(Bloomberg) — Harley-Davidson Inc.’s first-quarter profit fell from a year earlier as supply-chain snarls hurt sales growth in the U.S.
The Milwaukee-based company posted earnings of $1.45 a share, excluding some items, down 14% from a year ago and slightly beating the $1.44 average of analysts’ estimates compiled by Bloomberg. Revenue from motorcycles and related products rose to $1.5 billion, above the $1.3 billion forecast by analysts, but sales in the key U.S. market declined in the period.
Chief Executive Officer Jochen Zeitz, a former Puma SE executive who took the helm of the troubled manufacturer in February 2020, has slashed costs, exited unprofitable markets and tightened inventory to raise motorcycle prices. While pursuing his “Hardwire” turnaround plan, he’s had to contend with chip shortages, shipping delays and higher raw material costs that have bedeviled many manufacturers.
Harley left intact a previous full-year forecast for 5% to 10% revenue growth and operating margins of 11% to 12%. The targets assume that logistics and chip supplies improve in the second half, the company said.
“It’s important to acknowledge the significant supply challenges that we had to work through in Q1 and that we expect to continue to impact the industry,” Zeitz said on a call with investors Wednesday. “We are cautiously optimistic on improvements to the supply chain environment in the second half of the year, however, this remains difficult to predict with certainty.”
He said Harley will present an updated version of its “Hardwire” strategic plan in May. Zeitz also is culling dealerships in the U.S. and has begun clawing back a portion of dealer profits on certain models in the past few months, according to UBS AG.
Sales last quarter fell 5% in North America, Harley’s largest market. That was offset by growth in the rest of the world. Deliveries jumped 28% in Europe and 16% in Asia. Overall motorcycle shipments of around 54,800 were flat versus a year ago.
Harley shares erased an earlier gain and were down 1.2% at 10:28 a.m. in New York. The stock declined 3.2% this year through Tuesday’s close.
Lifestyle Brand
Zeitz, a branding whiz who served for years as a board member at Harley before taking the top job, is trying to turn the iconic motorcycle maker into a “global lifestyle brand” and is hiring marketing experts to boost sales of merchandise and accessories. Harley successfully launched two new models last year — the Pan America adventure bike and Sportster S.
The CEO is bullish on electrification as a way for the century-old company to reach new customers. In December, he agreed to a public listing for Harley’s electric motorcycle brand, LiveWire, in a reverse merger to fund the company’s electric ambitions. That deal is on track to close in mid-2022, Zeitz said.
LiveWire aims to sell more than 100,000 electric motorcycles in 2026, up from just 387 last year, and bring in $1.8 billion in revenue, according to an investor presentation in December.
(Updates share price, adds CEO comments)
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