Very few people need a Harley-Davidson (HOG) motorcycle. And in 2009, that number fell even further. For 2009, Harley sold about 223,000 bikes, compared with more than 303,000 in 2008. For the fourth quarter, sales were down nearly 50% from a year ago.
Harley met analysts’ estimates on quarterly revenues of $765.4 million, but badly missed loss estimates by $0.32 per share, coming in instead at a net loss of $0.94 per share. The loss from continuing operations was $0.63 per share.
In addition to lower sales, the company incurred significant restructuring charges in 2009, totaling $224 million. Harley is gambling that a leaner, more focused company will return it to profitability.
Harley’s restructuring included closing the company’s Buell motorcycle division and selling the MV Agusta division, as well as downsizing its operations at its York, Pennsylvania production facility. The company expects to eat $430-$460 million in restructuring charges through 2012.
Prospects for 2010 don’t brighten the picture any. The company expects to sell 201,000-212,000 motorcycles in 2010, which is 5%-10% less than 2009 sales. Gross margins are anticipated to be 32%-33.5%. For 2009, gross margins totaled 32.3%, compared with 34.6% in 2008.
And if all this were not bad enough, demographics are not on the company’s side either. Harley’s key demographic is the baby boom generation, which is getting smaller and has less discretionary income to spend on a leisure item like a motorcycle.
Lower sales, lower margins, restructuring costs going out for another three years and a dwindling demographic base does not add up to much improvement in Harley’s outlook. Everything looks bad, and unless the company can do something brilliant, the prognosis doesn’t improve.
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