Harley-Davidson Unveils The Hardwire Five-Year Strategic Plan; Targets Profitable Growth and Brand Desirability
Harley-Davidson (NYSE:HOG) launched The Hardwire, a strategic plan for 2021-2025, aiming for profitable growth and enhanced shareholder value. Key targets include low double-digit EPS growth, mid single-digit revenue growth in Motorcycles, and a focus on core motorcycle segments like Touring and Cruiser. Plans also emphasize expanding into Adventure Touring and strengthening electric motorcycle capabilities. The initiative promotes an inclusive workplace with equity grants for employees. The company aims to reinforce its lifestyle brand through digital enhancements and an expanded customer experience.
- Low double-digit EPS growth target through 2025.
- Mid single-digit revenue growth expected in the Motorcycles segment.
- Commitment to growth in profitable motorcycle segments, enhancing brand desirability.
- Launch of the Harley-Davidson Certified™ pre-owned motorcycle program.
- Dedicated division for electric motorcycles to lead in technology.
- Dependence on successful execution of The Hardwire strategy amid changing market conditions.
MILWAUKEE, Feb. 2, 2021 /PRNewswire/ -- Harley-Davidson, Inc. ("Harley-Davidson") (NYSE:HOG) has announced The Hardwire, its 2021-2025 strategic plan targeting long-term profitable growth and shareholder value, and aiming to enhance its position as the most desirable motorcycle brand in the world.
Key Highlights:
- Target increased profitability and low double-digit EPS growth through 2025
- Broaden view of its customers, inclusive of non-riders, tailoring each step of the journey in new ways and through multiple channels, including enhanced digital touchpoints
- Invest in core segments of Touring, large Cruiser and Trike to strengthen and grow its position
- Expand into Adventure Touring and within the Cruiser segment to unlock untapped volume and margin
- Launch Harley-Davidson Certified™, a pre-owned motorcycle program supporting growth expected across all complementary businesses
- Strengthen commitment to electric with the creation of a dedicated division focused exclusively on leading the future of electric motorcycles
- Fuel power of Harley-Davidson as a global lifestyle brand through reinvigoration of parts, accessories and riding gear and global expansion of financial services
- Extend employee ownership to all employees by offering an equity grant to approximately 4,500 employees, aligning with new approach to Inclusive Stakeholder Management
"We launch The Hardwire with capabilities, assets and a legacy unmatched by any competitor. Harley-Davidson is the most desirable motorcycle brand in the world, backed by leading positions in the most profitable segments and a reinvigorated culture of performance, efficiency, focus and speed. By unlocking our full potential, prioritizing profit through leadership and fueling our lifestyle brand with an enhanced product offering and leading digital capabilities, our strategic plan will drive the desirability of Harley-Davidson for all." said Jochen Zeitz, chairman, president and CEO, Harley-Davidson. "I am proud to announce our first commitment as part of our Inclusive Stakeholder Management priority, an equity grant to thousands of our employees, including every hourly factory worker. It is only fitting that this inaugural action is for our own Harley-Davidson community who continue to deliver our iconic products and experiences with great pride and craftsmanship every day."
Rooted in desirability and guided by the company's vision and mission, The Hardwire aims to build the brand beyond riders, deepen loyalty, preserve value and drive engagement. The strategic priorities of The Hardwire are:
Profit Focus
Harley-Davidson will invest significant time and resources on strengthening and growing its leadership position in its strongest motorcycle segments - Touring, large Cruiser and Trike - with a curated portfolio of the highest priority products. These segments are the most profitable in the market globally and demonstrate steady aggregate demand of new and used sales.1 The company believes these segments offer untapped opportunity to inspire more engagement and repurchase and also compel new customers and riders to choose Harley-Davidson. Profitable growth is expected through inspirational new products that live up to the company's vision for market-leading innovation, evolution and emotion.
