What To Think Of Harley-Davidson Disappointing 3rd Quarter 2015 Results

2440In a conference call, Harley-Davidson explained its poor performance due to a loss of market share due to new product introductions from competitors in the US, price-slashing by Asian competitors, a less lucrative product mix and unfavorable currency exchange.

Harley-Davidson sold more than half of America’s motorcycles last quarter (52.4% of all motorcycles in the US last quarter, down from 56.3% just a year ago) and that wasn’t nearly enough for investors. Harley-Davidson Inc (HOG) lost close to 12.93% during Tuesday October 19 trading day and 2.53% again on Wednesday. Despite having a famous brand, Harley Davidson’s reputation for quality suffered a big hit this year. The amount of recalls in the last 3 quarters (185,000 during last summer) outstripped recalls in the last three years. After $32.0 million in recall costs, plenty of investors were willing to cut their losses on HOG stock.

Harley-Davidson US Market Share Heavy Cruisers (2008-1015 YTD)
HD-Shares2Harley-Davidson’s average motorcycle revenue per unit decreased $899 compared to last year’s third quarter driven by a less lucrative product mix and unfavorable currency exchange rate. A challenging business environment contributed to a 6.5% decline in net income, down to 140.3 million. Harley initially dropped its 2015 shipment totals in the first quarter from 282,000-287,000 motorcycles to 276,000-281,000 units. Now they’re cutting shipment totals again to 265,000-270,000 motorcycles worldwide in 2015.

sportsterexhaust“We expect a heightened competitive environment to continue for the foreseeable future, and now is the time for us to dial things up with significant additional investments in marketing, advertising and product development,” said Matt Levatich, Harley-Davidson’s president and chief executive officer.

Harley-Davidson hopes to revitalize its brand and stock through better quality and affordability. Contrary to what management stated in former quarters, the company is now ready to engage in a price war with its competitors through better pricing, an admission that the most recognizable and successful motorcycle brand name is not enough anymore to attract buyers, especially those of a younger generation. For Harley-Davidson investors, a strategy not perceived as a quick fix but probably taking a few years, explaining the HOG stock big value drop of 16.45% in the 2 trading days following the 3rd quarter earnings announcement.

Zipper's

25 Responses to “What To Think Of Harley-Davidson Disappointing 3rd Quarter 2015 Results”


  1. 1 Woody's Oct 22nd, 2015 at 8:19 am

    Good info, thanks!

  2. 2 CHOPMONSTER66 Oct 22nd, 2015 at 9:36 am

    Looks like Polaris got those sales , Indian coming on strong…

  3. 3 zipper Oct 22nd, 2015 at 11:29 am

    Too bad it will all roll down hill until the employees lose their jobs. HD’s arrogance, high prices, and poor designs may take a while to turn around. Nice too have another choice in a USA built bike. ..Z

  4. 4 1550tc Oct 22nd, 2015 at 2:54 pm

    When your number 1 and arrogant you only have one place to go !!!

  5. 5 Zenaldo Oct 22nd, 2015 at 4:21 pm

    the days of putting 2K down and waiting in line for many months are LONG gone..

  6. 6 richards Oct 22nd, 2015 at 4:24 pm

    I’ve posted 3 responses…none have worked???

  7. 7 JR Oct 22nd, 2015 at 6:47 pm

    If they would wake up and have ther dealers run by bike people and not car scamer they would be in a better place but when you go to a dealer and you sales person on parts guy do not even ride how can you buy from them or even listen to any thin they have to say just because you work at HD down not make you a biker just can not buy in these dealers would rather buy used in a bike shop

  8. 8 Wild Hog Oct 22nd, 2015 at 7:29 pm

    I interviewed twice at the PDC and HQ. No one there I met with was a motorcycle enthusiast. I believe the senior mgt only get bikes to say they have them. The company is run no different than any other except perhaps their marketing and design departments. There is no soul in the company from what I saw. The dealerships mark up the bikes b/w 21 and 23% and then charge add on fees that aren’t even legit such as a “doc” fee. The freight is inflated and the set up fees are grossly jacked up. You don’t get fair market value on your trade that is even close to KBB trade in value and they sell much higher than KBB retail. I understand you have a lot of overhead when you have a million plus dollar boutique but at the end of the day, the economy can’t support that business model. The take it or leave it attitude doesn’t work when you have competition. And when you recall more bikes than you sell, well, that doesn’t bode well. Take away the hype and it is just an expensive motorcycle that you don’t need.

