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HOG-WIMPERINGLY BAD

Harley-Davidson’s full-year 2020 results proved to be lamentable, compounded by an unanticipated fourth-quarter loss. BDN financial editor Roger Willis reports.

Other major global motorcycle brands have fought valiantly to recover from the Covid pandemic’s deleterious impact with considerable success. Harley, distracted by its new-wave corporate planning — hasn’t.

Investors were outraged at the results revelation on 2 February. Harley shares were discounted by six bucks in off-floor deals before the New York Stock Exchange’s opening bell that morning. After a brief 21.5% plunge, the price bumped along a low-level rocky road to end the session 17.1% lower than the previous day’s close of play — roughly a sixth of market capitalisation trashed. 

As for the inescapable facts, overall yearly revenue was 24.4% down at £2.978bn. Within that, turnover attributable to motorcycles and related products sank by 28.6% to £2.397bn. Only the company’s financial services arm providing domestic-market POS credit and dealer inventory funding held station, putting on a marginal 0.2% revenue gain to £580.1m.

At least financial services delivered an operating profit of £143.7m, albeit falling by 26.4%, because it offset the annual operating loss of £136.6m incurred by motorcycles and related products. The combined operating profit figure was utterly dreadful, though, a 98.3% dive to just £7.1m. Net profit, even after the benefit of tax rebates, was worse, plummeting by 99.7% to corporate loose change of £952,000.

Harley-Davidson wholesale bike shipments to dealers worldwide in 2020 shrank by 32.1% to 145,246. Global retail sales volume was 17.4% down at 180,248. Harley’s US domestic market dropped by 17.7% to 103,650. International sales fell by 17% to 76,598. Canada lost 27.6% on 6477. The EMEA region, which mostly means Europe, copped a 16.3% reduction to 36,906. Asia Pacific made a comparatively modest 7.8% retreat to 27,220. Latin America took the hardest knock, 38.6% down at 5995.    

Most aspects of Harley’s final-quarter numbers reflected greater grief. Shrivelling US trade demand saw Q4 wholesale shipments slashed by 48.3% to 20,921. Total revenue slumped by 32.4% to £532.2m, with a resultant operating loss of £87.7m and a net loss of £70.7m. 

But squirreled away in this data was an apparently upbeat element. During Q4, while Harley financial services revenue dropped slightly by 2% to £142.5m, its associated operating profit leapt 30.5% skywards to £56.3m. A similar phenomenon had occurred in Q3, delivering a 25.1% segmental profit increase. The same explanation was applied. These improvements were “primarily driven by a decrease in provision for loan losses”.

Millions of Americans temporarily subsisting on dole handouts, owing to the pandemic, are allowed to take time-limited repayment holidays on their credit commitments. Their inability to service these debts isn’t deemed “delinquent” through the alloted period. So lenders aren’t required to book adjustments for potential defaults, according to GAAP (generally accepted accounting principles) regulation.

[$-£ translations use forex rates applicable on 2 February 2021]

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