Harley-Davidson profit beats estimates


Roaring sales: A Harley-Davidson motorcycle model is seen at a shop in Paris. Retail motorcycle sales jumped 24% worldwide. — Reuters

MILWAUKEE: Harley-Davidson Inc reported better-than-expected sales and profit in the second quarter as demand in its largest market recovered from the pandemic shutdowns of last spring.

Adjusted earnings were US$1.41 (RM5.96) a share, compared with a loss of 38 US cents (RM1.61) a year earlier, the Milwaukee-based company said.

Analysts expected a US$1.26 (RM5.33) profit for the latest quarter, based on the average of estimates compiled by Bloomberg. Retail motorcycle sales jumped 43% in North America and 24% worldwide.

Chief executive officer Jochen Zeitz, a former Puma SE executive who took the helm of the troubled manufacturer in February 2020, has slashed costs, trimmed Harley’s product portfolio, culled dealerships and tightened inventory in order to raise prices. He’s plowing the savings into electrification and higher-end motorcycles.

Harley unveiled two new bikes this month: the LiveWire One, a longer-range, lower-priced version of its US$29,000 (RM122,600) debut electric bike, and the Sportster S, a lightweight bike meant for short urban rides that starts at US$14,999 (RM63,400). At the same time, it has discontinued cheaper entry-level bikes.

“I’m pleased with the pace of improvements and with the strong quarter that we have delivered,” Zeitz said in a statement. “We are encouraged by the signs of consumer positivity in the market; however, we remain mindful of the significant supply chain challenges that we expect to continue to impact the sector.”

Harley shares traded 2.2% higher before the start of regular trading in New York. They had climbed 19% this year through Tuesday, outperforming the S&P Midcap 400 Index.

While sales surged in North America, they fell in every other region, as Zeitz yanked unprofitable bikes from the lineup and shrank Harley’s global footprint. Deliveries dropped 7% in Europe, 31% in Latin America and 13% in Asia.

At the same time, Harley’s gross margins swelled to 31% from 16.1%, and revenue from parts and accessories increased 32%, a reflection of Zeitz’s strategy of cost cutting while raising prices and strengthening the iconic brand.

Culling entry-level bikes signals a retreat from Harley’s long-time quest to attract younger riders in its core United States market, UBS Group AG analyst Robin Farley said in a note this month.

The company is also aiming to close as many as 200 dealerships in its home market this year, she wrote, citing conversations with dealers.

“Much like exiting 39 unprofitable markets overseas last year, exiting those efforts may help the bottom line in the short term but doesn’t leave the potential for that growth in the longer term,” she wrote.

A Harley spokesperson disputed Farley’s characterization of its plans.

Branding Whiz

Zeitz, a branding whiz who revived Puma in the late 1990s, served as a Harley board member for years before taking over as CEO. In February, he unveiled his ‘Hardwire’ turnaround plan, which calls for investing US$190mil (RM779mil) to US$250mil (RM1bil) annually in part to develop Harley’s electrification technology, which lags behind Asian and European rivals.

He turned LiveWire into a stand-alone brand for electric bikes earlier this year and hired the company’s first “chief electric vehicle officer” in March, a former Bain & Co consultant with extensive mergers-and-acquisitions experience.

Zeitz replaced Matt Levatich, a company veteran who stepped down in early 2020 amid slumping sales and pressure from activist investor Impala Asset Management. -- Bloomberg

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