The bleeding at Harley Davidson continues as sales for its products fell another 7% from 2022. Net income was up, but the only reason it was up is because Harley continues to buy back its stock, something it has historically done to make the bottom line appear more palatable. Global sales fell by 11%. Harley suggests that this constitutes “prudent inventory management”, which is a euphamism for ‘stock on the showroom floor has not sold’.
Meanwhile Harley Davidson’s foray into electric motorcycles continues to lose money, with the fourth quarter financials being the worst of 2023.
Any increases in revenue were gained, not through sales of Harley products but through it’s financing arm. Net income fell again by 5% and it’s share value, despite the buyback fell another 2%. If there was a bright spot, it was the increased profit per unit sold, while losing sales. I wonder how that sits with buyers? In short order, Harley CVO’s have reached stratospheric retail prices at $45,000 US.
Harley’s headwinds won’t get any easier in 2024 as the company attempts to focus on changing its product line and business model. While Harley touts increased sales of its Livewire product, sales are so anaemic that it could hardly not help but increase. With a thousand unsold units on the dealership floor and losses of more than $115 million, discount prices are necessary to move product. Worse in some respects for Harley, sales are down in North America, again by 10% over 2022 figures, and operating income fell by a whopping 28%.
To offset the bleeding financially, Harley had to increase the cost of borrowing for buyers through it’s financial arm. Interestingly, Harley provided a cautionary statement to cover its statements about the future, to minimize liability.
Words that are in the cautionary note speak specifically to not relying on words quoted in the annual report, like “believes, anticipates, expects, plans, may well, estimates, targets, intends, forecasts, sees” or words of similar meaning. It then goes on to describe the potential risks and warns shareholders or prospective shareholders and disclaims any forward-looking statement.
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As Harley Davidson attempts to reinvent itself, one thing is more than obvious, that being that relying on it’s historical buyer base is a strategy for failure. As Harley’s buyers age, or die, there aren’t buyers willing to fill in the void left by their departure. In addition, where Harley is attempting to break into the electric motorcycle market, the segment is the most contentious it faces, with not only many more manufacturers producing motorcyles, but having a substantive headstart on the process. Additionally of course, Harley cannot rely on brand loyalty to a product that has no history.
Selling a thousand Livewires at a loss is not going to save Harley Davidson from further decline. Harley Davidson has to find a way to influence young buyers to purchase Harleys. To date, that has been abysmally unsuccessful, as sales have fallen in every market worldwide from 2022.
When one reflects on the fact that Indian and Chinese electric motorcycles wil be landing on North Americas shores in 2024-2025, it would seem that by simple dilution alone, Harley is unlikely to see growth.
Harley’s entire financial statement for 2023 can be found at:
In 2024, the question will focus on the viability of Harley’s 5 year plan to reinvent itself. As has been the case for at least 10 years, Harley will continue to flounder.
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