Harley-Davidson is finally doing a little better than expected

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Illustration from article titled Harley-Davidson Finally Does A Little Better Than Expected

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Harley Davidson is in the landfills and has been in landfills for a while, although its still new CEO says he has a plan. This plane is, basically, smaller and smaller and exclusive trading. In the short term, it seems to work.

The big question remains: what happens in the long run? But for now, CEO Jochen Zeitz’s plan to focus on the markets and motorcycles where Harley is most popular – mostly big bikes, mostly America – is paying off.

Harley reported higher than expected profits for the third quarter today, and the stock market responded in kind. The profit news was despite the fact that motorcycle sales in the United States fell 10% in the third quarter compared to the same period last year. But that was less as sales fell in the second quarter of this year, which was 27%, so progress, I guess.

Of Bloomberg:

In line with Zeitz’s strategy to reduce supply and boost pricing, the company said dealer inventory fell more than 30% from a year ago and was able to to charge the asking price for 2020 model year motorcycles in the United States during the quarter. The Milwaukee, Wis.-Based manufacturer reported adjusted earnings per share of $ 1.05, beating analysts’ consensus of 29 cents.

[…]

Harley shares climbed 27% to $ 36.82 at 11:20 a.m. in New York City. This reduced the stock’s decline this year to less than 1%.

The company has not released a forecast for annual earnings, citing uncertainty over the pandemic. But Zeitz teased some of his future plans, saying there was “significant leeway” to add a product into Harley’s staple heavy-duty category. He also played the debut of his first adventure touring motorcycle, the Pan America, scheduled for early next year.

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Harley has said he will have a new strategic plan ready early next year called The Hardwire, which I guess means more of the same. In the meantime, the most interesting part of Harley’s press release today is this:

Harley-Davidson plans to focus on around 50 markets, primarily in North America, Europe and parts of Asia-Pacific, which represent a high percentage of the expected volume and growth potential of the business. The company’s international operations have been significantly reset and refocused with investments and resources aligned with expected market potential. Under the new participation model, approximately:

• The 36 most potential markets will remain, with resources and autonomy within a clearly defined framework, to best stimulate growth and profitability.

• 17 markets will move to more profitable distributor models. This includes India, where Hero MotoCorp will be the exclusive distributor of Harley-Davidson and licensed to develop and sell a range of Harley-Davidson motorcycles.

• 39 markets will be abandoned due to volume, profitability or potential that does not support continued investments.

I wouldn’t say it’s great news for Harley that he is leaving the markets, but it’s a stock * investors are going to react to. It is also proof that Zeitz has a clear vision for Harley’s future, and directly opposed to that of his predecessor, Matt Levatich. Zeitz’s vision is for Harley to become a niche maker of expensive toys, while Levatich wanted to bring Harley to a global level.

And while Zeitz’s vision has now shown short-term gains, it’s unclear if that will work in the long term, as Harley’s baby boomer base population continues to age. Society is doubling the number of baby boomers in America and a dwindling number in other countries, but so what?

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