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Wednesday, 19 April 2017


First quarter market share and stock price gains in the U.S. as reduced shipments help dealers move MY 2016 carry-over inventory

Harley-Davidson’s first quarter 2017 results paint a mixed picture of the company’s fortunes. Overall, their performance to March 31 was no worse than the factory had been forecasting when reacting to the “new reality” that their 2016 annual results represented back in January, with “First quarter U.S. retail sales in line with our projections,” according to CEO Matt Levatich.
“We remain confident in our full-year plan despite international retail sales being down in the first quarter. We are very pleased with our continued growth in U.S. market share and the progress our U.S. dealers made in reducing their inventory of 2016 motorcycles in the quarter.”
Harley-Davidson retail motorcycle sales in the U.S. were down -5.7 percent compared to the year-ago quarter, driven by soft industry sales and the company’s decision to reduce shipments of model year 2017 motorcycles - a decision that appears to have succeeded in helping dealers focus on selling down their model year 2016 retail inventory.
Harley’s U.S. market share for the quarter was 51.3 percent in the 601cc-plus segment, up compared to the first quarter in 2016.
Overall, international retail sales decreased -1.8 percent compared to the same quarter in 2016, resulting in worldwide Harley retail motorcycle sales being down -4.2 percent compared to the same period in 2016.


International retail sales were down behind weak sales in Asia Pacific (in particular, but partially offset by strong growth in percentage terms in Latin America). Retail sales in EMEA and Canada were both down as they competed against strong prior year first quarter growth of +8.8 percent and +16.3 percent respectively.
However, at just -0.4 percent down, their EMEA (mostly European) sales have actually held up well in the context of poor official “new model” first quarter registration statistics in Europe. Triggered by a rush in the final quarter of 2016 to pre-register held-over Euro 3 compliant inventory (in advance of the January 1 deadline for Euro 4 new model compliance), reported first quarter demand in Europe is being artificially supressed as tens of thousands of zero mileage pre-registered motorcycles (from all manufacturers) sat in dealer showrooms with massive discounts and incentives.
Following their 2016 fiscals, the company started to cast its “long-term strategy” as a ten-year plan – citing the objectives it has set itself as achievements to be realized through 2027. In doing so Harley has reiterated the plans unveiled in January this year, now adding more detail to the bones of its prior statements - not least in terms of the increasing emphasis it continues to place on its international business.
“We recently announced our plan to build the next generation of Harley-Davidson riders globally. We are energized by our focused strategy, and we believe our powerful brand and commitment to excellence will position us to drive demand for our products and grow our sport,” said Levatich.

Harley’s Q1 statement lists its five key 10-year objectives as aiming to “build” two million new Harley-Davidson riders in the U.S.; grow international business to “50 percent of annual volume” (which is hugely ambitious given the nature of the competition it faces outside the U.S.); launch 100 new “high-impact” motorcycles (which means it is ramping up its 50 new models in the next five- year plan dramatically); deliver “superior return on invested capital” for Harley-Davidson Motor Company - the ownership vehicle through which it has its S&P 500 share listing and, in a clear side-swipe at those who think the present domestic U.S. political climate should result in an abrogation of corporate responsibility in such matters, Harley says it intends that the growth of its business should be achieved “without growing its environmental impact.”
By way of a three-year strategic focus Harley says that in addition to creating new customers and launching new models it wants to strengthen and expand its dealer network, target competitive riders, expand its H-D Touring offer still further, maintain its Premium Brand status and embrace used H-D motorcycles (Harley added seven new dealerships internationally during the first quarter of 2017 and is targeting between 150 and 200 more international dealers by the end of 2020).
For 2017, Harley-Davidson continues to anticipate full-year motorcycle shipments to be flat to down modestly in comparison to 2016; the company says it expects to ship approximately 80,000 to 85,000 motorcycles in the second quarter of 2017.
Harley-Davidson continues to expect full-year 2017 operating and gross margin as a percent of revenue to be approximately in line with 2016, and for full-year 2017 capital expenditures to be $200 million to $220 million.
First quarter 2017 diluted EPS decreased -22.8 percent to $1.05 compared to $1.36 in the same period of 2016. First quarter net income was $186.4 million on consolidated revenue of $1.50 billion versus net income of $250.5 million on consolidated revenue of $1.75 billion in the first quarter of last year.