Iconic American motorcycle manufacturer Harley-Davidson carries on fighting. In the United States, its biggest market, Harley-Davidson’s sales have been dwindling for the last five years as its baby-boomer consumer base ages. The financial damage triggered by the pandemic and its consequences has further damaged demand from retailers.
With a two-month closure (since resumed) owing to the pandemic combined with a predicted significant fall in revenue attributable to the general slowdown of economic activity, the immediate future may be tough. The company’s most recent report on revenue reveals that as of late April, the figures were down about 18 per cent year-over-year.
After years of decline, the beginning of 2020 was eventually optimistic, with global revenue rising 1.5 per cent in the first couple of months of the year predicting Q1 2020 to be the first success since the 12 consecutive drops.
Sadly, COVID-19 entered many countries in March, including the USA, Canada, China, Brazil and Germany, bringing the quarter to an end with sales of 40,150 (-16.2 per cent). Sales in the United States fell at 23,701 units by 15.7 per cent. Canada lost more than 20 per cent and Latam lost 14.0 per cent (not including Mexico). Sales declined 42.9 per cent in Europe while China lost 81 per cent in ASIA and Japan was stable. India has lost 83%. Q2 outlook, and no better at all.
The 2020 forecast is pessimistic at best Harley-Davidson will likely deal with the still high concentration of sales in the United States on the podium of the three countries that are paying the highest economic tribute to the COVID-19 pandemic in this and next year. Europe is Harley-Davidson’s second market and the big sales drop in Q2 will be slowly reversed with a solid turnaround 2021 forecast. Sales in Asia are weak and the pandemic will affect both players in South America much as nothing else has done before. Harley-Davidson risks being more struck in this climate by the “America First” agenda pursued by the new US President.
The real estimate for the entire 2020 global revenue is for 160,000 units, down one-fourth from the accomplishment of the previous year and the 11th decrease in a row.
Until around the coronavirus and COVID-19 epidemic, the heavyweight cruiser manufacturer from Milwaukee, Wisconsin-and a fully electric variant-had been on a sales and stock price decline for many years as the firm looked for new customers. Recently, the company was restored by Polaris Outdoor Adventure Gear and entered the demand for Harley while drawing new riders for their Scout and FTR versions.
Under the direction of now-retired CEO Mark Levatich, Harley went on a bold flight of fancy into the realm of hybrid cars and unveiled two years ago the all-new LiveWire motorcycle. While the bike itself received positive reviews, a price tag close to $30,000 has been a difficult sell as competitors in the electric motorcycle room like Zero are offering versions of equivalent performance for about a third less.
Until Levatich quit the company, the CEO said more hybrid vehicles were on the way, including motorcycles, as Harley is often called. New CEO Jochen Zeitz, who took over in February, a long-time member of the board, who is lauded for turning around the near-bankrupt business of the Puma brand, laid out his restructuring strategy, which he labelled “The Rewire,” which aims to make Harley leaner and more efficient. It aims to reset product lines, focus on the core strengths of the business and prioritize profitable markets.
The firm has recently announced it will lay off 500 employees this year as part of Zeitz’s plans to restart the troubled motorcycle manufacturer. Harley said the steps would set the groundwork for a five-year turnaround plan to boost the fourth-quarter revenues that the firm plans to share. In total, the move would remove 700 regional positions. That will result in a restructuring charge of $50 million in 2020, including $42 million in the 2nd quarter. Although it is estimated that the redesign will be finished before the end of the year, Harley said it will definitely incur further turnaround charges in 2021.
Part of the new conundrum of Harley is a perfect storm with a declining mainstream client base, pricey bikes, and youth with heavy debt, myriad travel choices, and poor brand loyalty.
Throughout the years, Harley-Davidson has sought to expand its overseas markets, and progress has been high alongside its financial arm, but slumping total revenues have dropped the company’s market value to below $4 billion, or about half of what the S&P 500 uses as the threshold to make the list.