Harley-Davidson Swings to Loss, Shares Sputter

DAN BURROWS Posted 12:00 PM 01/22/10 Company News, Earnings
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The recession continued to hammer Harley-Davidson (HOG) in the fourth quarter as the iconic motorcycle maker reported a wider-than-expected loss. The latest results mark the sixth consecutive quarter in which Harley has failed to meet Wall Street estimates. Shares fell sharply on the news.

Harley, whose high-end bikes cost as much as $25,000, has seen shipments and sales tumble as the recession has made expensive, discretionary purchases too much of a reach for too many of its customers. The company has been going through a brutal restructuring this year amid the downturn, but continued to miss Street forecasts by a wide margin.

For the three months ended Dec. 31, the Milwaukee company swung to a net loss of $218.7 million, or 94 cents, from a year-ago profit of $77.8 million, or 34 cents. Excluding discontinued operations, Harley reported a loss of 63 cents a share, missing analysts' average forecast by a stunning 31 cents, according to Thomson Reuters.

Sluggish demand caused revenue to tumble 40% to $764.5 million from $1.28 billion a year ago. The top-line figure essentially matched analysts' view, but gross margin contracted sharply amid a 53% decline in shipments.


"Our full-year 2009 results were affected by the difficult economy, as well as the planned actions we took that resulted in restructuring charges of $224 million," said Chief Executive Keith Wandell in a statement. "We are confident we have made the right decisions for our future, and we are executing our strategy with focused intensity."

William Blair & Co. analyst Sharon Zackfia told clients ahead of the report that Harley is likely several quarters away from achieving positive sales trends in the U.S.

For the full year the company reported a net loss of $55.1 million, or 24 cents, versus year-ago earnings of $654.7 million, or $2.79. Revenue declined 23% to $4.29 billion from $5.58 billion a year ago.

 

They are taking a beating right now, but they'll recover in time.

 

Unfortunately, all businesses are suffering. As with other posts of similar nature... those dealerships that work with the customer are most likely to succed while those that do not will suffer the most. As with Nature there is a law "Survival of the fittest" and it applies to businesses as well. We are all tighening our financial belts... I know I am. I do purchase my equipment, accessories, and clothes from the dealers that have done me right.

 

RIGHT ON.......customer service IS #1. No loss to the dealers with the losy attitudes that take the gas pipe.

 

These talking heads at Harley crack me up. This is the same bunch that claims their snowmobiles stopped selling because we stopped getting snow...nevermind the fact that their snowmobiles were junk. The recession is part of it, but the bikes are another part. Many people who finally had the ability to jump into motorcycling back in the 90's and early 2K's have become educated about motorcycles and have decided to not ride at all or to buy a different brand with more power and features. Luckily for Harley, their core group is still here and still supporting them, although not at the level they would like.

 

All the actions taken by the government for the last 10 or 15 years have been directed at wiping out the middle class.

Tax incentives for taking production oversea's "outsourcing"! Most favored nation trading status with China. Unlimited number it seems for H1B Visa's from India, taking most high paying skilled positions.

Overturning the Roosevelt Acts and regulations that seperated Wall Street from the banking sector. The international banker and Wall Street lobby has userped the voice of the people in a representive style republic.

Lobbyist have changed our style of government to a corpocracy and it seems they are hell bent on destroying the working and middle class. Harley as a corporation imports parts and oursources for cheap labor and lower legacy cost.

The thing is if you wipe out the class of people that have the discretionary cash to buy a high end recreation product your business will fail if you depend on that sector to buy your product.

Harley will survive only if the working or middle class survives! With the current policy of destroying all the manufacturing segment and using H1B Visa's to replace every professional position you can, the middle class/working class is in trouble long term. So is Harley!

