Harley-Davidson reports big profit beat, though motorcycle sales keep falling

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Shares of Harley-Davidson Inc. cruised toward a five-week high Thursday, after the motorcycle maker beat fourth-quarter profit expectations by a wide margin, even as motorcycle shipments continued to fall due to “prudent” management of inventory by dealers.

Net income dropped to $25.8 million, or 18 cents a share, from $41.9 million, or 28 cents a share, in the same period a year ago. But that beat the FactSet consensus for earnings per share of 4 cents.

The big profit beat comes even as gross margin, declined 3.6 percentage points to 22.9%, as higher sales incentives to counter lower volume and increased manufacturing costs offset lower material costs and improved sales mix.

The stock

climbed 2.2% in premarket trading, which puts it on track to open around the highest closing price seen since Jan. 3.

Revenue declined 7.8% to $1.05 billion, but topped the FactSet consensus of 998.2 million.

Motorcycle shipments fell 13.2% to 29,500 bikes — the third straight quarter of declines — while motorcycle sales declined 12.5% to $583 million and parts and accessories sales dropped 13.9% to $130 million.

Harley-Davidson apparel sales sank 21.9% to $57 million.

The company said global motorcycle shipments declined due to “prudent dealer inventory management and market conditions,” while apparel sales dropped as “high dealer inventory levels” resulted in lower replenishment.

For 2024, the company expects motorcycle sales to be flat to down 9%.

Geographically, motorcycle sales in North America fell 8.9% to 17,500, as the current high interest-rate environment weighed, while sales in Europe, Middle East and Africa (EMEA) sank 22.7% to 6,800, amid weakness in the France and Germany markets.

Harley said it sold 514 LiveWire electric motorcycles in the fourth quarter, up from 69 a year ago, and expects to ship 1,000 to 1,500 EMs in 2024.

Meanwhile, revenue at Harley-Davidson Financial Services increased 15% to $246 million, amid higher interest income, while the business segment’s operating income fell 9.4% due to higher interest expenses and an increased provision for credit losses.

Harley’s stock has rallied 25.1% over the past three months through Wednesday, but has dropped 29.8% over the past 12 months. In comparison, the S&P 500 index
has advanced 21.3% over the past year.

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