  9. 9 Anton Oct 23rd, 2015 at 5:54 am

    try a reissues of EVO engine. look at gibson guitars reissues products sales as a percentage of sale. more examples are out there that seem to be that worked. and probably dump the twincam ?

  10. 10 Roger Oct 23rd, 2015 at 7:25 am

    JR and Wild Hog summed it up nicely. The wife still rides a H-D, but I moved to a different brand several years ago. My next bike will likely be a Victory or Indian, and I will look for a low mileage late model unit. The whole dealer thing leaves a bad taste in my mouth.

  11. 11 Drew Oct 23rd, 2015 at 9:32 am

    Made it through two World Wars, the great depression, a lengthy list of other economic troubles, and still operating after 112 years. That is a rather amazing accomplishment for any type business. Adapt and conquer.

  12. 12 Steve Oct 23rd, 2015 at 10:03 am

    I’ve owned a couple of H-D’s over the years but stopped riding 15 yrs ago until last august when I bought an 2015 Indian Chief Vintage….best bike I’ve ever owned and I’m 67 yrs old !!

  13. 13 Mike Tomas Oct 23rd, 2015 at 10:12 am

    While it is easy to criticize the giant and without doubt some of it is quite due to them, the bigger picture is the aftermarket industry will suffer as the trickle down effect will be greatly reduced with any improvements. The loss in production numbers will effect a lot of aftermarket business’s as well as well as other brands most likely will not fill the void. Other brands of bikes being offered may not be the savior as they may not be as customizable, and with their better mechanicals they may not fuel as vibrant of an aftermarket. The one thing that cannot be denied is that Harley Davidson is the most customizable motorcycle ever made and it has provided hundreds of millions of dollars (id not Billion) in aftermarket parts, services and jobs. It is a brand that many today depend on for their living.

  14. 14 Jim Castro Oct 23rd, 2015 at 10:17 am

    When all of us Boomers quit riding Harley will be dust.

    Harley has nothing to fear from the Asian market but everything to fear from Victory, Indian and Triumph.

    I hope they get it together and go back to being America’s enthusiast bike; designed, built and maintained with ALL American manufactured parts.

    After all, why buy a new one when you can find a low mileage one for half the price.

  15. 15 Dave Oct 23rd, 2015 at 10:29 am

    seems to me that that the biggest issue is not the dealers being owned by “Car Scammers” as JR stated but the opposite, 4 of the top 5 Harley-Davidson Dealerships by volume… IN THE WORLD are owned by families that come from the automotive side. The dealers that sit at the bottom of the list are “enthusiast” that own a franchise by default and have no business sense. At the end of the day H-D needs to sell bikes to to support the brand, the top dealers are proving that it can be done and that customers will return to buy their second third and even fourth bike at these dealers based on being given a better dealership experience.

    Although progress may seem slow to some. Project Live-Wire is a great testament that there is technical capability and change within the organization.

  16. 16 Mike Oct 23rd, 2015 at 3:06 pm

    Bikes too expensive for what they are. Parts to expensive for what they are. Lower prices on both and problem will be solved when sales volume increases greatly.

  17. 17 Bygtime Oct 23rd, 2015 at 8:11 pm

    Kiwi, the trickle down effect is going to be brutal…The Moco’s statement they are prepared to jump into price wars is a step in the right direction that maybe will save some plant jobs.
    Election year is upon us and historically we see a drop in production across the board because folks want to see before investing… Time will tell, pray our economy don’t slip into a recession again

  18. 18 Mdkuder Oct 26th, 2015 at 7:50 am

    Bold new graphics every year sucks!

  19. 19 Dr Dave Oct 26th, 2015 at 8:08 am

    It’s the same old thing Harley continues to use the “We are the best attitude” If you don’t ride a harley you aren’t a biker. And they are pricing themselves out of the market, parts are outrageous. Victory is a better build and less expensive alternative. Along with many others.

    They can’t keep the FU attitude!

