Harley-Davidson(US:HOG)2020-01-28 18:18Financial Data and Key Metrics Changes - Consolidated net income increased compared to the prior year, with earnings per share for the quarter at $0.09, and adjusted EPS at $0.20 when excluding restructuring costs and tariff impacts [21][22][35] - Motorcycle segment operating loss improved due to lower SG&A expenses and the positive impact of manufacturing optimization, despite lower shipments and higher tariffs [20][28] - Financial Services operating income decreased by 7% [20] Business Line Data and Key Metrics Changes - Worldwide retail sales of new Harley-Davidson motorcycles in Q4 were down 1.4% year-over-year, an improvement from a 6.7% decline in the previous year [22][25] - U.S. retail sales in Q4 decreased by 3.1%, marking the lowest rate of decline in the last 12 quarters [24][25] - International retail sales increased by 0.5%, driven by growth in emerging markets, while developed markets saw slight declines [22][26] Market Data and Key Metrics Changes - Harley-Davidson's market share of new bike registrations was 50.4%, up 1.0 percentage points, with significant gains in the Touring and Cruiser segments [25][26] - Retail sales in emerging markets rose by 2.2%, led by growth in ASEAN markets and China, while developed markets experienced a 0.5% decline [26][27] Company Strategy and Development Direction - The company is focused on its "More Roads" plan, which includes product development, marketing transformation, and building a customer-creation culture [5][9][10] - Plans for 2020 include launching new middleweight motorcycles and expanding into electric bicycles, aiming to broaden the product portfolio and reach more customers [10][35] - The company is shifting its performance measurement from unit shipments to revenue, reflecting a broader view of business growth [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to growth in 2020, viewing it as a pivotal year, despite recognizing ongoing challenges in the U.S. and developed international markets [19][42] - The company aims to increase the number of committed riders and improve retention rates, with a target of reaching 4 million riders in the U.S. by 2027 [14][19] - Management acknowledged the need for cultural transformation within the company to focus on building riders rather than just manufacturing motorcycles [48][56] Other Important Information - The company expects motorcycle segment revenue for 2020 to be between $4.53 billion and $4.66 billion, reflecting a slight decline or modest growth compared to 2019 [35] - Anticipated tariff impacts for 2020 are expected to be approximately $30 million, significantly lower than the previous year's $97.9 million [38] - The company plans to maintain a minimum of 12 months of projected liquidity needs in cash and/or committed credit facilities [33] Q&A Session Summary Question: What is behind the decision by riders to leave the brand? - Management noted that the primary reason for riders leaving is the lack of confidence among early-stage riders, and efforts are being made to nurture these riders to build commitment [43][44] Question: How is the transformation strategy progressing? - Management indicated that while there has been improvement in rider numbers, there is a need to accelerate efforts to meet long-term objectives [46][47] Question: What specific programs are being implemented to reduce rider churn? - Management outlined four target areas for programs aimed at improving rider retention, including introductory riding experiences and community-building initiatives [51][52] Question: Will the company consider strategic alternatives if growth efforts do not yield results? - Management confirmed that the board is always evaluating strategies to maximize shareholder value, including growth platforms beyond U.S. ridership [55][56] Question: Can you clarify the launch timing of new motorcycles and expected operating margins? - Management confirmed that new middleweight motorcycles will launch towards the end of 2020, with operating margins expected to be between 7% and 8% [60][62]