Despite sales slump, Harley-Davidson earnings beat poor expectations
Harley-Davidson demolished
Wall Street’s expectations in its third-quarter earnings report, with profits up 67 per cent at nearly $114 million. But the future still looks grim for the motorcycle maker, which has been in decline for some time.
The motorcycle company’s earnings per share were up from last year at $0.68, far above the $0.51 that analysts had predicted. But its U.S. sales dropped by 13 per cent, the company’s biggest quarterly decline since 2010, according to Bloomberg. Internationally, Harley-Davidson’s sales were up 2.6 per cent.
The company’s overall revenue, however, was up 3 per cent.
For years, Harley-Davidson has struggled from a drop-off in ridership and domestic sales. This year has been particularly turbulent for the company, which was caught in the crossfire of President Donald Trump’s trade war. The company has said Trump’s tariffs would cost it up to $20 million this year. Retaliatory European Union tariffs could cost it as much as $45 million.
Rather than raise its prices, Harley-Davidson — long touted as an icon in American manufacturing — announced it would absorb the cost of the tariffs and move some of its manufacturing overseas to stay afloat in its muchneeded European market, which had 40,000 new riders last year.
“Increasing international production to alleviate the [European Union] tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” the company wrote in an SEC filing in June.
To make up for its domestic struggles, Harley rolled out a new long-term strategy in July to boost sales overseas, with goals of new product launches, an expanded digital and retail presence and the growth of international business by 50 per cent. It also has a plan to court a broader customer base, aiming to appeal to younger riders, women and minorities.
In total, Harley-Davidson plans to ship 231,000 to 236,000 motorcycles this year — a number it admitted was low — with more than 45,000 predicted to ship before the end of 2018. The low numbers of new bike sales might be the result of historically low prices for used bikes, chief financial officer John Olin said in a conference call, according to reporting from CNBC.
Much of the hike in HarleyDavidson’s profits came from a cutback in expenses.
In June, Harley-Davidson announced it was consolidating its domestic manufacturing and opening a plant in Thailand to serve its Asian market at lower cost.
The news was ill-received by Trump, who attacked the company in a tweet storm, saying that Harley-Davidson bikes should “never be built in another country-never!”