Cars and Drivers
Moving Production Offshore Won't Save Harley-Davidson From Poor Sales
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Harley-Davidson Inc. (NYSE: HOG) will move some production out of the United States because of the potential effects of tariffs on goods uses. This, in turn, will increase prices of its motorcycles. Lost in trade war issues is that Harley-Davidson is doing poorly financially because the demand for its products has fallen.
Its stock price is down 24% in the past two years, while the S&P 500 is higher by 29%. Revenue in the most recently reported quarter rose only 2% to $1.4 billion. (Harley-Davidson separates financial service revenue from motorcycle revenue.) Net income dropped from $186 million in the period a year ago to $175 million. The awful news is that sales in Harley-Davidson’s home market, the United States, dropped 12.0% to 29,309. Globally, sales fell 7.2% to 51,086.
Matt Levatich, president and chief executive officer of Harley-Davidson, made a comment that did not address the company’s problems:
We are pleased to deliver revenue growth on the heels of our recent product investments in Softail and Touring. This, plus solid financial services segment performance and strong cash returns during the first quarter underscore our commitment to drive shareholder value. Our international markets returned to retail sales growth supporting our long-term objective to increase international sales to build the next generation of riders globally.
Harley-Davidson also tried to stop the media from battering its performance. In one of the strangest annual report decisions of the year, management kept the press out of its annual meeting.
Management better get busy warding off the likes of Indian, Polaris and products from Japan, like Yamaha and Honda, and from Europe. Harley-Davidson has been plagued by research that shows product quality is below much of the industry.
Ultimately, while the cost to produce products is critical to Harley’s success, more critical is whether people want to buy its motorcycles.
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