4 Takeaways from Harley-Davidson’s Q4 2023 Results

"In the third year of our Hardwire strategy we have made progress in key elements of our strategic plan - focusing on our most profitable products and markets, which we believe will continue to yield benefits to the business and have set us up for long-term value creation despite the current challenging environment for the industry," says Jochen Zeitz, Chairman, President and CEO, Harley-Davidson. "We are excited by the early read of our new Model Year launch, the most comprehensive product development in the touring platform in well over 10 years, that will redefine the Harley-Davidson Grand American Touring experience for years to come and lay the foundation to drive retail sales growth in '24."

The highlights for the 2023 fiscal year, according to Harley-Davidson:

• Delivered diluted EPS of $4.87
• Achieved 13.6% operating margin at HDMC
• HDMC unit profitability returned to historically healthy levels
• HDMC global motorcycle shipments of 179,984, down 7% year-over-year
• HDFS operating income finished down 26%
• LiveWire launched the Del Mar electric motorcycle – the first bike off the S2 platform

Guidance for 2024:

• HDMC: revenue flat to down 9% and operating income margin of 12.6% to 13.6%
• HDFS: operating income flat to up 5%
• LiveWire: electric motorcycle unit sales of 1,000 to 1,500 and operating loss of $115 to $125 million
• Harley-Davidson, Inc: capital investments of $225 to $250 million

With those numbers out of the way, here are some details from Harley-Davidson’s fourth-quarter presentation that stood out for us.

Motorcycle Sales Were Down, But Revenues Didn’t Take A Hit

Harley-Davidson says it sold 30,162 motorcycles during the final quarter, down from 33,834 units of retail sales in the same quarter of 2022. This capped off a year that saw total retail sales decrease from 178,451 motorcycles to 162,771 motorcycles.

Despite the lower sales volume, Harley-Davidson reported a very slight uptick in motorcycle sales revenue. Year-end sales revenue reached $3.8 billion, up $11.5 million compared to 2022’s results, a marginal increase of 0.3%. This is the result of the Hardwire strategy’s shift in focus from unit sales volume to profitability, with Harley-Davidson claiming an average profit of $3,700 per motorcycle sold compared to $1,300 per motorcycle sold back in 2019.

How you interpret this depends on your perspective. If you prioritize sales volume, then selling 15,680 fewer motorcycles is disappointing. If profit is the more important metric, then having revenue hold steady despite selling less product

Sales Revenue for Apparel, and Parts & Accessories

Motorcycle retail sales is the backbone of Harley-Davidson’s revenue, but a 0.3% increase in motorcycle sales revenue was more than offset by lower revenue for both Parts & Accessories, and Apparel.

Harley-Davidson says Parts & Accessories brought in $698.1 million in revenue, down from $731.6 million in 2022. Revenue from Apparel sales also declined, dropping to $244.3 million from $271.1 million (on a semi-related note, Harley-Davidson is offering a lot of discounts on 120th anniversary merchandise at the moment.)

S2 Del Mar Gives LiveWire A Needed Boost

After posting middling numbers over the first three quarters, we finally see signs of life from LiveWire, thanks mostly to the S2 Del Mar. LiveWire shipped 660 motorcycles in 2023, with 514 of them coming in the final quarter, and 482 of them attributed to the S2 Del Mar, which finally began deliveries. It’ll be interesting to see how Del Mar shipments will look in this current quarter.

The 660 units marks a record for shipments for the LiveWire brand, up from 597 units in 2022 and 461 units in 2021. Those numbers from previous years consisted entirely of the LiveWire One, which carries a much higher price than the Del Mar. As a result, LiveWire reported $38.3 million in revenue for 2023, compared to $46.8 million in 2022 and $36 million in 2021.

There’s still a long way to go before LiveWire can turn a profit. Development costs are still high, and it will take more than two products (and quite soon, three) before that investment produces positive results. Another factor is the production and stockpiling of excess parts inventory. For the year, LiveWire reported a loss of $109.6 million in 2023 compared to a loss of $78.9 million in the prior year.

New Touring Platform

Harley-Davidson revealed its new touring models a few weeks ago, which means they won’t figure into the bottom line until the next quarterly report. During today’s presentation, Zeitz confirmed development of the new Street Glide and Road Glide models began in 2020, and reiterated that they represent the future of the Grand American Touring segment.

Answering a question about the pricing strategy for the new models, Zeitz pointed out the new MSRP positions them as the “mid-level” in between the previous generation’s standard and Special models.

“(With) the comments that you will see in online forums, people understand that there's a lot more key features and a lot more benefits that we've previously had in our STs and Specials are now already incorporated in our mid-levels,” says Zeitz, confirming that yes, Harley-Davidson does lurk on online forums.