Harley-Davidson ((HOG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Harley-Davidson detailed a challenging year marked by significant declines in global retail sales and financial performance. Despite these hurdles, there were moments of optimism, particularly in the US Touring segment, which experienced growth, and in the company’s strong market share in electric motorcycles. Although these positive aspects were noted, the overall sentiment conveyed during the call was negative, primarily due to the substantial headwinds and financial losses faced by both Harley-Davidson and its electric motorcycle brand, LiveWire.
Growth in US Touring Segment
The launch of the 2024 Street Glide and Road Glide motorcycles was a bright spot for Harley-Davidson, contributing to nearly 5% growth in the US Touring segment. This growth drove the company’s market share to an impressive 75%, marking a 3.5% increase since 2023. This segment’s performance was a key highlight amidst otherwise challenging circumstances.
Positive Customer and Industry Recognition
Harley-Davidson’s motorcycles continued to receive accolades, with Cycle World voting the CVO Road Glide as the best cruiser of 2024 and Motorcycle.com recognizing the Street Glide as the best bagger of 2024. These recognitions underscore the brand’s strong reputation and the quality of its products.
Strong Cash Flow Generation
In 2024, Harley-Davidson achieved over $1 billion in operating cash flow, reflecting a nearly 40% increase from the previous year. This strong cash flow generation is a testament to the company’s robust financial management and operational efficiency.
Market Share Leadership in Electric Motorcycles
LiveWire, Harley-Davidson’s electric motorcycle brand, maintained a commanding 65% market share in the US 50+ horsepower on-road EV segment. The brand also experienced a 46% year-over-year growth in global retail performance, highlighting the growing demand for electric motorcycles.
Significant Inventory Reductions
The company reported a 19% sequential reduction in dealer inventories globally relative to the end of Q3 2024, with overall inventory levels 4% lower year over year. This reduction is part of Harley-Davidson’s strategy to manage supply chain efficiency and reduce excess stock.
Decline in Global Retail Sales
Global retail sales faced a downturn, declining by 15% in Q4 2024, with North America down 13% and other international regions down 17%. The full-year global retail sales saw a 7% decline, reflecting broader market challenges.
LiveWire Operating Loss
LiveWire ended 2024 with an operating loss of $110 million, which, while significant, was within the range of revised guidance. This loss highlights the financial challenges associated with scaling operations in the electric motorcycle segment.
Reduced Financial Performance
Harley-Davidson’s consolidated revenue for Q4 2024 was down 35%, with an operating loss of $193 million, a stark contrast to the $21 million loss in Q4 2023. This decline underscores the financial headwinds faced by the company in the current market environment.
Challenges in Key International Markets
The company faced notable challenges in key international markets, with Q4 retail sales in Asia Pacific declining by 26%, driven by weaknesses in Japan and China. EMEA retail sales were down 7%, impacted by macroeconomic conditions.
Headcount Reduction
As part of cost-cutting measures, Harley-Davidson reduced its total headcount by 7% from the end of Q4 2023 to the end of Q4 2024, including employee severance expenses. This move reflects the company’s efforts to streamline operations in response to financial pressures.
Forward-Looking Guidance
Looking ahead, Harley-Davidson’s CEO Jochen Zeitz outlined the company’s strategy amidst ongoing challenges. Despite a 15% decline in global retail sales for Q4 and a 7% decline for the full year, Harley-Davidson is optimistic about the future. The company expects flat retail sales in 2025, with improvements anticipated in the second half of the year. They aim to achieve a double-digit operating margin by 2026 and plan to reduce dealer inventory by over 30% in the first half of 2025, alongside targeting an additional $100 million in savings.
In conclusion, while Harley-Davidson’s earnings call reflected a year of significant challenges, the company is making strategic moves to navigate the turbulent market conditions. The positive performance in the US Touring segment and strong cash flow generation offer glimmers of hope. However, the overall sentiment remains cautious as the company faces substantial financial and market headwinds.
