Harley-Davidson expects low earnings over increased input cost

The 118-year-old American brand, which has failed to post-sales growth in the United States in the past six years, has shifted focus back to big bikes.
By : Reuters
| Updated on: 22 Jul 2021, 19:57 PM
Harley said the supply chain logjam would keep inventories depleted at company dealerships in the remainder of the year.
Harley said the supply chain logjam would keep inventories depleted at company dealerships in the remainder of the year.
Harley said the supply chain logjam would keep inventories depleted at company dealerships in the remainder of the year.
Harley said the supply chain logjam would keep inventories depleted at company dealerships in the remainder of the year.

Harley-Davidson Inc on Wednesday warned soaring raw material prices and supply chain and logistics bottlenecks would hurt its earnings in the second half of the year, prompting a sell-off in its shares.

In the latest quarter, raw material and logistics inflation shaved off 5 points from the U.S. motorcycle maker's profits. The shipping delays, meanwhile, are affecting deliveries of bikes to dealers, hitting sales especially in Europe and Asia.

Similar Bikes

Find More Bikes
Harley-davidson Harley Davidson 350 (HT Auto photo)
UPCOMING
Harley-davidson Harley Davidson 350
₹2.5 Lakhs *Expected Price
Harley-davidson Harley Davidson Edt600r Electric Bike (HT Auto photo)
UPCOMING
Harley-davidson Harley Davidson Edt600r Electric Bike
₹6 Lakhs *Expected Price
Harley-davidson Harley Davidson Iron 883 (HT Auto photo)
Harley-davidson Harley Davidson Iron 883
883 cc
₹9.26 - 10.11 Lakhs**Ex-showroom price
Harley-davidson Harley Davidson Forty Eight (HT Auto photo)
Harley-davidson Harley Davidson Forty Eight
1202 cc
₹10.61 - 11.75 Lakhs**Ex-showroom price
Harley-davidson Harley Davidson Bronx (HT Auto photo)
UPCOMING
Harley-davidson Harley Davidson Bronx
₹12 Lakhs *Expected Price
Harley-davidson Harley Davidson Low Rider S (HT Auto photo)
Harley-davidson Harley Davidson Low Rider S
1868 cc
₹14.69 Lakhs**Ex-showroom price

Harley said the supply chain logjam would keep inventories depleted at company dealerships in the remainder of the year.

"We're going to sell what we make essentially," Chief Executive Jochen Zeitz told investors on an earnings call.

FOLLOW US:Stay Updated with latest content - Subscribe us on
FOLLOW US:Stay Updated with latest content - Subscribe us on

To mitigate the mounting cost pressure, the company will impose an average 2% pricing surcharge from July 1 on some of its bikes sold in the United States.

The measure, however, will not completely offset elevated raw material costs.

Inflation worries overshadowed Harley's better-than-expected earnings in the quarter through June, which offered evidence that Zeitz's turnaround plan was gaining traction.

The company's shares fell after opening higher. They were last trading down 7.3% at $40.61.

The 118-year-old American brand, which has failed to post sales growth in the United States in the past six years, has shifted focus back to big bikes, traditional markets like the United States and Europe, and to older and wealthier customers in a bid to grow profits.

Although the company's performance in the latest quarter was exaggerated by a favorable statistical base as most of its dealerships in the United States were hit by pandemic-linked lockdowns last year, it offered signs that the new strategy was working.

For example, unit sales of its bikes in the United States - Harley's biggest market - were higher than in the second quarter of 2019.

Similarly, the motorcycle maker substantially reduced the share of cheaper and low-margin models in overall shipments and was able to drive up sales despite spending less on marketing and promotions.

The measures helped mitigate about a $16-million hit in the quarter from increased tariffs on its bikes in the European Union - its second-biggest market.

Harley's products in the EU are now subjected to 31% tariff after a ruling revoked the credentials that allowed it to ship motorcycles to the single currency zone from its international manufacturing facilities at a 6% duty.

Citing the higher tariff, the company revised down operating income guidance from motorcycle sales to 6% to 8% in 2021 from 7%-9% estimated earlier.

On an adjusted basis, Harley earned $1.41 per share in the quarter, beating analysts' average estimate of $1.17 per share, according to IBES data from Refinitiv.

First Published Date: 22 Jul 2021, 19:35 PM IST
Recommended For You
View All
NEXT ARTICLE BEGINS

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
By clicking VIEW OFFERS you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city