2018 Letter to Shareholders
2018 LETTER TO SHAREHOLDERS
Dear Fellow Shareholders,
In July we announced the More Roads to Harley-Davidson plan – an acceleration of our strategy to build the next generation of Harley-Davidson riders, grow motorcycling and return our business to growth through 2022. Our execution is on track, and we met or exceeded all stated plan milestones in 2018. We are energized that we’re getting new and different people to stand up and take notice of Harley-Davidson.
Our current riders remain deeply engaged in the brand and tell us they too are excited at the direction we are headed. It’s clear that the groundwork for an exciting future is being built in real time.
The More Roads to Harley-Davidson plan addresses the challenges of today and the opportunities ahead of us through three growth catalysts: new products, broader access and stronger dealers.
We continue to demonstrate our clear commitment to the passions and preferences of our current riders. Our 2019 motorcycles are hands down our best ever – we launched new models and debuted rider confidence, performance and infotainment features.
Our commitment to lead the electrification of motorcycling is also clear. In 2018, our first electric Harley-Davidson model, LiveWire™ made its debut, and we also provided a public glimpse of our broader electric portfolio.
Even before the first LiveWire™ is in the hands of the first owner, we are reaping the strategic value of this extraordinary motorcycle. The buzz is captivating and inspiring new people about what’s possible from Harley-Davidson and why riding is an exciting and emotionally charged activity filled with adrenaline and fun.
Harley-Davidson LiveWire, coming in 2019
We are accelerating our progress to grow Harley-Davidson’s reach and relevance by aligning our efforts in an integrated way, to attract and increase value for new and different consumers and meet people where they are and how they want to engage.
In line with our plans to reach more urban dwellers and expand in emerging markets, 23 Harley-Davidson apparel stores were opened in high foot traffic areas throughout Asia in 2018. These stores offer a unique line of branded apparel, which we know is a gateway into Harley-Davidson. In our sample survey, over 75 percent of shoppers said it was their first visit to any Harley-Davidson store and over 60 percent were under 34 years old.
In 2018, we also launched eCommerce in the U.S. (Amazon) and in China (T-Mall) and enhanced our eCommerce store on H-D.com. In 2018, total eCommerce sales were up 32 percent.
We are building an integrated multi-channel retail experience that today’s consumers expect and providing consumers an inspiring and convenient way to connect with Harley-Davidson products.
In an environment of rapidly increasing customer expectations, we and our dealers must be prepared. Our dealers are critical as they bring the spirit of Harley-Davidson motorcycling to life each and every day.
We are emphasizing dealer capabilities, and we significantly increased support and incentives under a performance framework. Part of this work includes creating conditions to enable dealer growth and improve the customer experience.
Stronger Dealers means optimizing our network composition, providing more meaningful support tailored to individual dealers’ needs and expanding our international footprint. In 2018, 56 international dealerships were opened.
56 International dealerships, as of 12/31/18
Building the Next Generation of Riders Globally
Underpinning all global efforts is our topline strategy to build the next generation of Harley-Davidson riders through 2027. We set 10-year objectives knowing this would be a long march to change the way people think about motorcycling. It requires our very best efforts, significant change, and it requires time. More Roads is our plan to accelerate our progress, and it includes clear deliverables through 2022.
Our capabilities in building and retaining new riders are improving, and our 2018 marketing investments engaged new and existing riders. We continued the momentum we started in 2017 and ended 2018 with over 52,000 more Harley-Davidson riders in the U.S.*
*SOURCE: *IHS Markit Motorcycles in Operation (MIO) data for On-Highway and Dual purpose bikes in the U.S. as of Jan 1, 2019 compared to previous years of MIO back to 2002
Looking forward, our efforts will intensify. We are on track with our new middleweight Adventure Touring and Streetfighter motorcycles planned to launch in 2020. The immense talent and capabilities of our teams continue to boldly expand how the look, sound and feel of Harley-Davidson motorcycles drive appeal with new types of people.
We will continue to lead with passion and focus, to disrupt the status quo and ignite a cultural movement for motorcycling, inspiring new people AND our current riders to join us all along the way.
On behalf of everyone at Harley-Davidson, thank you for your investment and continuing to ride with us.
President and Chief Executive Officer