Harley Davidson, Inc. (HOG) is investing a record $562,500 in contingency program funding for the 2018 American Flat Track race schedule, after rival Indian Wrecking Crew riders took the Top 3 spots in the 2017 AFT Twins class; the brands’ first championship after a 60-year absence from the sport. The contingency program money serves as an incentive for unaffiliated riders to race specific bike models; with riders receiving payouts for winning (and placing in) the 18 circuit races. Flat Track, where competitors race on a 1.5-mile-long tracks at over 140 MPH, is valued by motorcycle manufacturers; seen as an entry point to the valuable 18-24-year-old demographic, riders who choose their allegiance and remain loyal as they age.
Howie Long-Short: Indian Motorcycle Co. was acquired by Polaris Industries (PII) in 2011; relaunching its racing team for the 2014 season. PII had a great Q3’ 17, increasing revenue 25% YOY to a record $1.479 billion; with a net income, up 153.6% YOY to $81.9 million. Indian Motorcycle retail sales (up 16% YOY) helped to drive the growth; with the brand’s market share exceeded 10% in September.
Fan Marino: HOG is serious about taking back the title in 2018, offering $35,250 per race (winners take home $10,000) to “privateers” riding XG750R or XR750 models. To put that amount in perspective, HOG’s entire 2015 program cost just $96,000! For those wondering, Indian riders won the ’17 Championship racing Scout FTR750s. Indian isn’t just handing the ’18 Championship to HOG though, PII is offering $350,000 in performance bonuses ($18,500 per race) for “privateers” who prefer their bikes.
Harley-Davidson Is Spending a Half-Million Dollars to Win the Racing Crown Back From Indian
For the balance of today’s newsletter, sign-up here!
Harley Davidson (HOG) reported Q3 earnings that beat analyst predictions and the company announced it will meet full year shipment forecasts, despite lagging sales and net income that declined from $114.1 million to $68.2 million YOY. HOG reported U.S. retail sales declined 8.1% for the quarter, with total global sales down 6.9% from Q3 ‘16. Moving forward the company hopes that a price increase on some of their bikes, favorable foreign exchange rates and more models to choose from, will lead to improved profits.
Howie Long-Short: Harley’s core audience is aging. They’re not buying new bikes and they’re flooding the resale market with used ones. The younger demographic is scooping up bargains on the resale market or opting for lower-margin models. Harley can’t solve those problems and they have no control over exchange rates, but they are doing a good job controlling what they can. The company is introducing 17 new models in 2018, 9 of which are under $12,000. They’re giving the consumer what they want!
Fan Marino: Millennial motorcycle enthusiasts aren’t the only ones opting to save where they can. NBA star LeBron James readily admits to being thrifty. Despite an estimated net worth of $400 million, James was recently quoted as saying “I’m not turning on data roaming, I’m not buying no apps, I still got Pandora with commercials.” With that attitude, James is certain to avoid lists like Time Inc.’s “10 Insanely Rich Athletes Humbled By Financial Ruin”.
Harley-Davidson beats profit estimates, backs full-year forecast
For the balance of today’s newsletter, sign-up here!
Harley-Davidson (HOG) reported retail sales were down 9.3% YOY in Q2 ’17 amidst an industry wide slowdown; as baby boomers, historically the company’s biggest customers, aren’t buying new bikes. To exacerbate the issue, boomers are selling their old HOG bikes, which is driving prices down within the used market. As a result, the used Harley market is booming, with pre-owned HOGs selling at 2.5x the rate of new ones. The growth within the used market reflects the strength of the Harley-Davidson brand, but those sales obviously don’t impact the company’s bottom line.
Howie Long-Short: Harley is rolling out 17 new models in 2018, 9 of which are under $12,000. Smart. Millennials want to ride HOGs, they just want cheaper ones.
Fan Marino: Harley envisions adding 2 million new riders in the U.S., by 2027. Their riding schools turn out 65,000 new riders/year. Howie is the mathematician, but 65,000/year over 10 years is only 650,000. Where are the other 1.35 million people coming from?
How Used Bike Growth Is Impacting Harley-Davidson
Harley-Davidson (HOG) announced 17 new bike models that will hit the streets in 2018, the 115 year anniversary of the company. The motorcycle manufacturer announced the upcoming releases of 12 new softails that will include the most powerful engine ever offered on a HOG cruiser, and 5 new touring bikes, each with 3 custom vehicle operations options. The release is the company’s largest product development project ever and part of CEO Matt Levatich’s plan to add 100 new models over the next 10 years.
Harley-Davidson Rolls Out 17 Stunning New Models
Howie Long-Short: Q2 sales were down 6.7% YOY, but that figure only tells part of the story. While the remainder of the industry is slashing prices to account for the industry-wide retail slowdown, HOG prices (and margins) remain at a premium. IF the company chose to discount, it would likely show growth. Oh, and even with the drop in sales, they still own 50% of the U.S. motorcycle market.
Fan Marino: The concern for HOG has been that as baby boomers continue to age, they’ll buy motorcycles less frequently. Recent reports indicate that motorcycle rider demographics are getting younger, more urban and more female, which would bode well for the industry; but as a 30-something who lives in NYC, that is certainly news to me.
The Milwaukee Bucks have announced a partnership with long-time sponsor, Harley Davidson (HOG), that will enable the motorcycle brand to place their logo on the team’s jersey beginning next season. The patch has the potential to receive 2 billion+ impressions across Bucks local & national broadcasts, video and digital platforms. HOG was founded in Milwaukee and maintains their corporate headquarters in the city. It should be noted that NBA contracts prohibit players from riding motorcycles.
Bucks sign jersey patch deal with Harley-Davidson
Howie Long-Short: Certainly some synergy between Bucks and Harley fans, but as a long-time sponsor, this move is about reaching the fans of the other 29 teams.
Fan Marino: You have to wonder if Bobby Hurley & Jay Williams read the terms of their contracts, before purchasing their bikes.