Harley-Davidson sales slump as motorcycle business sputters

MILWAUKEE – Swept up in President Donald Trump’s trade war, Harley-Davidson said Tuesday it faces up to $100 million in European Union tariff costs in 2019.

That’s in addition to about $50 million this year as the company calculates the damages from recently imposed tariffs.

The European Union imposed the levies in retaliation to Trump’s tariffs on imported steel and aluminum. The company said recently that it would shift some production out of the U.S. to avoid the tariffs, a prospect that drew a concerned tweet from Trump.

“We are doing everything we can as a company to absorb the costs,” Chief Financial Officer John Olin said during a conference call with analysts. “But we can’t eat the whole $45 million to $55 million,” so the company has lowered its motorcycle-segment profit margin this year to reflect the tariffs.

Harley now says the margin will be between 9 and 10 percent, down from an estimate of 9.5 to 10.5 percent before the tariffs. The $90 million to $100 million in EU tariffs in 2019, if unchecked, would represent most of the company’s profit in that market.

“We are making every effort to mitigate the costs,” Olin said.

Olin’s comments came as Harley-Davidson said U.S. motorcycle sales fell in the second quarter ended July 1. Harley, based in Milwaukee, said a strategy announcement is coming July 30. It could address new products, ways to reach customers and strengthen dealerships.

Year after year, Harley and other makers of cruiser and touring motorcycles have seen sales fall as baby boomers begin to age out of riding and fewer younger people step up to take their place.

Harley said its net income fell to $242.3 million, or $1.45 per share in the second quarter ended July 1, down from $258.9 million, or $1.48 per share, a year earlier. Revenue fell 3.3 percent to $1.71 billion.

However, the company’s financial results zoomed past the earnings per share and net income forecasts of Wall Street analysts.