Is Harley-Davidson on the Financial Comeback Trail?
Now, I’ve been called a lot of things over the years, most of them unpleasant. More than a few times, depending on what exactly it was that I said, people have told me that I’m biased, ignorant, and some more colorful things that you can’t repeat in polite company.
A few folks have, from time to time, taken exception to the fact that with my dusty old business degree and some time spent in bureaucratic management positions I have learned to read between the lines.
Case in point – some people took me to task because I said that Harley was struggling this year and their argument was “they can’t be, they just introduced a new engine platform!”
Someone else thought that I was “picking on” Mother Davidson when I pointed out that the first losers of the “Milwaukee Eight” were the factory workers who were laid off a week later.
So now that Harley has released third quarter earnings and the brokers are singing about how H-D is on the comeback trail, I have to disagree. The number of new bikes registered this year in North America has dropped nearly 6% since a year ago (which only means that there are fewer new bikes hitting the street). More importantly, the number of Harleys that went out of the showroom this year versus last year was down 7.1% in North America.
Now, we could play Devil’s advocate and say that folks are holding on to their bike to trade up to the new powertrain in the 2017 year, and that could be true, but the facts that we can’t avoid are that the base group that H-D puts its money towards – Baby Boomers – are getting older and the next Generation – mine – is still raising kids and has a house payment and less discretionary income. My question is why the focus on all the bigger bikes and not the entry level ones? There’s where the market is right now. Retired dudes don’t have many more purchases in them. Twenty-somethings? They have a lifetime of purchases and they can be brand loyal. Think about it – a 25-year-old either has an iPhone or an Android. They don’t switch back and forth – one or the other.
Taking that to its logical extreme, Harley would do well to follow Apple’s marketing model and branding – people lining up for a new phone that does exactly what the old phone did is a pretty good deal!
Matt Levatich, president and CEO of Harley-Davidson, did come out in the earnings report and give us his spin, “We continue to effectively navigate a fiercely competitive environment and an ongoing weak U.S. industry. We are pleased with the positive results and the enthusiasm we’ve seen for our Model Year 2017 motorcycles, featuring the new Milwaukee-Eight engine. We are confident that the entire line-up will drive retail sales growth for the remainder of 2016 and position us well heading into the spring riding season next year.”
Sounds too good to be true, but I hope they are able to pull out of this tailspin.