Despite the sales cut, Harley-Davidson wins earnings on expectations
A Harley-Davidson logo is seen at the Paris car show on 4 October. (Benoit Tessier / Reuters) [BENOIT TESSIER / Reuters]
Harley-Davidson struck Wall Street's expectations in the third quarter earnings statement, earning 67 percent, at almost $ 114 million. But the company also reported one of its deepest decline in quarterly sales in the United States.
The Motorcycle Company's earnings per share rose from last year at $ 0.68, well over $ 0.51 as analysts predicted. But US sales fell by 13 percent, the company's largest quarterly decline since 2010, according to Bloomberg News. Internationally, Harley-Davidson's sales have increased by 2.6 per cent.
However, the company's total income was 3 percent.
For years, Harley-Davidson has fought for a drop-off in rideship and domestic sales. This year has been particularly turbulent for the company, caught in the crossroads of President Trump's trade war. The company has said that Trump's tariffs would cost it up to $ 20 million this year. Retaliatory European Union tariffs can cost as much as $ 45 million.
Instead of raising prices, Harley-Davidson announced – long as an American production icon – that it would absorb the cost of tariffs and move some of its production overseas to stay floating on its acclaimed European market, which had 40,000 new riders last year.
"Increasing international production to ease [European Union] tax burden is not the company's preference but represents the only sustainable alternative to make its motorcycles available to customers in the EU and maintain a viable business in Europe," the company wrote in a SEC- archiving in June.
In order to make up for its domestic struggle, the company rolled out a new long-term strategy in July to increase sales abroad, targeting new products, expanded digital and retail, and growth in international business by 50 percent . It also has a plan to judge a broader customer base, which aims to appeal to younger riders, women and minorities.
Overall, Harley-Davidson plans to send 231,000 to 236,000 motorcycles this year – a number admitted was low – with over 45,000 predicted to ship by the end of 2018. The low number of new bicycle sales may be due to historically low prices on used bikes, "says Finance Director John Olin in a conference call, according to CNBC reports.
Much of the increase in Harley Davidson's profit came from a decline in spending. In June, the company announced that it was consolidating its domestic production and opening a factory in Thailand to serve its Asian market at a lower price. The news was badly received by Trump, who attacked the company in a tweet storm saying that Harley-Davidson bikes should never "be built in another country – never!"
Trump last year welcomed Harley-Davidson executives and workers to the White House, celebrating the company to make 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 moistened by announcement Tuesday of a 238,000 bicycle recall linked to a hydraulic coupling unit, estimated to cost the company $ 35 million. In February, the company issued another major recall of possible brake failure.
Harley-Davidson shares were down almost 2 percent Tuesday.
