Harley unveils turnaround plan after swinging to quarterly loss

CHICAGO (Reuters) – Harley-Davidson Inc on Tuesday unveiled a five-year turnaround plan to target low double-digit earnings growth through 2025 after unexpectedly swinging to a fourth-quarter loss.

FILE PHOTO: The logo of U.S. motorcycle company Harley-Davidson is seen on one of their models at a shop in Paris, France, August 16, 2018. REUTERS/Philippe Wojazer

The latest turnaround strategy from the company, which has struggled for years to grow sales beyond baby boomers, comes after a decade-long effort to grow sales overseas and draw younger riders with cheaper and newer models.

Harley said it would invest between $190 million to $250 million a year in its strongest motorcycle segments – touring, large cruiser and trike – to achieve mid single-digit growth in bike revenue.

Under Chief Executive Jochen Zeitz, who took charge last year, Harley has shifted focus back to big bikes, traditional markets like the United States and Europe, and older and wealthier customers.

Harley’s shares, which have gained 38% since last July when the company shared the plan to reboot its business, were down 5.4% in pre-market trade.

As part of Zeitz’s strategy, the company has trimmed its workforce, global dealer network, eliminated slow-selling models and exited 39 markets where weak sales and profits do not justify investment.

To enhance the desirability of Harley’s brand, Zeitz is focusing on profitable growth. He has done away with promotional offers, tightened supplies and reduced inventory, enabling dealers to charge asking prices for Harley bikes.

This led to a 59% reduction in dealer inventory last year. A leaner inventory as well as a switch in the introduction of new models to January from August, however, took a toll on the bike sales in the latest quarter.

Harley saw a 39% annual drop in revenue in the latest quarter as motorcycle shipments almost halved. Retail sales in the United States, the company’s biggest market, fell about an annual 15% in the three months to end-December, marking the 16th straight quarter of sales decline.

The decline comes at a time when motorcycle sales have gone up on the back of a demand for socially distanced recreational outdoor activity.

Polaris Inc last month said retail sales of its Indian brand of motorcycles in North America were up more than 30% in the December quarter. In contrast, Harley’s sales in the region declined 15.4% year-on-year.

Harley posted a quarterly loss of 63 cents per share, compared with a profit of 9 cents per share a year earlier. Analysts surveyed by Refinitiv, on average, expected the company to report a profit of 14 cents a share.

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