AMD 254 September 2020 | Page 8

<<< Continued from cover and new, high- potential segments; expanding product offerings of its best-selling motorcycles; delivering its first Adventure Touring motorcycle - the Pan America 1250 (in 2021); shifting annual product launch timing from August to early in the first quarter; reinvigorating launch efforts, including collaborations with key influencers to bring the brand and new products to life and drive brand desirability. Among other plans, the company says it is set to launch a new marketing campaign including a collaboration with DC Comics' "extended universe" movie actor Jason Momoa "to celebrate the shared journey and unrelenting spirit of Harley- Davidson." Apparently. Growth Through P&A and General Merchandise The company says it intends to intensify its focus on its Parts & Accessories and General Merchandise businesses, "encouraging customers to customize their entire riding experience to match their own style. Now part of the new Commercial function, new leadership has designed strategies for each business aligned to the company's motorcycle and market priorities with the goal of delivering a holistic experience in the marketplace." Internationally Harley plans to "reset" its "global business" to concentrate on approximately 50 markets primarily in North America, Europe and parts of Asia Pacific, the "high-potential" markets that represent "the vast majority of the company's volume and growth potential" and is "evaluating plans to exit international markets where volumes and profitability do not support continued investment - in line with the future strategy." Marketing In a very welcome step, one that smacks of the kind of grass-roots nearmarket connectivity between sales and marketing that Harley has singularly failed to embrace in the past 30 years, the company says it also plans to shift resources and marketing investments "into the regions for maximum impact. "As part of this effort, the company has streamlined regional offices and created new groups of high potential countries that will have the autonomy to drive the business (within a clearly defined framework)." Additionally, the company plans to "optimize" its dealer network to provide an "improved and integrated customer experience." Among corporates, this is generally code for closing down a large number of outlets. Harley-Davidson has "revamped its approach to supply and inventory management, focusing on products and initiatives that add value, while significantly reducing discounting and price promotions. This is expected to drive retail pricing to help preserve the value and desirability of Harley- Davidson motorcycles for its customers and brand." "All of these efforts of The Rewire aim to provide a better starting point for the future and to build desirability for the Harley-Davidson brand and products." In its Q2 news release, Harley has highlighted several "Rewire outcomes" that it says it has already been able to bank - such as $250m in cash savings (excluding restructuring charges) including SG&A and capital reductions expected in 2020; restructuring charges of $42m that are expected to result in approximately $100m in ongoing annual savings Jochen Zeitz, Harley-Davidson Chairman, President and CEO based upon actions taken; a reduction in global dealer inventory of -32 percent with U.S. 2020 new model year motorcycles selling at MSRP on average and used H-D pricing up significantly at retail and auction. "The Rewire is expected to continue through the end of the year, leading to a first look at the company's 2021- 2025 strategic plan, "The Hardwire", expected in the fourth quarter. Building on the foundation and principles of The Rewire, the driver of the new plan will be Harley-Davidson as the most desirable motorcycle Pan America Adventure Tourer, captioned: The 2021 launch of the 1250 cc 'Pan America' Adventure Tourer is set to go ahead and rumors suggest that Harley will follow manufacturers such as BMW, Yamaha and Honda with a family of lower displacement variants in subsequent years. The 'Rewire' update does NOT name check the planned new 'Bronx' streetfighter model for 2021, which appears to confirm the widespread speculation that the project is to be dropped - at least for the foreseeable future. brand in the world for its customers, employees, community and investors." In terms of its COVID-19 Response and Recovery the company says it "continues to proactively manage its business through the pandemic and has implemented robust protocols to keep workers safe in its factories. Most non-production workers will continue to work from home until the end of the year. Response and recovery plans include supporting global dealers and customers. At the end of the quarter, about 93 percent of our global dealers were open for retail motorcycle sales following pandemic interruptions." Included in the company's broad cost and cash savings measures are SG&A reductions, curtailed capital spending, suspended discretionary share repurchases and a "prudent" approach to dividend payments. The company announced it will pay a third quarter cash dividend of $0.02 per share, in line with its second quarter dividend. The dividend is payable September 25, 2020 to the shareholders of record of the company's common stock as of September 10, 2020. The company has also further strengthened its strong liquidity position with nearly $4.7bn in liquidity at the end of the quarter. Second Quarter 2020 Results Global retail motorcycle sales in the second quarter of 2020 were significantly impacted by COVID-19. Q2 U.S. retail sales finished down 27% compared to the prior year; -22% YTD. European (EMEA) retail sales were -30% Q2; -29% YTD. Worldwide motorcycle retail sales were down -27% Q2 and -23% YTD. Revenue from the Motorcycles and Related Products segment was down in the second quarter of 2020 (-53% and -33% YTD). Revenue from motorcycle shipments specifically were -59% in Q2 and -36% YTD. Gross margin and operating margin were down during the quarter, primarily due to lower productivity and absorption resulting from the suspension of manufacturing. "Second quarter 2020 results reflect the impacts of COVID-19 and also the actions taken in the second quarter to rewire the company. Q2 GAAP diluted EPS was $(0.60) versus $1.23 in Q2 2019. Excluding restructuring plan costs and the impact of recent tariffs, adjusted Q2 diluted EPS was $(0.35) versus $1.46 in Q2 2019. Second quarter net loss was $92m on consolidated revenue of $865m versus net income of $196m on consolidated 8 AMERICAN MOTORCYCLE DEALER - SEPTEMBER 2020 www.AMDchampionship.com