Harley-Davidson shines as CEO Zeitz's turnaround plan boosts profit

Harley-Davidson's sharp recovery from the pandemic lows comes as CEO Jochen Zeitz looks to recharge the business by shifting the focus back to big bikes and traditional markets like the United States and Europe.
By : Reuters
| Updated on: 28 Oct 2020, 12:09 PM
2020 Harley-Davidson Iron 883 BS6
2020 Harley-Davidson Iron 883 BS6
2020 Harley-Davidson Iron 883 BS6
2020 Harley-Davidson Iron 883 BS6

Harley-Davidson Inc beat profit expectations on Tuesday as tighter inventories helped drive up prices and it reined in costs as part of Chief Executive Officer Jochen Zeitz's restructuring plan, sending its shares up as much as 28%.

Overall shipments were down only 6% in the third quarter, recovering from a 59% slump in the prior quarter, indicating a rise in demand for the maker of large cruisers.

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The sharp recovery from the pandemic lows comes as CEO Zeitz looks to recharge the business by shifting the focus back to big bikes and traditional markets like the United States and Europe.

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(Also read | Hero MotoCorp to now develop and sell Harley-Davidson bikes in India)

Harley also tightened supplies and cut production, driving up prices for pre-owned bikes, which used to be a drag on new motorcycle sales.

"We are managing inventory in line or rather a little short of demand," Zeitz said. "Dealers are selling new bike at or very close to MSRP (manufacturer suggested retail price) and higher dealer profitability."

Global dealer inventory was down 30% in the quarter and Zeitz said the company was planning to exit 40 unprofitable markets.

The company exited the world's largest two-wheeler market, India, last month and recently announced a plan to develop and sell a range of premium motorcycles under its brand name in the country along with Hero MotoCorp.

(Also read | Harley-Davidson and Hero MotoCorp join hands: Five key highlights)

Retail sales in its biggest market, the United States, where Harley has not recorded a sales rise for the past six years, fell 10% from a year earlier, but was much less than the 27% slide in the second quarter.

Total expenses fell 26% to $196.9 million in the quarter.

Net income rose 38% to $120 million, or 78 cents per share in the third quarter ended Sept. 30. Analysts were expecting a profit of 21 cents per share, according to Refinitiv data.

Motorcycles and related product revenue fell to $964 million from $1.07 billion a year earlier.

First Published Date: 28 Oct 2020, 12:09 PM IST
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