Harley-Davidson reported weaker second-quarter earnings and sales while increasing its annual retail sales forecast, as the motorcycle maker leaned on a strategic product shift to help absorb rising inputs.
The Milwaukee-based company recorded quarterly net income of $80 million, or 75 cents per share, down from $108 million, or 88 cents per share, in the same period a year earlier. Total revenue for the quarter fell 6% to $1.23 billion versus the prior year.
Gross margin in the quarter declined to 27.5% from 28.6% a year earlier. Management attributed the margin pressure to higher cost of raw materials, an unfavorable product mix and foreign exchange impacts.
Under new chief executive Artie Starrs, Harley-Davidson has been executing its "Back to the Bricks" turnaround plan, which focuses on attracting younger riders by reviving some of the brand's iconic models and introducing motorcycles with smaller engines. The strategy includes a deliberate move away from emphasizing premier touring models in favor of lighter and more affordable bikes. The company said the current entry point to the Harley ownership experience is near the $10,000 mark.
Despite the quarterly decline in profit and revenue, Harley-Davidson raised its annual global motorbike retail sales expectation to a range of 133,500 to 138,500 units, up from its prior forecast of 130,000 to 135,000 units. The upgrade reflects management's view of stronger retail demand.
Market reaction was muted in premarket trading, with shares down about 1%.
Analysis
The company is balancing near-term margin pressure against a strategic repositioning aimed at broadening its customer base and lowering the price of entry. The higher raw material input costs and foreign exchange effects have already reduced second-quarter profitability and margins, while the product mix shift will be a key variable to monitor as it affects average selling prices and cost absorption.
Sectors impacted: consumer discretionary, manufacturing and automotive supply chains.
Data recap
- Q2 net income: $80 million, or $0.75 per share, versus $108 million, or $0.88 per share, last year.
- Q2 revenue: $1.23 billion, down 6% year-over-year.
- Q2 gross margin: 27.5% versus 28.6% a year earlier.
- Updated 2024 global retail sales outlook: 133,500 to 138,500 units, raised from 130,000 to 135,000 units.