When last we checked in on Harley-Davidson, the iconic “hog” manufacturer was caught between a rock and a hard place.
Early last year, the Wisconsin-based motorcycle maker found itself in an absurd (and one-sided) war of words with Donald Trump after the company announced that, due to the expected impact of retaliatory tariffs, some production would be moved overseas in order to ensure unfettered access to the European market.
Trump was beside himself.
Over the course of several days, the President attacked the company on Twitter, at one point threatening to impose punishing taxes and suggesting the White House would actively promote Harley’s competitors.
“A Harley-Davidson should never be built in another country-never!”, Trump shrieked, on June 26, before elaborating as follows:
Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end — they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
At one point during his days-long tirade, Trump attempted to cite the company’s plans to close a Kansas City plant as evidence that Harley was already plotting to do something treasonous prior to the tariffs. The effort to blame management was then ramped up, with Peter Navarro accusing Harley of “speaking through forked tailpipe” and Larry Kudlow suggesting that management teams are using the tariff excuse to cover up bad execution.
In July, Democrats made a video citing that same Kansas City plant closure as evidence that Trump’s policies were not, in fact, delivering as promised for the American worker. To make matters worse, the DNC noticed that Harley announced its intention to buy back some $700 million worth of stock just days after breaking the bad news about the plant closure.
Long story short, Harley found itself on the bad side of both Trump and Democrats.
The feud with Trump was made all the more amusing by the fact that just weeks after the inauguration, Harley was trotted out by the new administration as a poster child for American manufacturing — a quintessential example of iconic American brands.
The President famously invited executives to the White House for what amounted to a photo op that found Trump and Mike Pence posing by various Harley models and pretending to care about motorcycles.
Great meeting with @harleydavidson executives from Milwaukee, Wisconsin at the @WhiteHouse. pic.twitter.com/7Spcmh6guM
— President Trump 45 Archived (@POTUS45) February 2, 2017
Note the time stamp.
Fast forward two years and Trump has succeeded in driving profits to zero at Harley – literally.
On Tuesday morning, the company reported GAAP earnings of nothing. Zilch. Nada (as they say south of Trump’s imaginary steel slat fence). To wit, from the filing:
Fourth quarter 2018 GAAP diluted EPS was $0.00. Year ago GAAP diluted EPS was $0.05. Excluding restructuring plan costs (including manufacturing optimization) and the impact of incremental tariffs, fourth quarter 2018 diluted EPS was $0.17. Fourth quarter 2018 net income was $0.5 million on consolidated revenue of $1.15 billion versus net income of $8.3 million on consolidated revenue of $1.23 billion in 2017.
That adjusted figure ($0.17) missed analyst estimates by a cool $0.12, the largest margin since 2009.
(Bloomberg)
Although there’s obviously more going on here than trade policy (US retail sales posted another decline during the quarter, the eighth in a row), Trump’s “greatest” tariffs aren’t helping.
As for the shares, well, they plunged 9% in the premarket on the news.
(Bloomberg)
Assuming the losses hold during the regular session, that will be “good” enough to wipeout the 2019 gain. 2018 was the worst year for the shares since the crisis.
(Bloomberg)
The only question now is whether noted HOG analyst Donald J. Trump (of 1600 Penn. Asset Management fame), will deliver a postmortem on Twitter accompanied by, one can only assume, a reiteration of his “Sell” rating.
I wonder how they will justify future buybacks when they make 0 money. I mean they were able to buy back 700mm when top line revenue was 1.2B and net income 8.3mm (lol) so they obviously don’t give a fuck anyway. I wonder if the debt service cost for that 700mm is included in their “restructuring plan costs“.