Harley-Davidson Inc reported its steepest decline in home gross sales in eight years on Tuesday, and warned that bike shipments for the yr might be on the decrease finish of its forecast because it faces increased tariff-related prices. Milwaukee-based Harley’s shares reversed course and have been down 5 per cent, giving up pre-market positive aspects after the corporate recorded its greatest quarterly revenue in two years. “We anticipate U.S. trade to stay challenged into 2019 and can proceed to proactively deal with the weak U.S. trade,” Chief Monetary Officer John Olin stated on a convention name with analysts.
Harley’s demographic challenges within the home market are properly documented – core clients are rising older and efforts to draw new and younger riders have but to point out outcomes. As well as, President Donald Trump’s name to boycott the bike producer for its determination to maneuver manufacturing for European markets abroad has solely compounded the corporate’s troubles. Harley stated on Tuesday it may see as much as $48 million in prices from tariffs in 2018.
Rising prices and a tit-for-tat tariff struggle with China have weighed on the shares of most U.S. producers. Harley’s shares are down about 30 % up to now this yr and have underperformed the broader S&P 500 index. Analysts at Goldman Sachs final week reduce their 12-month value goal for the inventory, whereas BMO Capital Markets downgraded the corporate’s shares on Friday, citing its poor efficiency. To make sure, the corporate nonetheless dominates the native heavyweight bike market, however rivals similar to Polaris are chipping away at its market share.
To counter weak demand at dwelling, Harley plans to make deeper inroads into a few of the quickest rising two-wheeler markets in Asia by light-weight bikes. Retail gross sales in america, which accounts for greater than half of the corporate’s gross sales, fell 13.three % within the three months ended Sept. 30 from a yr in the past. Whole retail gross sales have been down 7 %. Analysts anticipate 2018 to be the third straight yr of declining gross sales. Worldwide retail gross sales, nonetheless, rose about three %, led by Europe. “
First look (EPS beat) seems to be good, however whenever you dig additional you see that retail was worse than anticipated, particularly in america,” Wedbush analyst James Hardiman stated. The corporate’s web earnings jumped 67 % to $113.86 million for the third quarter, helped by cost-cutting and better worldwide gross sales.
Excluding manufacturing optimization prices, the corporate earned 78 cents a share. Income from bikes and associated merchandise rose 16.eight % to $1.12 billion. Analysts on common anticipated a revenue of 53 cents a share and income of $1.07 billion, based on information from Refinitiv. The corporate now expects 2018 shipments forecast to be on the low finish of its steerage of between 231,000 and 236,000 bikes.