According to Reuters UK, Piaggio reported a 28% drop in net profit in 2008, which reminded us to check on our Piaggio stock: It’s at €0.95, an all-time low since Piaggio’s June, 2006 IPO at €2.30. Poor sales, a bad economy, and the weak Euro all hurt Piaggio last year, as did nearly €100 million in new debt from stock buybacks and a €.06-per share dividend last year, which will be offered again this year, which seems counterintuitive, but what do we know?
We’re not financial analysts. If we knew the first thing about business, we’d be making money off 2strokebuzz, somehow. But here’s the situation as we understand it:
- Piaggio SpA isn’t doing that well, worldwide.
- The United States is a pitifully small market for Piaggio, and an afterthought in their planning, budget, and product distribution.
- Even with the perfect storm of U.S. scooter sales last year, PiaggioUSA’s sales were a drop in Piaggio SpA’s bucket.
- PiaggioUSA maintains a large-ish staff in an expensive Manhattan high-rise office, and an expensive training center in California.
- PiaggioUSA overextended their dealer network over the past few years, pushing into unproven non-powersports dealers and small markets for the sake of quick unit sales.
- Many of these dealers are folding and/or defaulting on flooring payments and may soon be unloading bikes cheap.
- Historically, Piaggio has done this all before, several times, and in some cases, dropped out of the market less than a year after a huge sales spike.
- Italian business in general (and the Italian motorcycle industry specifically) seems to follow a crash-and-burn cycle of government bailouts, private ‘rescues,’ acquisitions, mergers, demergers, and public offerings that always seem to tarnish the marques in the long run, and make venture capitalists like Roberto Colaninno and IMMSI rich at the expense of taxpayers (sound familiar, America?)
- It could be argued that Colaninno has lost some degree of his interest in Piaggio since the IPO.
- Colaninno has a new hobby, Alitalia, which will be a more likely recipient of his attention (at least until its IPO).
- A restructuring, sale, or government intervention at Piaggio SpA would likely require some cost-cutting measures (start back at the beginning of the list and you’ll see where this is going…)
Note: It’s hard to say whether Aprilia and Moto Guzzi help or hurt PiaggioUSA’s case. (Gilera and Derbi are not an issue in the U.S.) the diversity in the market may help, but neither marque seems to be setting the American market on fire, either.
Last year, during the “boom,” people laughed when 2strokebuzz suggested PiaggioUSA wouldn’t see 2010. Our bet is that this summer won’t come close to 2008, but 2009 will be a reasonably good year for scooter sales. Sadly, Piaggio SpA seems to expect exponential growth every year, and even a reasonably good sales year may not be enough to keep them here. We love the Vespa, we love Piaggio scooters, we admit PiaggioUSA has come a long way since the ill-concieved “boutique” days. With a scaling back of sales expectations and some responsible management, Piaggio and Vespa could remain in the U.S. indefinitely. But their fate probably lies in Piaggio SpA’s hands, so we’re sadly sticking to our 2010 estimate, and hoping we’re wrong.