Harley saw huge sales, profit gains in 2021
Sales in Harley-Davidson’s motorcycle segment have been sliding for years. The decline started after the company nearly reached $5.6 billion in 2014 and sales were down nearly a billion dollars by 2019.
Then the pandemic hit and motorcycle segment revenues fell to less than $3.3 billion. But the decline wasn’t entirely because of COVID-19. With new leadership, the company set about resetting its strategy, changing when it launched its new models, scaling back its offerings, exiting certain markets and placing an emphasis on desirability of the brand and profitable growth.
Harley’s results for 2021 show some of the fruits of the new strategy. Motorcycle segment sales were up 39% for the year to $4.54 billion, essentially bringing the company back to its 2019 level. Add in Harley’s financial service business and revenue was up 32% for the year. The company also turned a $650 million profit, a massive improvement from just $1 million in 2020.
Heading into 2022, Harley is projecting its motorcycle segment sales will grow 5% to 10%. At the high end, the company would be returning to sales levels from 2017 or 2018. It would take three to five years of the growth Harley is forecasting this year to reach its 2014 peak.
Harley’s struggles in recent years have been driven by a number of factors, including competition from other companies and the used motorcycle market, challenges in attracting new riders and the potential for older riders to age out of the sport.
Like many manufacturers, Harley’s outlook is complicated by supply chain issues and rising costs. In 2021 alone, the company estimates supply chain cost inflation ate into its margin by around $91 million, a full two percentage points.
The company’s forecast for this year assumes that the current operating conditions and higher costs will hold throughout the first half of the year before showing some improvement in comparison to 2021 in the second half of the year for logistics and raw materials, Gina Goetter, chief financial officer of Harley-Davidson, said on the company’s earnings call Tuesday.
Goetter said challenges with semiconductor components will remain and Harley is assuming there will be some improvement in the second half of the year.
“The supply chain issues are not going away, in fact they intensified going into the year,” said Jochen Zeitz, chairman and chief executive officer of Harley.
Zeitz said Harley is seeing solid demand for its products, noting the recently introduced 2022 model year has been well received and the company has been able to sell through its production of new offerings like the Pan America.
“This is a question of supply and not a question of demand,” Zeitz said.
While Harley expects things to improve in the second half of the year, Zeitz cautioned that may not be the case.
“Visibility is relatively limited at this point in time,” he said, later noting the company is managing day-to-day in terms of the components it can get and products it can produce.
