Zeitz Cites +5% H-D US Touring Segment Growth as Cover for Near Halving of Operating Profit; 2024 Global Retail -17% at 148,862 Units; Market Cap Collapses to $3.31bn
Harley-Davidson, Inc. (HDI) reported fourth quarter and full year 2024 results and provided 2025 outlook (on February 5) that sent shares tumbling from $30.02 at the start of the year to as low as $25.77 at one stage.
This dragged the company's market capitalization down to as low as $3.31bn, fuelling concerns that Harley-Davidson is increasingly vulnerable to a hostile or even foreign (Chinese?) take-over bid. From a 2024 post financial crisis high of $16.27bn in April 2024, Harley's stock market value is now approaching the March 2020 Covid triggered 10-year low of around $3bn.
HDMC global motorcycle shipments of 148,862 units (excluding LiveWire) were down by -17% compared to 2023. Available trend data show that H-D unit sales (including LiveWire) have tanked in the past decade. From 267,999 total units in 2014, the 2024 comparable was 151,229 units; a collapse of 116,700 units (-43.57%) as the Hardwire five-year strategic plan continues its ambition of achieving brand exclusivity through scarcity.
In 2022 Harley-Davidson Chairman, President and CEO Jochen Zeitz told investors that Stage II of the Hardwire five-year corporate strategy (slated to run through the end of 2025) would see key investor objectives achieved, including steering Harley to becoming "one of the most powerful and the most desirable motorcycle brands in the world, evolving as a global lifestyle brand rooted in 'MotoCulture'."
A brand that would "grow beyond motorcycles", delivering "growth and profitability, projecting [a] strong financial and growth profile" that would provide "solid fundamentals for motorcycle demand" with the fifth pillar of the "integrated customer experience" strategy delivering "significant improvement in dealer health."
In February 2025 Zeitz stated that 2024 "saw our performance being significantly impacted by the continued cyclical headwinds for discretionary products, including the high-interest rate environment affecting consumer confidence.
"The launch of our new Street Glide and Road Glide touring motorcycles contributed to nearly 5% growth in the U.S. Touring segment and drove H-D's market share to 74.5% in '24. The decisions we have made and the bold actions we have taken as part of our Hardwire strategy are continuing to strengthen our foundation for the future.
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| Jochen Zeitz: Time runs out on his Hardwire five-year strategic plan at the end of 2025 |
"The industry has faced many challenges over the past couple of years, impacting at all levels, but we believe we are best positioned to take advantage of any uptick in consumption."
The 2024 financial results 'highlights' saw Harley deliver diluted EPS of $3.44; HDMC operating income of $278m for an operating margin of 6.7%; HDMC global motorcycle shipments of 148,862, down 17% from prior year; North America retail sales of Touring, Trike, and CVO up more than 8%; dealer inventory levels of new motorcycles finishing the year down over 4% year-over-year and HDFS operating income of $248m, up 6% from prior year.
However, the fourth quarter of 2024 saw delivery of a diluted EPS loss of -$0.93; HDMC revenue of $420m, down 47% vs. prior year; HDMC global motorcycle shipments of 14,010, down 53% from prior year; global retail sales of new motorcycles down 15% vs. prior year.
For 2025 the Company expects HDMC revenue to be flat to down 5% with operating income margin of 7.0% to 8.0% and HDFS operating income down 10% to 15%; diluted earnings per share flat to down 5% and HDI capital investments of $225 to $250m. LiveWire electric motorcycle unit sales are forecast for the 1,000-1,500 range with an operating loss of $70 to $80m.
Those were the 'highlights'. The details (taken more or less directly from the February 05, 2025 release on) were no less depressing.
Fourth quarter consolidated revenue was down 35%, driven by a revenue decline of 47% at HDMC, partially offset by revenue growth of 4% at HDFS. In the fourth quarter, the consolidated operating loss was $193 million which compares to an operating loss of $21 million in the prior year's period.
For the full year, consolidated revenue was down 11% compared to the prior year. This was driven by revenue decreases of 15% at HDMC and by $12 million at LiveWire, partially offset by a revenue increase of 9% at HDFS. For the full year, consolidated operating income was down 47% compared to last year. This was driven by an operating income decline of 58% at HDMC, partially offset by a 6% increase at HDFS. The full year operating loss at LiveWire was $110m, which was in-line with our expectations.
