was the result of negative product mix, along with tariff costs and higher logistics and commodity costs.” It seems both Harley-Davidson and Polaris are blaming tariffs for their financial situation in 2018’s last quarter; remember, the EU’s tariff on American-made bikes didn’t come into effect until late June, so its ramifications would take a while to show up in sales. Now, we’re seeing the effects of all that financial squabbling last summer.