Harley-Davidson U.S. Sales Decline 8.5% in 2017, To Close K.C. Plant, Slash 800 Jobs

Harley 200x200

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

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Indian Takes ’17 AFT Championship, Harley Davidson Investing Heavily to Win in ’18

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 MarinoHOG 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

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