Milwaukee-based Harley-Davidson Inc. plans to introduce 50 new motorcycles over the next five years and chief executive Matt Levatich promised “a new era of product development.”
“I’ve never been more excited about our product pipeline in my 22 years here at Harley-Davidson,” Levatich said.
He said the company has invested in refining its product development process over the last several years and things like Project LiveWire, Rushmore, the Milwaukee Eight engine and a new suspension system represent the leading edge of the new products to come.
“If people were excited about the projects I just named, they haven’t seen anything yet,” Levatich said, although he did not get into specifics, except to say Harley would reinvent product segments and push into new ones.
He added that the company plans to continue its efforts to attract new riders and will also seek to embrace the used motorcycle market as an opportunity to bolster those efforts.
“We’re called to preserve the sport by engaging and inspiring new riders,” he said, cautioning that the ambitious goals are a long-term play that will provide value in the years to come.
The glimpse at the future came as the company reported its fourth quarter and fiscal 2016 results. Harley increased its net income during the quarter by 11.8 percent to $47.2 million and earnings increased from 22 to 27 cents per diluted share. Revenue, however, was down 5.9 percent to $1.11 billion. In just the motorcycles segment, revenue was down 7.4 percent with shipments down 11.9 percent.
Retail sales worldwide for the quarter were down 0.5 percent to 46,610. That total included a slight uptick of 33 motorcycles in the U.S. and a 1.3 percent drop for all international markets.
Those results were opposite from the rest of the year. The company’s full year results included a 1.6 percent drop in worldwide sales to 260,289. The decline was led by a 3.9 percent decline in U.S. sales, while international sales were led higher by a 5.9 percent in the Europe, Middle East and Africa region and a 2 percent increase in Asia Pacific. Levatich said the company had its best years ever in those two regions.
The company forecasted retail sales would be flat to slightly down in 2017, including the sale of 66,000 to 71,000 in the first quarter. Harley shipped more than 83,000 in the first quarter of 2016.
Harley entered 2016 having introduced a host of new initiatives aimed at increasing demand and drawing new people to motorcycles both internationally and in the U.S. Levatich said the company had opened 40 new dealerships internationally and trained 65,000 new riders in through its rider academies.
“While we made great progress, our demand driving efforts only partially offset the impact of the down U.S. market,” he said, adding that the company’s long-term plans reflect a “new normal” for the U.S. market.
Chief financial officer John Olin said the industry in the U.S. was fairly stable through May but then began to see a number of challenges.
Olin said the company’s dealerships exited 2016 with too many model year 2016 motorcycles and Harley will look to help dealers sell those models during the quarter.
He also said that launching new products like the Milwaukee Eight engine added costs in 2016, but said there would also be startup costs for new 2018 models that will likely hamper margins this year as well.
Olin said the company was pleased with its performance internationally and suggested those markets would become a bigger part of the mix going forward.
Levatich also said the company will look to engage with the used motorcycle market more, citing company research that showed nine in 10 riders purchasing a used Harley plan to buy another from the company and 90 percent of those would consider buying new.
“We have timeless, classic, durable, awesome motorcycles,” Levatich said. “The simple idea here is just to wrap our arms around that.”
He added the company is still working through how that embrace will be put into practice.
Levatich also said the company needs to do more to convert the 65,000 riders who went through the rider academies into owners. He noted his 17-year-old son recently completed the academy and the instructor reminded the students at the end they were qualified to ride in a parking lot.
“There’s a lot more learning that has to go on to be confident,” Levatich said.