Selective Expansion and Redefinition
The company plans to selectively focus on opportunities in profitable segments, aligned with the company's product and brand capabilities that demonstrate a clear path to market leadership.
Pan America™, Harley-Davidson's first Adventure Touring motorcycle, is an example of the company's selective expansion into a high-potential segment that is one of the largest in many European markets and has untapped potential in the U.S. The company also intends to reinvent and increase profitability within the Cruiser segment, with highly competitive and profitable middleweight offerings that expand its relevance to a greater customer set beyond its current stronghold segments.
Harley-Davidson has redefined its geographic footprint, with a focus on ten global markets that matter most to future success. The company will strategically drive these markets to their full potential by developing custom product and go-to-market approaches. The company will continue to test further avenues for desirable long-term growth through premium low displacement partnerships.
Lead in Electric
Electric motorcycles are important to Harley-Davidson's future and the company is committed to remaining at the forefront of electric motorcycle technology following its groundbreaking success with the LiveWire® motorcycle, widely regarded as the leading electric motorcycle in the world. The company is investing in its long-term success by creating a separate division dedicated exclusively to electric motorcycles. The focus will be on technology development, with an approach to product and go-to-market actions that reflect the expectations of the targeted customer to deliver the most desirable electric motorcycles in the world.
Growth Beyond Bikes
Harley-Davidson's complementary businesses – Parts & Accessories, General Merchandise, and Harley-Davidson Financial Services – are important pillars of the company's future success as a global lifestyle brand and provide untapped potential to grow its customer base and add to customer lifetime value. The Hardwire targets growth and profitability of these businesses through refreshed product offerings, stronger execution, and additional digital and in-dealership purchase opportunities. Expanding global Harley-Davidson Financial Services offerings will provide greater flexibility for customers, including a pre-owned Harley-Davidson motorcycle program, Harley-Davidson Certified™, aimed at enhancing the overall customer experience and supporting growth in all complementary businesses.
Customer Experience
The Hardwire puts customers at the forefront of Harley-Davidson's products, experiences and investments and defines customers as people who may dream of motorcycling or just learned to ride, all the way to riders who are deeply passionate about and invested in the Harley-Davidson lifestyle. The company recognizes the different needs and expectations of customers across the purchase journey and the importance of a customer experience that ensures each touchpoint is tailored to individual needs. Powered by integrated data, the company's goal is to seamlessly engage with customers, creating a meaningful, unique and personalized experience with Harley-Davidson each and every time.
Inclusive Stakeholder Management
In its approach to optimize long-term value for all stakeholders, Harley-Davidson views inclusive stakeholder management in the context of people, planet and profit, as all three are deeply embedded in the past and future success of the Harley-Davidson brand and company.
People: Harley-Davidson aims to foster a community reflected in its H-D #1 culture, including a highly desirable, safe and inspiring workplace that attracts and retains top talent by evolving its spaces and how its employees work. The company will strive to create an inclusive community with a strong dealer network and a supply base focused on ethical, sustainable and equity-based purchasing and sourcing practices.
Planet: The company is developing a path to net zero environmental impact while delivering on its mission, investing in its practices and teams to do so.
Profit: Through Harley-Davidson's focus on desirability, the company plans to drive profitability and shareholder returns. In order to closely align the rewards of its employees with those of its shareholders, approximately 4,500 employees will be offered an equity grant at the start of The Hardwire. With this expanded approach, all employees from factory workers to executives and all shareholders will benefit when the company succeeds.
Financial Targets
The company is targeting profitable growth on the top and bottom line through 2025. Financial results are expected to demonstrate progress in several critical areas, including revenue and operating margin, driven by investments, increased efficiencies across operations and leverage within SG&A as the company maintains a lean cost structure.
