Harley-Davidson’s latest quarterly and full-year results underlined the short-term challenges it faces as it tries to build the next generation of Hog riders.
Harley said motorcycle revenue rose 12% to $1.05 billion in the fourth quarter but for the year, it was down 6.8% to $4.92 billion amid slumping retail sales in the U.S. and worldwide.
Global retail motorcycle sales fell 6.7% in 2017, compared with the prior year, with U.S. sales down 8.5% and international sales declining 3.9%. And this year looks like more of the same, with Harley expecting to ship 231,000 to 236,000 motorcycles after shipping 241,498 vehicles in 2017, the lowest number since 2011.
Harley shares plummeted 8% to $50.84 after the fourth-quarter results were released on Tuesday. The company also announced it would close its assembly plant in Kansas City and merge its operations into its plant in York, Pa., a move that will save $65 to $75 million a year after 2020.
“Our actions to address the current environment through disciplined supply and cost management position us well as we drive to achieve our long-term objectives to build the next generation of Harley-Davidson riders globally,” CEO Matt Levatich said in a news release.
As Reuters reports, “Despite generally higher U.S. consumer spending, Harley is grappling with an aging customer base and younger, more price-sensitive buyers hesitant to embrace the iconic brand as previous generations have done.”
It has set a goal of attracting 2 million new riders in the next decade by introducing new models. This year, it is pinning its hopes for growth on overseas markets.
“Our assumptions include U.S. retail dealer retail sales to be down, partially offset by growth in international retail sales,” CFO John Olin said in an earnings call.
The closure of the Kansas City plant will eliminate about 800 jobs. “HOG is restructuring the business for the demand reality,” analysts at RBC Capital Markets wrote in a research note. “A big concern of ours had been that the cost structure didn’t seem right-sized for demand.”