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Shares in Harley Davidson tumbled Tuesday after the company posted a fourth-quarter loss and said it was setting "realistic expectations" after years of underperformance.
Harley also revealed a five-year turnaround plan that includes $190 million to $250 million a year in capital investments and a focus on touring, cruiser and trike markets to achieve higher growth in motorcycle revenue.
The company said its bike shipments to dealers for 2020 fell 32% to about 145,000 units, one of the lowest levels since the 1990s. In the recent quarter, bike shipments were down 48% to about 40,500 units.
Part of the company's strategy has been to tighten inventories to address an over-supplied market, along with eliminating discounted pricing.
"We will not chase volume for volume's sake," Jochen Zeitz, chairman, president and CEO said in a conference call with analysts.
Harley posted a fourth-quarter loss of $96 million, or 63 cents per share, compared with a profit of $13 million, or 9 cents per share, a year earlier. Revenue fell to $725 million, down 32% from a year earlier.
The company said its North American motorcycle sales were down 15% in the quarter and 18% for the full year. Worldwide, it exited 39 markets in 2020, and its bike sales were down 17% for the year.
Highlights of the five-year turnaround plan, named The Hardwire, include launching a used bike program called Harley-Davidson Certified, creating a separate division for electric motorcycle development, and extending employee ownership to all 4,500 employees through an equity grant.
We launch The Hardwire with capabilities, assets and a legacy unmatched by any competitor," Zeitz said.
Still, it's going to be a hard road back for the world's largest manufacturer of heavyweight motorcycles as its baby-boomer customer base ages out of riding and not enough young people have embraced the big cruiser and touring bikes.
Following the earnings announcement and conference call with analysts, Harley shares tumbled nearly 19% as investors showed skepticism. The stock closed at $33.28, down 17% for the day.
Obviously the earnings were a big disappointment. Until they can prove Wall Street wrong, I think the stock is going to continue to be volatile," said analyst Brian Yarbrough with Edward Jones Co.
They are doing the right thing by trying to correct the supply and demand problem. There has been way too much supply in the market and not enough demand," Yarbrough said. "But I just don't know that shrinking your way to profitability works."
The biggest cloud that hangs over Harley is the cloud of aging demographics and younger customers not being interested in their bikes. Whether that is the truth or not, it's the cloud that hangs over them from an investor standpoint," he added.
A year ago, then-CEO Matt Levatich said 2020 would be a pivotal year as the company focused on attracting new customers through smaller, more versatile bikes and electric motorcycles.
Shortly after, Levatich left the company after 26 years. Under Zeitz's leadership, Harley-Davidson has focused on big bikes that are more popular with older, wealthier, experienced riders
Harley also revealed a five-year turnaround plan that includes $190 million to $250 million a year in capital investments and a focus on touring, cruiser and trike markets to achieve higher growth in motorcycle revenue.
The company said its bike shipments to dealers for 2020 fell 32% to about 145,000 units, one of the lowest levels since the 1990s. In the recent quarter, bike shipments were down 48% to about 40,500 units.
Part of the company's strategy has been to tighten inventories to address an over-supplied market, along with eliminating discounted pricing.
"We will not chase volume for volume's sake," Jochen Zeitz, chairman, president and CEO said in a conference call with analysts.
Harley posted a fourth-quarter loss of $96 million, or 63 cents per share, compared with a profit of $13 million, or 9 cents per share, a year earlier. Revenue fell to $725 million, down 32% from a year earlier.
The company said its North American motorcycle sales were down 15% in the quarter and 18% for the full year. Worldwide, it exited 39 markets in 2020, and its bike sales were down 17% for the year.
Highlights of the five-year turnaround plan, named The Hardwire, include launching a used bike program called Harley-Davidson Certified, creating a separate division for electric motorcycle development, and extending employee ownership to all 4,500 employees through an equity grant.
We launch The Hardwire with capabilities, assets and a legacy unmatched by any competitor," Zeitz said.
Still, it's going to be a hard road back for the world's largest manufacturer of heavyweight motorcycles as its baby-boomer customer base ages out of riding and not enough young people have embraced the big cruiser and touring bikes.
Following the earnings announcement and conference call with analysts, Harley shares tumbled nearly 19% as investors showed skepticism. The stock closed at $33.28, down 17% for the day.
Obviously the earnings were a big disappointment. Until they can prove Wall Street wrong, I think the stock is going to continue to be volatile," said analyst Brian Yarbrough with Edward Jones Co.
They are doing the right thing by trying to correct the supply and demand problem. There has been way too much supply in the market and not enough demand," Yarbrough said. "But I just don't know that shrinking your way to profitability works."
The biggest cloud that hangs over Harley is the cloud of aging demographics and younger customers not being interested in their bikes. Whether that is the truth or not, it's the cloud that hangs over them from an investor standpoint," he added.
A year ago, then-CEO Matt Levatich said 2020 would be a pivotal year as the company focused on attracting new customers through smaller, more versatile bikes and electric motorcycles.
Shortly after, Levatich left the company after 26 years. Under Zeitz's leadership, Harley-Davidson has focused on big bikes that are more popular with older, wealthier, experienced riders