  20. 20 Ty Oct 26th, 2015 at 9:26 am

    This is all noise that happens from time to time. The facts are in Southern California, Indian has a 1% market share. The polaris Slingshot has a 1% market share. Victory has a 0.3% market share. Harley-Davidson is at 45%. Does that sound like something to fear?

    Coming from a current H-D dealer who just sold an Indian/Victory dealership, its comical to see all this online posturing from the readers of this blog. Everyone is such a know it all, and the recurring theme you see on here and from Wall Street is Polaris is taking over H-D. My question is when? Because it sure as heck isn’t happening now. And we are in the highest selling district in that nation for motorcycle sales the past 2 years.

  21. 21 Pop Oct 26th, 2015 at 9:46 am

    The king is dead. Long live the king. Google it.
    The Moco has been arrogant. I lived through the era when fabled names in racing and customizing lost their franchises because they wouldn’t commit to multi million dollar glass and chrome off ramp showrooms. They were replaced by automobile dealers.
    I lived through the era when the Moco was sending more units to Europe than that market could absorb while American riders were putting their names in fishbowls and paying non refundable deposits to see if they got the chance to buy whatever bike they were offered at well over MSRP.
    The factories survival is a testimony to them but it also includes plenty of backroom shenanigans and the backing of Uncle Sam as well as the lack of cunning among the competition and some plain old dumb luck.
    It’s a great day for motorcycling when the numbers tell truth that Madison Avenue smarminess and ruthless pursuit of the buck is not all that makes a motorcycle company.
    Relearn the lessons you used to know Milwaukee. It may not be too late.

  22. 22 Blackmax Oct 26th, 2015 at 4:22 pm

    Ok, will try this again !
    Arrogance is what’s going to doom the Mo-Co !!!
    Like Zipper, 1550tc, Roger, Jr, & wild hog have hit the nail on the head
    The days of “that’s what I charge, take it or leave it ” are over !!!
    Dealers don;t realize that are sending customers right on down the road
    straight into the arms of the competition.
    Yes, you are the largest seller of heavyweight cycles & might remain so for a while longer
    Like Ty said H-D never really worried about the Asian share
    & they might not worry about Triumph & Victory.
    But put them all together with a substantial share from Indian & you start to see what we see here
    erosion of the market share.
    But there are things H-D can do :
    1. Project Rushmore was a good start but how about putting that R & D dept to work on a
    power-train that will run Correctly from the factory.
    Why am I paying a VERY premium price for a cycle with antiquated tech that I have to spend
    anywhere from $3500.00 to $5000. to make it run right
    I only want to spend $$ if I want to to upgrade,not because I HAVE to
    2. Quit charging exorbitant amounts for accessories that should’ve been standard features
    (Example LED head & taillights ??)
    These are just a few examples, there are lots more

    But in the end the facts remain, as Jim Castro & Pops allude to, us Baby boomers are not getting any younger & whether it’s due to age or death, the core market for all those Glides is shrinking
    If H-D does not heed the warning signs, they will be gone with us, dust & a distant memory

  23. 23 Dr. Rock Oct 27th, 2015 at 3:19 pm

    Ironic this comes the same week Rich Teerlink is inducted into the AMA Hall of Fame, The most ironic thing is his induction was for his unique and successful Leadership style!

  24. 24 Ceebo Dec 3rd, 2015 at 9:59 pm

    Ty,

    Look at Indian, Victory, and Slingshot’s growth trajectory. Do some simple math. You’ll find out when.

    They’ll never take over. But if they gain another 10% of market share HOG will really feel it.

  25. 25 Mazz Oct 11th, 2016 at 6:48 am

    Being a 53 year old, middle class person who has been interested in motorcycles since the tender age of 4, I have seen the industry change from the late 1960’s to the current trends. I simply cannot afford to buy a new Harley Davidson, I am way past the “Street” stage and the “Sportster” stage, and big twins just seem to be getting higher and higher in price. Sure the allure of an Indian Chief is there, but a nice Road King Classic or a Street Glide would suit me just fine. Bottom line for me is cost, I just can’t buy one new, so I will keep building them from wrecks and parts I find or run 10 or 15 year old Evo’s until the price on Twin Cams comes down to my level, this is my reality, not making excuses for it, just sayin.

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