Harley Davidson second-quarter sales continued to slide as profit falls 19%


VIDEO4:1704:17Harley's international business looks concerning, says analystSquawk Box

Sales of Harley-Davidson's signature motorcycles continued to slide during the second quarter as profit, though better than expected, eroded 19% for the struggling manufacturer.

The company also told investors Tuesday it expects fewer sales in 2019 than previously forecast. Its fix to avoid tariffs on motorcycles shipped from the U.S. to the European Union is taking longer than expected, it said in releasing its second-quarter earnings results before the markets opened. Its shares dropped 2.1% in premarket trading.

Here's how the company did compared with what Wall Street expected:

  • EPS of $1.23, versus, Refinitiv estimates of $1.20.
  • Revenue of $1.43 billion, versus Refinitiv estimates of $1.44.

The company reported $195.6 million in net income during the second quarter, versus net income of $242.3 million during the same quarter last year.

Sales of motorcycles, parts and merchandise fell to $1.43 billion during the second quarter from $1.53 billion during the same three months last year — a decline of 6%.

The Milwaukee, Wisconsin-based company lowered its outlook for motorcycle shipments for 2019.

It now expects to ship about 212,000 to 217,000 bikes in 2019, down 5,000 from its April estimate of 217,000 to 222,000 bikes for the year.

That forecast is down considerably from its 2019 guidance given a year ago when it said it expected to ship between 231,000 to 236,000 bikes this year.

The company's operating margins have also shrunk. It now expects operating margin as a percent of revenue of about 6% to 7% this year, dropping from the the 8.0% to 9.0% estimated earlier in the year.

Bigger bikes are falling out of favor with younger riders. Sales of the industry's largest bikes, with engines of 601 cubic centimeters or bigger, fell 4.9% in the second quarter compared to the same period in 2018, Harley said. All but one of the 36 models the company sells are at least that big with some Hogs weighing in around 1,000 pounds.

Though the company beat on earnings, they slumped on sales with Harley-Davidson worldwide retail sales decreasing 8.4% in the second quarter. U.S. retail sales were also down 8.0% in the quarter with international retail sales down 8.9%.

The "HOG" maker claimed the declines were driven by weakness in developed international markets.

Harley-Davidson has struggled in recent years with declining sales at home and abroad. The company's bike deliveries are down by 5.3%compared to a year ago, according to its second quarter earnings report. In Asia and the pacific Harley has seen Motorcycle retail sales drop by 4,165 units from 2016 to 2018.

The regions largest motorcycle market — India, has also seen the company's sales fall 21.6% from 3,690 units sold in 2016 to 2,676 units sold in the first quarter of 2019.

The company is also preparing for the gradual increase of tariffs from the European Union. In its earnings report Harley said that it had "obtained regulatory approvals required to mitigate the majority of incremental EU tariffs."

Tariffs have been a part of the motorcycles makers story since it drew the ire of President Donald Trump on Twitter after it announced it was moving production of some of it's bikes abroad to Thailand.

That strategy of manufacturing in Thailand appears to be working in southeast Asia where it said sales rose 77% during the second quarter.

The company also claims to have confirmed its highest ever Harley-Davidson U.S. ridership; over 3 million riders in 2018. Increasing the number of riders is vital to Harley's "More roads to Harley-Davidson" initiative to create new riders in the U.S. and world.

The bike maker said that U.S. rider training participation was up, with the greatest increase among 18 to 34 year-olds. Harley's mix of new sales to 18 to 34 year-olds grew 2.7% in the U.S. during the second quarter.

VIDEO0:4200:42Harley-Davidson revenue comes in just below forecastsSquawk Box

Correction: Harley's motorcycle revenue slightly missed estimates at $1.43 billion. Its total revenue was $1.63 billion.


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