- Sales dropped 40% for the quarter, putting a cap on the year's 23% decline.
- Profits rolled over, as last year's $0.40 Q4 profit turned into this year's $0.63 loss, closing out the year with a 90% decline in profits -- $0.30 per share.
- And in response to the tough sales environment, Harley expects to cut bike shipments by 5% to 10% in 2010.
But was anyone really surprised by the news? Perhaps the analysts at Citigroup
If truth be told, I was surprised, too -- but pleasantly so. Just three months ago, I remarked on the unprecedented level of cash Harley generated in Q3. But seeing as "historically, Harley has burned cash in the year's final quarter," I predicted that come Q4, we'd see that cash flow evaporate.
Well, news flash: It didn't. To the contrary, Harley ended the year with $609 million in "cash provided by operating activities," or nearly $100 million more than it had produced as of Q3. How'd they do that? For one thing, Harley slashed inventories 25% since the end of last quarter. Converting steely chrome bikes into cold, hard cash certainly helped to boost cash flow.
When you combine the inventory liquidation with Harley's 53% reduction in Q4 shipments, and tack on a further 10% decline in shipments planned for this year, it looks like Harley's finally making progress in aligning its production patterns with its sales trends.
So what's with the sell-off?
Regardless of this, investors sold off the stock by nearly 8% Friday. But from where I sit, Harley's ability to produce cash -- and even free cash flow -- in the middle of a recession gives us reason to hope for a rebound. Just as production cuts at automakers like Ford
This train's been a long time coming, but better late than never. If Harley's finally getting serious about its inventory issues, now seems like a good time to climb aboard.