Harley-Davidson presented some disappointing numbers for the third quarter of 2015, reporting a 1.4% drop motorcycle sales and a 6.5% decrease in net income. In response, Harley-Davidson announced it would lay off about 250 workers while budgeting more money into marketing and product development.
For the quarter ended Sept. 27. 2015, Harley-Davidson reported sales of 72,178 motorcycles worldwide, down from 73,217 motorcycles sold in the same quarter of 2014. Motorcycle sales revenue actually saw a slight increase to $ 1.14 billion from $ 1.13 billion but Harley-Davidson still reported a 2.3% decline in operating income to $ 143.1 million.
Overall, Harley-Davidson reported a net income of $ 140.4 million over the third quarter, down from $ 150.1 million reported in 2014.
To snap out of this funk, Harley-Davidson will cut about 250 jobs, or 4% of its workforce. These layoffs and early retirements (Harley-Davidson uses the phrase “employee separation” in its press release) will result in a one-time expense of $ 30-35 million to be incurred in the fourth quarter.
At the same time, Harley-Davidson plans to increase its marketing budget by 65% while increasing its product development funding by 35%, a total investment of $ 70 million. The company hopes the increased investments will increase product and brand awareness, draw new riders in the U.S. market, increase brand access and speed up the development of new products.
“We expect a heightened competitive environment to continue for the foreseeable future, and now is the time for us to dial things up with significant additional investments in marketing and product development,” says Matt Levatich, president and chief executive officer of Harley-Davidson. “We have a strong plan, built on our incredible foundation, to further assert Harley-Davidson’s substantial market leadership and accelerate growth. We have great confidence in our plans to drive demand and grow our reach and impact with customers globally.”
Harley-Davidson announced five main objectives:
- Lead in every market.
- Grow the sport of motorcycling in the U.S., in part by growing the number of U.S. core customers and growing the number of U.S. outreach customers at a faster rate.
- Grow U.S. retail sales and grow international retail sales at a faster rate.
- Grow revenue and grow earnings faster than revenue through 2020.
- Outperform the S&P 500.
To help reach these goals, Harley-Davidson wants to double the number of riders going through its Riding Academy school, targeting a goal of training 100,000 riders a year by 2020. The Riding Academy has trained more than 220,000 riders since 2010 or about 37,000 a year, so it has quite a ways to go to reach that target.
Harley-Davidson also intends to increase its international dealer network by 150-200 new dealerships by 2020.
For the rest of the fiscal year, Harley-Davidson expects to ship 47,000 to 52,000 motorcycles, compared to 47,157 motorcycles shipped in the final quarter of 2014. Harley-Davidson now expects to have shipped 265,000 to 270,000 motorcycles in all of 2015, down from a previously-announced target of 276,000 to 281,000 motorcycles.