Title: Harley-Davidson's Share Price Takes a Dive After DEI Policy Changes
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Sometimes, you don't appreciate something until it's gone. That seems to be the case with Diversity, Equity, and Inclusion (DEI) initiatives in the corporate world. The fourth quarter earnings season has brought DEI efforts back into the spotlight, with shareholders more than ever asking board members to take a stance on these programs.
This shift in focus began six months ago, with conservative groups and activists pushing to have companies abandon DEI efforts. One of the first companies to announce this move was Tractor Supply, a chain of 2250 stores selling farm supplies and pet food. Soon after, John Deere, one of America's top 100 companies, followed suit. The movement really gained momentum in August when Harley-Davidson, the iconic American motorcycle manufacturer, announced that they had not had a DEI function since April 2024.
Harley-Davidson's decision has not been without consequences. Since the announcement, the company's stock has experienced a significant drop of 25%. From April 24th to January 15th, HOG has gone against the broader market trend.
The politics of DEI should not overshadow its potential power. By 2045, America will be a majority-minority country. Building bridges to be inclusive and represent these voices can help companies overcome historical blind spots when it comes to messaging, marketing, and the importance of these consumers in society and the economy at large.
The blind spot is substantial. In the U.S., the combined spending power of Black, Latino, and Asian American consumers is estimated to be over $16 trillion. Black Americans' spending power alone is between $1.4 trillion and $1.8 trillion annually, making it a powerful economic bloc comparable to the gross domestic products of Mexico, Canada, and Italy. The Latino market in the U.S. reached $3.4 trillion in 2021 and grew over twice as fast as non-Latino counterparts. The Asian American market, with $1.3 trillion in buying power, has a median household income of $104,646, higher than the average income in the U.S. This demographic has grown 314% over the past two decades, making it the fastest-growing ethnicity group.
Tapping into these consumer markets is not just smart, but necessary for robust corporate bottom lines. The collective intelligence, insights, and skillsets of diverse populations also provide opportunities for employers to strengthen their workforce headcounts.
Harley-Davidson will release its fourth quarter and year-end 2024 financial results before market hours on February 5, 2025. What will the future hold for them?
Despite the negative short-term impact of ditching DEI efforts, as seen in Harley-Davidson's case, there are some positive indicators. Some analysts still view HOG stock as undervalued, with an average rating of "Buy" and a 12-month stock price forecast of $42.71. However, it's important to remember that the long-term impact on stock performance will depend on how effectively companies manage backlash and adapt to changing market conditions.
The trend of companies rolling back DEI efforts is not unique to Harley-Davidson. Major corporations like Meta, Walmart, Ford, and John Deere have also announced similar moves. This shift could be driven by political and economic pressures, as well as a perceived lack of measurable return on investment for DEI initiatives.
References:[1] KTEG Bellevue (2022) [2] Wheeler, K. (2022) [3] Neff, S. (2022) [4] The Wall Street Journal (2022)
doug melville, as an advocate for diversity and inclusion, has expressed concern about the trend of companies like Harley-Davidson, Tractor Supply, and John Deere abandoning DEI initiatives. Melville, who previously worked at Harley-Davidson, believes that ignoring diversity can lead to missed opportunities in tapping into growing consumer markets, such as the $16 trillion combined spending power of Black, Latino, and Asian American consumers in the U.S.
During the upcoming earning season, investors will be closely watching how Harley-Davidson, expected to release its financial results on February 5, 2025, will navigate the consequences of its decision to end its DEI function. According to some analysts, despite the short-term drop in stock price, they still view HOG stock as undervalued, with a 12-month stock price forecast of $42.71.
In response to the movement away from DEI, other companies like Meta, Walmart, Ford, and Deere have also announced similar moves. Doug melville argues that while companies may face pressure to cut costs by abandoning DEI initiatives, they may miss out on the long-term benefits of a diverse workforce and tapping into diverse consumer markets.
