The topline numbers in Harley-Davidson’s third quarter earnings tell the story of a company that continues to shrink.
Total revenue was down more than 8% to $1.67 billion. Retail motorcycle sales in the U.S. dropped 10% to 31,300. Harley’s market share in the U.S. – regularly above 50% not long ago – dropped 8.4 percentage points to 41.4%.
But the bottom-line numbers tell the story of a company that could be turning things around under a new CEO.
Harley reported net income of $120.2 million, up from $86.6 million at the same time last year. The company said it was the best third quarter net income since 2015. For the year, however, net income is down from $410 million in 2019 to $97.7 million.
“We’re building a strong foundation,” said Jochen Zeitz, chairman and chief executive officer of Milwaukee-based Harley-Davidson Inc.
Zeitz took over as CEO this spring. He has since launched The Rewire, a strategic initiative aimed at resetting the company’s operations. Harley has undergone several leadership changes at its top levels, including a new CFO and new operations leaders.
Hundreds of other jobs have also been eliminated throughout the company. In the first three quarters of the year, Harley has recorded nearly $86 million in restructuring costs with around half taking place in the third quarter.
The company also streamlined its product portfolio by 30% and plans to eliminate additional model options that are not popular with customers. It is also exiting around 40 markets globally and switching to distributor models in another 17 markets.
Harley announced in September it would stop making and selling motorcycles in India, but reports quickly emerged that the company wasn’t leaving the country completely. On Tuesday, Harley announced a deal with Hero MotoCorp that calls for the Indian motorcycle maker to sell and service Harley motorcycles and develop a range of premium motorcycles under the Harley-Davidson brand name.
Zeitz said the company wouldn’t be afraid to delay or cancel product launches that didn’t make sense or to move others up if it makes sense.
“We can now focus our resources where they can make the most impact,” he said.
Part of the third quarter’s topline result was a shift in the start of Harley’s model year. Traditionally, Harley introduced new models in late August, but the company will now launch them at the start of a new calendar year. Zeitz said Harley will benefit from unveiling products closer to the start of the riding season.
The company also sought to curtail dealer inventory during the quarter, reducing it by 13,400 motorcycles in the U.S compared to the prior year.
Zeitz and other executives touted that Harley had little to no promotional activity driving sales during the quarter and said they would seek to avoid those practices in the future.
“While some of our competitors are rather price aggressive, it’s not something we want to buy into,” Zeitz said.
He said the company’s market share does not really matter at this point.
“The key is not the topline growth. The key is we want to grow desirably and profitably,” Zeitz said. “Focus is key. You’re not trying to do everything at once.”
One area where Harley is choosing not to focus is the eBicycle market. Instead those efforts will be led by Serial 1 Cycle Co., a new venture with a minority equity ownership by Harley.
“Born as a skunkworks deep inside Harley-Davidson’s Product Development Center, the eBicycle project began with a small group of passionate motorcycle and bicycle enthusiasts working with a single focus to design and develop an eBicycle worthy of the Harley-Davidson name,” a press release announcing the brand said.
