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Tuesday, 26 January 2016


October's 15 percent drop in Harley share price followed by a further 10 percent in the last three months

As this edition of AMD Magazine went to press, some four weeks before Harley's 4th Quarter/full year 2015 financial results were due for release, the company's share price continued to languish in the $45.00 range - its lowest for more than a year.

This 10 year view of Harley's stock price takes in the pre-recessionary all-time high in November 2006, the height-of-recession low of March 2009, the impressive recovery seen by April 2014, and the uncertain trading since then - including an approx. 15% drop in the share price following the 2015 Q3 fiscal announcements on October 20th

Any bounce that had been anticipated by the decision to launch a further tranche of Share Buy Back activity last year has clearly been offset by the announcement that Harley would add $750m of medium and long-term debt to its balance sheet to finance the program, a less than enthusiastic response to the 2016 model year announcement and the panicked responses to their third quarter numbers - responses that included dispensing with the services of some 250 employees (and their Chief Marketing Officer) as the company sought to reassure investors by throwing additional marketing Dollars at their problems.
Neither has maintenance of their near record levels of dividend done anything other than camouflage the increasing disquiet being voiced among investors as Milwaukee continues to count the cost of failing to keep so-called "legacy" customers inside the fold at a time when Polaris has been winning plaudits (and customers) for its handling of its re-launch of Indian Motorcycle and repositioning of the Victory brand.

The "current" rolling 12-month high for Harley's share price came on December 5th 2014 at $70.15, it is now trading in the $45.00 range pending the January 28th 2016 Q4/2015 full-year fiscal announcements

The current 5-year high for Harley's share price came in May 2014 at $72.68, which put it back within touching distance (in percentage terms) of its historic pre- and post-recession highs of $74.93 on November 24th, 2006.
From $70.15 at the start of December 2014  it had dropped to a "current" (at time of going to press) rolling 12-month high of $66.33 by the end of December 2014, and then saw a quick return to a cycle of decline that has now seen a 12-month low of $45.12 reached on December 18th, 2015.

At 0.31 per quarter, Harley's 2015 dividend remains the highest since the recession and the second highest in its history

During that time the August 25th 2015 MY2016 announcement has been and gone - an announcement that triggered an approximately 10 percent drop in Harley's share price (compared to a week before the announcement) and a massive 15 percent drop in response to the late September 2015 Q3 fiscals announcement.
Since then some 250 redundancies have been undertaken and Harley's Chief Marketing Officer has left to pursue the next stage of his career elsewhere. That announcement came just after CEO Matt Levatich announced an emergency increase in marketing spend as part of a four focus area and five objective plan for additional investments totalling some $70m.
That investment was being substantially funded by job losses just as the company was taking on some $750m of medium and long-term debt in order fund the latest tranche of share buy-backs.
Despite the admirable ambition of nothing less than global motorcycle industry domination, the effects on the value of the decisions and announcements clearly have not bee seen by investors as Harley's market value has now declined by a further 10 percent.
Since the August 2013 Project Rushmore announcements that were supposed to be a platform for a return to growth in sales, Harley's market value, as expressed by its share price, has declined by some 37.5 percent since the high of December 2013.
The effective loss of over a third of market capitalization in just 24 months (for that is what the numbers show), at a time when Polaris is piling on company value and when the wider motorcycle industry is growing and evolving before our eyes, can no longer be put down to anything other than a deep seated concern among investors that Harley's responses to the issues it faces are proving inadequate.

Investors are saying that they are not yet seeing any evidence to suggest that Harley management has a handle on tackling the problems effectively.
While no formal news has yet emerged about potential take-over bids or hostile equity raids, common sense dictates that once the 2015 annuals are released at the end of January 2016 it is likely to be open season for those looking to make a quick turn on a program of blood letting, or to add the 'Bar 'n' Shield' to a portfolio balance sheet - either inside or outside the motorcycle industry, inside or outside the United States.
Whatever Harley has in its "skunk works,” it needs to deploy quickly and convincingly. A mid model year cycle announcement (or announcements) of epic proportions are called for and it is to be hoped that the radio silence that MY2016 has represented so far is akin to the quiet before the drama - Project Overlord anyone?
If the rumors that Harley may be revisiting its 1980s Nova concept thinking, or getting back on the V4 horse that it abandoned when the financial crisis left Harley stranded above the water line in 2009, or make some other attempt at a convincing quantum leap into competition territory, then it needs to get the news out there STAT.
Harley needs multiple new platforms - it needs to defend its existing business and take the battle to exploit the new areas of the riding public's increasingly diverse tastes that other manufacturers are creating.