The iconic motorcycle manufacturer Harley-Davidson said on Monday (April 19) that strong retail demand, reduced dealer inventories and fewer loan write-offs drove better-than-expected first-quarter results, as well as an increased forecast for the year.
According to a press statement, the Milwaukee-based company said its revenues rose 10 percent to $1.2 billion, led by a 12 percent increase in its core business amid strong retail demand for touring motorcycles for the three months ending March 28.
At the same time, the company said its earnings more than tripled from a year ago, as its profit margins rebounded sharply and its financial services division set aside less money for expected loan losses.
“We can see the initial signs of consumer excitement and optimism returning and I am confident that Harley-Davidson in 2021 is a significantly leaner, faster and more efficient organization that is ready to win and successfully deliver on our five-year ‘hardwire strategy,’ as the most desirable motorcycle brand in the world,” said Harley’s Chairman, President and CEO Jochen Zeitz.
Zeitz, who was just appointed to the top job last May after overseeing a 15-year turnaround at athletic footwear and apparel maker Puma, said the first-quarter results reflect the actions the company has taken to reshape its business — especially in North America, which is Harley’s most important region.
“I am very pleased with the pace of recovery that we have seen across our business, as demonstrated by the strong financial results this quarter,” Zeitz added.
Dealers and Taxes
Although only about 45 percent — or 630 — of Harley-Davidson’s independent retail dealers are based in the U.S., when it comes to sales, the domestic market accounted for 70 percent of the 44,235 motorcycles it sold last quarter. The U.S. market also delivered Harley’s fastest growth, as unit sales rose 30 percent to nearly 31,000 up from less than 24,000 a year ago.
Due to that Q1 strength and demand, Harley’s said it now expects full-year motorcycle revenue to grow 30 to 35 percent, up from its previous guidance of 20 to 25 percent.
One caveat to Harley’s outlook is its European operations, which saw sales drop nearly 40 percent last quarter amidst ongoing COVID closures in the region. The company is also facing additional tariffs there, which it has pledged to vigorously fight.
In a separate press statement, Harley said that since 2019, the company has been allowed to supply its EU markets with motorcycles produced at its international manufacturing facilities at tariff rates of 6 percent. However, the EU’s new ruling, which will apply to the entire Harley-Davidson product portfolio, will raise those levies to more than 50 percent.
“[These increased tariffs] will effectively prohibit the company from functioning competitively in Europe. From June 2021, all Harley-Davidson products, regardless of origin, will be subject to a 56 percent import tariff within the EU,” the company said.
“This is an unprecedented situation, and underscores the very real harm of an escalating trade war to our stakeholders on both sides of the Atlantic. The potential impact of this decision on our manufacturing, operations and overall ability to compete in Europe is significant,” Zeitz said.
As of the end of 2020, Harley has 369 dealers in the EMEA region, down by about 13 percent from a peak of 412 in 2019.