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.
What’s interesting is that Polaris has other products than motorcycles. So they can more easily weather the hard times of low motorcycle sales than Hardley. At this point, I think Indian has a better chance of surviving than HD.
When the inevitable share price collapse at HD happens in the face of weak sales and an antediluvian product line, it is likely to be bought out to become a “cachet brand” for some Chinese manufacturer. They’ll peddle cheap bikes under the HD brand until it’s as much a joke as Cadillac in the 1980s.
Who can buy a new Harley? .A XG 500 is $10.000 [ out the door ] a bottom feeder Sportster is $15.000. [out the door ] Bolth machines are last in their class. Yesterdays tech at tomorrows prices! I just purchased a left over 2017 Yamaha R3 for $5081,00 [ out the door ] Harley should be watching very closely to Royal Enfield as the new 650 INTERCEPTOR for 7499.00 ! [ Iwill have one of them when available in the spring ] Sold off most of my harley stock last year . Not hard to tell the ship is sinking.The folks at Harley figure electric bikes are their big comeback. Good luck with that! Over priced and underwhelming!
A LOT of people aren’t giving Royal Enfield enough credit. Once they get build quality figured out, I suspect they will absolutely crush the competition in the retro market, especially once people figures out they’re mostly coming out of Asia anyway.
IF they build quality figured out. They’re not going to inspect quality into their parts or bikes – they need processes that can be counted out to produce quality. I’m not convinced they’ve got a handle on that.
I’m old enough to remember when the Royal Enfield Interceptor was a current model back in the ’60s. They had serious quality problems back then, to the point that they disappeared from the market well before the rest of their British competition. I won’t be lining up to buy one until they have been on the market for a few years. . .
Those bloody Millennials are ruining everything for corporate America! Don’t they know how this is suppose to work? All those Babyboomer shareholders get lots and lots of money and CEO’s get 1000 times more than the regular worker. And bonuses. Big fat f%#cking bonuses. Millennials aren’t following the rules! Buy the right sh#t and then invite your friends over to see that cool sh#t! Get it?!
So many corporations are faced with something similar to what the record companies and film industry were faced with in the 90’s or early 2000’s, their antiquated business plans no longer work and they have evolve to suit this changing world. Those HD electric bikes are pretty dope. That’s a start. I hope they can evolve, I’d hate to see people lose their jobs.
I saw an article elsewhere that the millennials (and others) were buying smaller bikes because of their ease of use in urban environments and on short commutes.
I’m in my early 50’s and have ridden on the road since my 16th birthday. I’ve had a 750cc or larger 2 or 4 cylinder bike since 1987, but now I’m planning to downsize (to a KTM 690 because…DIRTBIKE..WHOHOO!) because a lighter less highway capable bike better fits my riding preferences/habits now.
The world changes. Harley knew what their demographic was and its limitations. It placed more importance on listening to the grumbling of self-appointed “purists” when it released new models and tech (V-Rod, XR1200, Buell, engine upgrades etc.) than it did planning for replacement of those purists as customers.
I think the company will survive and it still will likely be the top seller of large bikes in the US, but it will be a much smaller company selling many fewer bikes.
I was chatting to some guys who ride HD’s and they assumed I couldn’t afford one because I was on a small bike so they essentially gave me permission to buy a Honda shadow 750. They just couldn’t wrap their heads around the fact that riding a small or mid-sized bike is optimal in the city. I told them “I ride it around the hood”, which that’s what it’s for but they just thought I was making excuses for what ever reasons. It’s weird having someone project their feeling of inadequacy on me. How can middle-aged adults have so little self awareness? I feel like I should carry copies of this book (below) and hand them out at times. But ultimately I mind my business.
https://www.amazon.ca/You-Are-Not-So-Smart/dp/1592407366
Brand snobbery isn’t unique to HD – there’s also, for example, a Bavarian brand that tends to draw status buyers.
Sounds like you’ve got the right idea – critical thinking.
Buy something that fits your needs, budget, and requirements such as quality, features, etc.