Despite sales slump, Harley-Davidson earnings beat expectations

A Harley-Davidson logo is seen at the Paris auto show on Oct. 4. (Benoit Tessier/Reuters) (BENOIT TESSIER/Reuters) Harley-Davidson demolished Wall Street’s expectations in its third-quarter earnings report, with profits up 67 percent, at nearly $114 million. But the company also reported one of its deepest declines in quarterly sales in the United States. 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 percent, the company’s biggest quarterly decline since 2010, according to Bloomberg News. Internationally, Harley-Davidson’s sales were up 2.6 percent. The company’s overall revenue, however, was up 3 percent. 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 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 much-needed 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, the company rolled out a new long-term strategy in July to boost sales overseas, with goals of new products, an expanded digital and retail presence, and the growth of international business by 50 percent. 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 increase in Harley-Davidson’s profits came from a cutback in expenses. In June, the company announced it was consolidating its domestic manufacturing and opening a plant in Thailand to serve its Asian market at a lower cost. The news was ill-received by Trump, who attacked the company in a tweetstorm, saying that Harley-Davidson bikes should “never be built in another country-never!” A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!— Donald J. Trump (@realDonaldTrump) June 26, 2018 Trump last year welcomed Harley-Davidson executives and workers to the White House, celebrating the company for making its products in the United States. The company still makes most of its motorcycles in Pennsylvania and Wisconsin. The good news from the earnings report was dampened by the announcement Tuesday of a 238,000-bike recall related to a hydraulic clutch assembly estimated to cost the company $35 million. In February, the company issued another major recall over possible brake failures. Harley-Davidson shares were down nearly 2 percent Tuesday.
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