Fourth quarter, global motorcycle shipments at HDMC decreased 53% from a year ago, due to focus on dealer channel de-stocking and market conditions. HDMC revenue was down 47%, due to lower volumes and unfavorable mix, partially offset by higher pricing. Gross profit came in at a loss of $3m compared to gross profit of $181m in the prior year period.
The result was additionally driven by negative operating leverage and adverse foreign exchange, partially offset by lower raw material costs and supply management. Operating expenses were $15m lower than a year ago. Operating loss was $214m in the fourth quarter compared to an operating loss of $44m in the prior period.
For the full year, global motorcycle shipments decreased 17% from the prior year. HDMC revenue was down 15%, due to lower volumes and unfavorable net pricing, partially offset by positive impacts of shipment mix. Gross margin was lower by 4.3 points in 2024 compared to 2023. The lower margin was driven by the revenue drivers cited, as well as negative operating leverage and negative impacts of net shipment mix, partially offset by the benefits of lower logistics and raw material costs. Operating expenses were $28m lower than a year ago. Operating income margin was 6.7%, which is 6.9 points lower compared to 2023.
Fourth quarter, global retail sales of new motorcycles were down 15% versus the prior year. In North America, retail sales declined by 13%, with the bulk of declines in the large cruiser category, which includes the Softail motorcycle. In EMEA, retail sales declined by 7%, driven by weakness in Germany and the surrounding region. The 26% decline in APAC was driven by weakness in Japan and China, partially offset by growth in Australia and New Zealand. Latin America sales decreased by 7%, driven by declines in Brazil and Mexico.
For the full year 2024, global retail sales of new motorcycles were down 7% versus prior year. North American retail sales declined by 4%, where first half was up 2%, while the second half was down. In North America, Touring, Trike, and CVO retail sales were up more than 8% for the full year of 2024. EMEA retail sales declined by 11% for the full year, where a majority of the retail weakness was in non-core motorcycles. Touring, Trike, and CVO retail sales were up 10% year over year. APAC retail sales declined by 18% for the full year driven by weakness in Japan and China.
LiveWire revenue decreased 32% in Q4 compared to the prior year, driven by lower unit sales of EV motorcycles in the quarter. LiveWire operating loss of $26m, $9m less than a year ago, was in-line with our expectations. For the full year, LiveWire revenue decreased by 31% compared to the prior year, driven by lower unit sales of EV motorcycles and of STACYC electric bikes. LiveWire operating loss of $110m was $7m less than prior year and was in-line with our expectations. For the full year, LiveWire sold 612 EV motorcycles, which compares to 660 EV motorcycles sold in 2023. LiveWire continues to invest in new products and action initiatives to reduce the overall cost of sales for EV motorcycles.
In 2024 HDI generated $1.1bn of cash from operating activities; paid cash dividends of $91 million; repurchased $450m of shares (12.5 million shares) on a discretionary basis and was sat on cash and cash equivalents of $1.6bn at year end [worth nearly 50% of market capitalization].
Vulnerable
In addition to Earnings Per Share (EPS), and aside from the dubious benefits of programs to buy back declining price stock, part of any shareholder value delivery strategy should, of course, include maintenance of the share price relative to other investment opportunities.
Since being deprived of its treasured S&P 500 listing in June 2020, a month after Harley confirmed Jochen 'Rewire/Hardwire' Zeitz as the permanent CEO replacement for Matt 'More Roads' Levatich, Harley's falling market capitalization has been tracked by its share price performance relative to that of the S&P 500 index:
Declining Share
As a model that could potentially compete for sales from other manufacturers, the clearly failed Hardwire strategy suggests that the opportunity for a fresh additional direction of travel represented by a model such as the 2025 1250 cc Pan America ST (Sports Touring) is likely not going to be one that Harley will capitalize on.
Harley must embrace the simple truth of the present global motorcycle industry - namely that growth can only come by taking buyers from other brands. Recent history shows that in the USA Harley's market share among all 601+ cc unit registrations has collapsed from 54.9% in 2013 to 37.3% in 2024, and from 10.1% in Europe in 2018 to just 5% in 2024 - pretty much back to where it was in the 1990s.
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