 

Looks like HD took another hit. Literally

http://www.upi.com/Top_News/US/2010/...3461264312821/

 

This got me thinking on this cold rainy crappy day. Yeah - there's still a high level of "corporate mentality" at H-D, but overall I think they're doing as well as one could reasonably expect, given the suck-*** economy. I love the company and its products - but they are having an increasingly rough go of meeting the ever-tighter EPA regulations making their big air-cooled V-Twins. And the old guard riders are not going to keep them in business... they are going to have to appeal to the next generation of riders, which I think is going to be a difficult uphill climb for them.

I didn't get my first Harley until 2007, but I had ridden metrics since I was 16. I never see any riders under 30 around here on Harleys - they are all on metrics, usually sportbikes - and I hardly ever see anyone over 40 on anything but a Harley - except women, interestingly. Women seem to ride all kinds of bikes - but a lot more ride metrics than ride Harleys around these parts. The 30-to-40 crowd is the "crossover" age from metrics to Harleys, it seems. H-D has always been a brand you step up to when and if you can afford it - but since so many Boomers have had their 401ks and IRAs crushed since 2008, and many are un(der)employed - they have a lot less disposable income now, which doesn't bode well for H-D in the long term unless they can keep the crossover going with Yuppies who do have the bucks for a Harley.

But how could this business downturn really be any surprise for a company making expensive luxury items, in a severe recession, that no one really needs? I sold my HOG stock two years ago at $61 per share, and I'm so glad I did! Let's face it - no one needs a $20,000 (or more) motorcycle - or a motorcycle at all, really. We buy them because they are fun to ride and they represent a lifestyle we want to project and enjoy - not because they are cost-effective, nor even very useful, basic transportation. We just feel good owning a Harley! I have a full dresser, outfitted to the hilt, that I love to ride, but I would never even think about going to get groceries or to Home Depot on it - unless it's just for a gallon of milk or some screws, and it's a nice day out (which we haven't had here in over two months now...). Can't haul a weeks worth of groceries nor 8 foot 2x4s on a motorcycle! I ride for the pure fun of it... and absolutely no other reason whatsoever. I would ride to work if I could, but when I visit customers I have to dress up a bit - and I really don't want to ride in the morning if it's freezing cold, or in the afternoon in the summer when it's 90 degrees in heavy traffic on Atlanta highways - in semi-business attire. I did that for awhile in the first year I had my Harley, but it got old pretty quickly.

Now, the dealers are another story... I think that many of them just don't get it yet that their customer base is changing dramatically and shrinking, younger riders are all about crotch rockets and bigger metrics, their products are just too expensive for lots of riders (including my wife, who now wants a sportbike in addition to her 2008 V-Star 1100 Classic), and many dealers are still not really focused on providing outstanding customer service and value with regard to the metric competition. The ones around here still seem to largely have the attitude of "if you're not really serious about forking over $25K today, then I really don't have the time nor interest in talking with you." I used to go the dealer here where I bought my used bike at least twice a month, just to see what's new... but I stopped doing that after the first six months. Now I buy nearly everything for my bike from all of the discounters on the internet - for both H-D P&A, and for aftermarket stuff.

Having said all that, I would go out today buy a brand new 2010 Ultra or Road Glide Custom if I had the available cash - but I don't have it and don't expect to have it this year, and most other folks these days don't either.

 

I agree with absolutely everything you said! H-D and the USA are in trouble - and it's going to get worse, not better, anytime soon!

 

is that they might end up throwing the baby out with the bath water. Shedding cost's and circling the wagons might have worked a couple of decades ago. These bikes sell and will always sell because Harley keep to it's roots but if they do something stupid and outsource to bring down costs, it'll take them forever to bring back their ability to produce sifficient #'s when they start coming in again. I mean look how stupid people are still buying mortgages they have no hope of paying and the market is still flying. I have no business skills to speak of but Harley needs only to wait it out and not be so damn concerned with the margins at all times. These things will come around. Especially after all those wonderful tropps get out of the forces and want to ride the dream around the country.