Harley-Davidson CEO Jochen Zeitz doubled down on his “Rewire” turnaround plan as the company reported its steepest decline in U.S. retail sales in at least six years.
Zeitz’s plan, which he unveiled in April, is intended to revive an iconic brand that has been struggling for years to grow sales beyond baby boomers. As part of the plan, Harley said last month it would cut 700 jobs from its global operations.
On Tuesday, the company posted another tough quarter as the coronavirus pandemic contributed to a 53% decline in motorcycle and related products revenue, to $669 million, and a loss of 60 cents per share for the quarter, compared with a profit of $1.23 per share a year ago.
Analysts on average had expected a profit of 4 cents per share.
In the U.S., Harley’s biggest market, retail sales plunged 27% year-on-year for the second quarter. The company has not reported U.S. retail sales growth in the past 14 quarters.
“A total rewire is necessary to make Harley-Davidson a high-performance company,” Zeitz said in a news release, adding that the company was working on a five-year “Hardwire” plan that is “grounded in enhancing the desirability of our brand and protecting the value of our iconic products.”
“As we worked through Rewire, it was very evident to me that we had lost our focus on the strength of our brand in favor of promotional activities which erode our value and the investment our riders make in our products,” he told analysts.
According to Zeitz, Harley will exit international markets where volumes and profitability do not support continued investment and shrink its motorcycle lineup by about 30%, a departure from earlier strategies of adding bikes to the portfolio.
The Milwaukee Journal Sentinel reported, however, that analysts aren’t sold on the Rewire strategy.
“Maybe they got too focused on the young customer and lost focus on the core customer. But the problem still remains that the core customer is just aging and is just not as interested in riding motorcycles as they were in their 40s and 50s,” said analyst Brian Yarbrough, senior consumer analyst with Edward Jones.
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