Harley-Davidson coping with tariff impact
Cuts profit margin forecast to about 10 per cent as it copes with Trump’s costly trade wars
Harley-Davidson cut its forecast for profit margin this year by an amount that suggests it’s finding a way to cope with the damage done by President Donald Trump’s trade war.
Its operating margin this year will drop to about 9.5 per cent, the midpoint of a range the Milwaukee-based manufacturer gave in a statement Tuesday, citing the expected impact of tariffs. The company had been projecting a margin of roughly 10 per cent.
Harley sped up shipments to the European Union to mitigate the impact of higher tariffs that the bloc enacted last month. While that means the levies will cost the company as much as $35 million (US) this year — a less drastic hit than expected — the annual impact will still be about $90 million to $100 million, chief executive officer Matt Levatich said during a conference call with analysts.
Its adjusted profit for the second quarter was $1.52, beating analysts’ average estimate for $1.41. Revenue slipped to $1.53 billion, topping the average projection for $1.42 billion.
Harley shares rose as much as 7.2 per cent to $44.42 as of 10:25 a.m. in New York. The stock is down about 13 per cent this year.
Harley was caught in the crossfire of Trump’s trade war last month when it announced plans to shift some U.S. production overseas to sidestep higher tariffs imposed by the EU. The president attacked the iconic American company, claiming it was using the levies as an excuse to send jobs overseas. Harley had already announced plans to close a factory in Missouri and build a plant in Thailand.
The EU tariffs, which came in retaliation to Trump’s steel and aluminum levies, will cost about $2,200 per motorcycle shipped to Harley’s second-biggest market, the company estimated in a June 25 filing. The manufacturer hasn’t specified which of its overseas plants will begin producing bikes for European riders.
Harley is trying to navigate escalating trade tensions as sales in its core U.S. market continue to shrink. Bike deliveries in the U.S. sank 6.4 per cent in the second quarter, the 14th decline out of the last 15 quarters. Worldwide sales fell 3.6 per cent.
The EU enacted tariffs on Harleys and other U.S.-made products June 22, limiting the impact on Q2 results. International sales increased 0.7 per cent, driven by gains in Europe, the Middle East, and Latin America.
Levatich has struggled to attract younger riders with premium bikes and has begun to release a series of cheaper bikes. He’s aiming to cultivate two million new U.S. riders by 2027 and for half of global revenue to come from outside the U.S. It will release more details about its turnaround strategy on July 30.
Harley’s forecast for bike shipments this year was unchanged, and its moves to consolidate U.S. manufacturing are on track, which may help offset investor jitters about the tariff hit, Morgan Stanley analyst Adam Jonas wrote in a research note.
“While this may give pause to the pressure facing the stock, it’s unlikely to entice serious incremental capital,” he said.