The Hardwire financial targets 2021-2025:
- Mid single-digit revenue growth in Motorcycles segment, with solid growth expectations across all businesses
- Steady improvement in Motorcycles segment operating margin from 2019 (most recent comparable year)
- Double-digit growth in Financial Services segment operating income behind growth in the Motorcycles segment and optimization of the company's digital platform
- Low double-digit EPS growth
- Capital investments between
$190 million to$250 million annually
Cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends. Harley-Davidson, Inc.'s Board of Directors approved a first quarter 2021 dividend of
Company Background
Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Our vision: Building our legend and leading our industry through innovation, evolution and emotion. Our mission: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul. Our ambition is to maintain our place as the most desirable motorcycle brand in the world. Since 1903, Harley-Davidson has defined motorcycle culture by delivering a motorcycle lifestyle with distinctive and customizable motorcycles, experiences, motorcycle accessories, riding gear and apparel. Harley-Davidson Financial Services provides financing, insurance and other programs to help get riders on the road. www.harley-davidson.com.
Webcast
Harley-Davidson will discuss its financial results, strategic plan and outlook on a webcast today from 8:00-9:30 a.m. CT. The webcast log-in and supporting slides can be accessed at http://investor.harley-davidson.com/news-and-events/events-and-presentations. The audio replay will be available by approximately 10:30 a.m. CT.
Cautionary Note Regarding Forward-Looking Statements
The company intends that certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the company "believes," "anticipates," "expects," "plans," "may," "will," "estimates," "targets," "intend," "is on-track" or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this press release. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are only made as of the date of this press release, and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic and (ii) the company's ability to: (A) execute its business plans and strategies, including The Hardwire, successfully execute its remodeled approach to supply and inventory management, and strengthen its existing business while allowing for desirable growth; (B) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests, including successfully implementing a distributor model in fifteen international markets; (C) successfully access the capital and/or credit markets on terms that are acceptable to the company and within its expectations; (D) successfully carry out its global manufacturing and assembly operations; (E) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Touring, large Cruiser and Trike, and growing its complementary businesses; (F) perform in a manner that enables the company to benefit from market opportunities while competing against existing and new competitors; (G) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing; (H) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters; (I) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (J) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (K) successfully manage and reduce costs throughout the business; (L) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; (M) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (N) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (O) develop and maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (P) manage and predict the impact that new or adjusted tariffs may have on the company's ability to sell products internationally, and the cost of raw materials and components; (Q) successfully maintain a manner in which to sell motorcycles in the European Union, China, and the company's ASEAN countries that does not subject its motorcycles to incremental tariffs; (R) manage its Thailand corporate and manufacturing operation in a manner that allows the company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (S) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (T) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (U) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or company data and respond to evolving regulatory requirements regarding data security; (V) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio; (W) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the company's business; (X) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (Y) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (Z) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (AA) manage its exposure to product liability claims and commercial or contractual disputes; (BB) continue to manage the relationships and agreements that the company has with its labor unions to help drive long-term competitiveness; (CC) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with product development initiatives and the company's complex global supply chain; and (DD) successfully develop and launch the pre-owned motorcycle program, Harley-Davidson Certified.
The company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, or other factors. Other factors are described in risk factors that the company has disclosed in documents previously filed with the Securities and Exchange Commission. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the company's ability to manage through inconsistent economic conditions.
The company's ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the company's independent dealers to sell its motorcycles and related products and services to retail customers. The company depends on the capability and financial capacity of its independent dealers to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the company. In addition, the company's independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of COVID-19, or other factors. In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actions that the company has taken and could take that impact motorcycle values. Refer to "Risk Factors" under Item 1A of the company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020 and Part II, Item 1A of any subsequently filed Quarterly Report on Form 10-Q, for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.
1 Total demand based on Used and New vehicles data in the U.S. Used volumes based on IHS Markit Used Registrations data for U.S. motorcycles from 2015-2019 for On Highway and Dual motorcycles of 1201cc+ for models classified by Harley-Davidson as Touring and Large Cruiser. New motorcycle information reflects sales data from MIC.
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SOURCE Harley-Davidson, Inc.
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