Less Really Is Starting To Look Like Less
This has been one of those occasions when the Harley ( and Polaris ) results were published just as we were going to press . So , for my ' Comment ' piece this month I thought it appropriate just to take a quick canter through the primary bullet points , with the usual detailed reporting appearing in the next ( June- already !) edition . The headline reporting is of a + 6 % increase in unit retail growth in North America ( up by 1,500 units to 27,500 compared to Q1 , 2023 ), but declines of -11 % ( down 600 units to 5,300 ), and -12 % ( down 900 units to 6,000 ) in EMEA and Asia Pacific respectively left Harley flat in global terms at 39,400 units - dead level with 2023 . Latin America was up by + 2 %, but at only 600 units was also essentially flat . Chairman , President and CEO Jochen Zeitz is quoted as saying : " We are very pleased with the reception of this year ’ s new product line-up led by our new Touring motorcycles and look forward to continuing the positive momentum as the riding season comes into full swing .” Harley ' s formal take of Q1 unit retail was " Global retail motorcycle sales in the first quarter were flat versus prior year . North America retail performance was up 6 %, driven by sales of the new Touring motorcycles , which were introduced at the end of January . International markets did not receive new 2024 Street Glide and Road Glide motorcycles in dealerships until the end of the first quarter . " The decline in EMEA of 11 % was driven by weakness in Germany and France . The decline in APAC of 12 % was due to weakness in particular in China . Latin America experienced modest growth in both Mexico and Brazil ." There you are then . Three full years of Hardwire . A share price that dumped some 11 % of its stock market price to as low as $ 32 and changed on the morning that the results were released , and just 18 months of ' wire ' left , hard or otherwise ! Consolidated HDMC operating revenue was down by -3 % at $ 1,730m for the quarter , but with operating income down by -29 % at $ 263m for the quarter from the $ 370m that was reported for a ' bad ' first quarter of 2023 . The so-called " planned " slowdown in Q1 shipments saw Harley come down by -7 % ( actually a greater shipments reduction than " planned ") from 62,200 in Q1 2023 to 57,700 this year . The revenue generated by motorcycle shipments specifically was down -6 % at $ 1,222m . Overall , revenue in HDMC was down by -5 % at $ 1,476m for the quarter , resulting in the HDMC gross margin dipping by 4.5 pts to 31.2 % from 35.8 % - calling into question whether the " less is more " strategy is working in the way intended . The hemorrhaging of operating income suggests not . The net income ( aka ' profit ') attributable to Harley-Davidson , Inc was a mere $ 234.9 ( down from $ 301.8m in that " bad " year ago Q1 ). The Hardwire plan was that a reduction in supply , to increase demand , unit price-points , revenue per unit and perceived ' brand value ', could be done profitably . Instead , it would appear that less really is just exactly that - less ! Harley ( namely Zeitz ) had been making much of the increased revenue achieved per unit as an indicator of how well the strategic plan was working . However , let ' s look at it not so much in terms of revenue per bike , but in net profitability
break it to make it
per bike - after all , manipulating unit numbers profitability was Hardwire ' s primary success metric when it was published at the start of 2021 . Please correct me if I am wrong ( and I hope I am ), but my ( perhaps erroneous ?) read of the Q1 results shows 39,400 units reported as sold in Q1 of 2023 and 2024 ( this is going by ' retail ', not by ' shipments '), but with operating income ( aka profit ) achieved per unit of ( very crude math ) approx . $ 790 per bike retailed in Q1 2024 versus approx . $ 840 per bike in Q1 2023 . Now this is approximate rounded math , and I am never going to pass convincingly as a qualified auditor at the Christmas fancy dress party in this or any other lifetime . But is this not the very antithesis of what lies at the core of the Hardwire strategy ? By this measure less really is less . As a brand ' fan boy ', should I be worried ? As the most modest of stakeholders , I definitely am worried . Please somebody either tell me to throw away the calculator and stick to the day job , or else please explain how this is going to get turned around in 18 months ? And don ' t just fall back on the " times are hard " Dickensian universal excuse mantra . Yes sure , multiple wars , high inflation , pandemics , high interest rates - these are the stuff of economic nightmares , but when has it never been thus for one reason or another ? In 30-plus years of writing about this stuff , month-in , year out , a short ten-year period from the mid-1990s to the mid ' noughties ' aside , when has the economic climate ever been anything other than ' tricky ' at best ? Even that ' Golden Decade ' that saw the halcyon days of peak Harley didn ' t stop everyone in the Harley and wider V-twin market from complaining . And why should it have - after all we all love complaining , don ' t we ? And my , how good at it we are ! Was it a ' fever dream ', a fantasy of hope triumphing over reality , but isn ' t the biggest complaint that we have all been hearing recently ( certain V-twin markets aside , such as Germany especially ), that the economy in most of ' the West ', but especially in USA , is doing just too well ? Isn ' t that what Wall Street ' s primary concern is at this time ? So , save me the default economic angst , and look for the answers inside the plan itself . Look for the fundamentally flawed logic of the fundamentally flawed premise that in this choice-rich demographically changed mid-21st century motorcycle market , less can and will only ever be less . Isn ' t the plain truth of the matter that , for all the CEO ' s theoretical capitalist chops , Harley is simply failing to compete ? This is taking ' fail fast and fail often ' into entirely new territory - ' break it to make it ' would appear to be the mantra that ' Milwaukee ' is chanting . Oh , and don ' t get me going about Livewire !
Robin Bradley
Co-owner / Editor-in-Chief robin @ dealer-world . com