Harley’s retail sales misses estimates while margins slide

Harley-Davidson reported lower-than-expected quarterly retail sales as demand for its motorcycles stayed tepid, and said operating margin slid 8 points as manufacturing costs rose and it shipped more lower-margin bikes.

Harley shares fell 2 per cent to $45.63 in premarket trading.

The company, however, said it expected to ship more motorcycles in the fourth quarter than it had a year earlier, allowing it to maintain its full-year shipment forecast of 241,000 to 246,000 motorcycles.

Demand for Harley’s motorcycles continues to be slow as the company’s loyal baby boomer customer base ages and sells off used motorcycles due to health reasons. Younger riders favour cheaper, used Harleys, hurting sales of new motorcycles.

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Shipments in the third quarter ended September 24th slid 14.3 per cent, while global retail sales - sales by dealers to customers -fell 6.9 per cent. Retail sales in the United States, the company's biggest market, fell 8.1 per cent.

Analysts on average had expected US retail sales to fall 5.6 per cent, and retail sales worldwide to decline 3.2 per cent, according to Consensus Metrix.

Analysts said they expected sales to be hurt by Hurricanes Harvey and Irma and a tough comparison with the year-ago quarter, which benefited from the introduction of the Milwaukee-Eight engine on Touring bikes, Harley’s most-selling motorcycle.

Operating margin fell 8 points to 2 per cent in the third quarter.

The company shipped 23.6 per cent more mid-priced cruiser motorcycles, after Harley launched newer versions of these bikes with the Milwaukee-Eight engine in August. Shipments of the more costly Touring motorcycles slumped 37 per cent.

Net income fell to $68.2 million in the third quarter, from $114.1 million a year earlier.

Revenue from motorcycles and related products fell to $962.1 billion from $1.09 billion.

- (Reuters)