Caught in the middle of an ongoing trade war and amid a public smack down from President Donald Trump, Harley-Davidson’s fourth-quarter profits during 2018 were completely wiped out, sending the iconic motorcycle company’s stock sinking to its lowest levels in a year.
Earnings per share were zero during the fourth quarter, Harley-Davidson said in a statement Tuesday. Not counting restructuring and tariff costs, profit was 17 cents a share, a full 12 cents lower than analyst predictions of 29 cents.
Per Bloomberg:
In addition to the tariffs, U.S. retail sales fell a full 10 percent during the final months of 2018, the eighth-straight quarterly drop. To combat the losses, Harley-Davidson will try to attract younger buyers with cheaper bikes, electric bikes and more clothing and gear sold on places like Amazon, CEO Matt Levatich said.
“2019 we expect to be another difficult year until major initiatives like More Roads start kicking in,” Levatich said in an interview, referring to a turnaround plan unveiled last year. “Everything is angled at that core issue of building riders in the U.S. and leveraging growth opportunities we have in the near term and internationally.”
Harley shares fell as much as 9.5 percent — the biggest intraday drop since Jan. 30 — and were down 7.6 percent to $33.83 as of 9:48 a.m. in New York. The stock plunged 33 percent last year.
Expanding Overseas
Retail demand dropped in Europe and Asia, sending worldwide sales down 6.7 percent last quarter. Levatich’s plans call for half of sales to come from outside the U.S. by 2027, up from about 42 percent last year.
Harley has been investing to expand a new plant in Thailand to boost exports and produce the majority of motorcycles sold in the EU and China by the end of this year, Levatich said in the interview. The company hadn’t previously specified where U.S. production would be shifted to avoid tariffs the EU implemented in retaliation for higher levies on steel and aluminum.
Trump said in August that he’d back a boycott of the company’s bikes for moving production out of America. Tariff costs of $100 million to $120 million this year will be eliminated in 2020, once the Thailand plant expansion is completed, executives said on an earnings call.
Levatich is introducing as many as five electric models, including lightweight, urban bikes to target growth in Europe and India. Analysts think demand for Harley’s first electric model, called LiveWire, will be limited because of its $29,799 price tag.
For 2019, Harley plans to ship between 217,000 and 220,000 motorcycles. The midpoint of that forecast would be the lowest shipments for the company since 2010.