Harley-Davidson Suspends Buybacks

by Elliot C. Financial Analyst

Harley-Davidson Suspends Buybacks

Harley-Davidson Inc cut its quarterly dividend to just 2 cents and suspended share buybacks on Tuesday. This was to boost its cash reserves as global lockdowns due to COVID-19 hit motorcycles sales in the first quarter.

The company, which has $1.47 billion in cash, said it was in talks with big U.S. banks. That was to get an additional $1.30 billion in loan to ride out the crisis.

The cash preservation plan lifted Harley-Davidson stocks. Shares have lost nearly half of its value so far this year, up 9% in premarket trading.

Earlier this month, the motorcycle maker pulled its 2020 profit forecast. It decided to temporarily lay off most of its global production employees. Moreover, it has cut salaries of its leadership team in a bid to lower costs.

On Tuesday, the company said it would cut cost to match the lower demand. It plans to focus more on sales efforts in the United States, its biggest market.

Harley has been struggling with falling U.S. sales as its baby-boomer fan base ages. To counter that, it has tried to woo the next generation of younger riders with electric and more nimbler bikes. However, that has done little to boost sales and stock trading.

Harley-Davidson Sales Fall

To make matters worse, the coronavirus pandemic has further hit demand. Americans were forced to stay at home to curb the spread of the virus.

Retail sales fell 15.5% in the United States in the quarter while 20.7% internationally. The company said global retail motorcycle sales in the first quarter were significantly impacted by COVID-19.

Total motorcycle shipments to dealers dropped 10% to 52,973 units in the first-quarter ended March 29. Retail sales at its dealers were down nearly 18% to 40,439 units.

Harley-Davidson said it would expand its lineup of profitable "iconic" motorcycles. It will also target to boost sales of some of its new products. These include adventure touring, sport bike Streetfighter and electric motorcycles.

Acting Chief Executive Officer Jochen Zeitz said, these efforts will pave the way for improved profitability and long-term growth.

Zeitz, who was a board member at Harley replaced CEO Matt Levatich. Zeitz is best known for turning around the Puma brand's near-bankrupt business.

In stock market reports, Harley-Davidson’s net income fell to $69.7 million, or 45 cents per share in the quarter. That was from $127.9 million, or 80 cents per share, last year.

Motorcycles and related products revenue declined 8% to $1.10 billion. On an adjusted basis, it earned 51 cents, beating analysts' average estimate of 41 cents.

Source: Financebrokerage.com