Earnings roundup: Alibaba beats, Harley-Davidson posts surprise loss

Julie Hyman, Myles Udland and Brian Sozzi discuss some of Tuesday morning’s early movers, including Alibaba — which topped estimates — as well as Harley-Davidson — which posted an expected loss as the company unveils a turnaround plan.

Video Transcript

JULIE HYMAN: Let's talk about some of the earnings that came out this morning and are seeing some notable moves in the market. One of them is Alibaba, of course the Chinese giant e-commerce company. The company said revenue was up by 37%.

And Alibaba's numbers tend to look good on the face of it. They had strong results, they said, from Singles Day. They sort of extended the promotions from that. That's similar to what we saw for Amazon and its Prime promotion event.

But, you know, most of this is being overshadowed by the regulatory situation and what's going on in China, Myles, with its Ant subsidiary, with Jack Ma, and with threats of regulation for this company and also its pulled listing.

MYLES UDLAND: Yeah, I mean, I think-- look, Alibaba has a fine business in its own right that I think people are excited about, but certainly its, you know, 1/3 stake in Ant was a part of the company's value. And the company coming out and saying, you know, on the call that they don't really know what's going on right now or they're not able to provide an update, rather, to the markets-- all they said is the, you know, IPO process for Ant is subject to, quote, "substantial uncertainties." I would certainly say so when the Chinese government comes in and decides that Ant Group is not going to be able to-- I don't know, I guess upend and, you know, kind of be the main player within China's emerging fintech scene.

Also, this comes as news or, rather, a lack of news came out that China listed some of its tech luminaries-- out with a big, you know, splashy advertisement for this. Jack Ma not a part of that.

So the relationship between Alibaba, between Jack Ma, between Ant, between the Chinese government, certainly there was always some level of it being fraught because no one comes before the party, at least not anyone that, you know, Xi hasn't endorsed as being able to come before the party. But again, that would ultimately be no one comes before the party.

And so a very strange dynamic developed there with Ma's wealth, his, you know, public appearances, the way that he spoke. Certainly we covered at length his comments he made last fall speaking negatively about Chinese financial regulations, the way there's been a crackdown on him and now his businesses, and that really remains the big story here and what, you know, US-China relations look like now that Donald Trump is not the president. We no longer have trade war by tweet, but it's not like everything is now all hunky dory with US-China relations as China worries about, you know, I guess we could say displeasure within its own business ranks.

So very interesting and strange geopolitical, you know, business-political story, however you want to exactly phrase it. And I think, again, certainly overshadows what was, to no one's surprise, a very strong year for the e-commerce company.

JULIE HYMAN: Yeah, so this is obviously much more complex than just the earnings. A story that seems a lot more straightforward is that involving Harley-Davidson, which reported an unexpected loss. The company has also, Brian, come out with a turnaround plan over the next five years, but it's had some turnaround plans before. Unclear what's going to be different this time. Look at that stock. Woo, down 18% here.

BRIAN SOZZI: Yeah, Julia, I've followed Harley-Davidson for a good number of years, and there's been a lot of internal change at this company. I would say morale, just based on my conversations with folks familiar with the matter-- the culture inside has really taken a hit during these challenging times, and it really-- the morale is low, I would say, right now at Harley-Davidson.

And what you're seeing today here is a stunning quarter by one of the most widely recognized consumer brands in the world. Of note, they came out on the press release, Harley-Davidson this morning. They said they cut models, the number of models, by 30%. Dealer inventory down 59%. The core motorcycle division for Harley-Davidson lost $196 million in terms of operating profits.

What you're seeing, this is the reflection of really a review process by new CEO Jochen Zeitz who officially took over in May of last year. But he's been on the board since 2007, so he's very familiar with the company. He has hit the complete reset button on this company to really bring out a lot of costs from the business, get when they release bikes out on a better trajectory and just release hopefully more profitable bikes.

And his five-year plan is called Hardwire, and I think it really revolves around doing less and hopefully making more money per bike. But it doesn't change the structural problem in the bike industry, guys, that people aren't just buying bikes. Look, we just had Brunswick's CEO on, David Foulkes. People are buying boats. It's just the bike industry that remains very challenged.

I know our producer Nick Monte is sad about that, but that's just the reality of it. I hate to be the bearer of bad news, and I don't know what gets people to buy more motorcycles. It's not necessarily a new Harley-Davidson electric bike.

JULIE HYMAN: Well, Nick will still be able to buy his bike, so that's all right. By the way, Harley has also said it's offering an equity grant to 4,500 employees. So in other words, buyouts to employees to cut those jobs.