Harley-Davidson Lifts Profit Amid Turnaround Push -- 2nd Update
October 27 2020 - 12:04PM
Dow Jones News
By Bob Tita
Harley-Davidson Inc. delivered on its strategy to increase
profit by curbing motorcycle production and costs.
The manufacturer reported a 39% increase in third-quarter profit
on Tuesday despite selling 8% fewer bikes than a year earlier.
Chief Executive Jochen Zeitz is scaling back overseas expansions,
eliminating slow-selling models and lowering inventory at bike
dealers to sharpen Harley's focus on best-selling models in markets
with the strongest sales.
The company's shares rose 26% to $36.57.
The Milwaukee-based company is delaying or abandoning models
aimed at younger riders and customers overseas. Harley said it will
exit 39 markets overseas with low sales and rely on distributors to
sell its motorcycles in 17 countries, including in India, where the
company is closing its assembly plant.
Harley said India's Hero MotoCorp Ltd. will sell and service
Harley's bikes in India. Under a licensing agreement with Hero,
Harley will allow Hero to develop and sell motorcycles under the
Harley-Davidson brand.
Harley said it will concentrate on about 50 markets -- primarily
in North America, Europe and parts of Asia -- that generate a large
share of the company's sales and offer the best potential for sales
growth.
"We don't want to grow for the sake of growing. We want to grow
profitably," Mr. Zeitz said during a conference call with
analysts.
As the company retreats from a decade-long effort to expand the
brand globally, it has reduced its workforce by about 10% and plans
to trim the number of current and planned models in its lineup by a
third.
The company said overhead expenses were down 26% during the
third quarter. Motorcycle shipments from the company's factory
dropped 6% and dealer inventories of motorcycles were down more
than a third from a year earlier, the company said.
The quarter's 8% decline in motorcycles sold was driven by a 10%
drop in sales volumes in the U.S., the company's strongest
market.
The company's market-leading share of big-motorcycle sales in
the U.S. slipped to 41% from nearly 50% last year. Harley
attributed the decline to the elimination of sales promotions and
discounting and a switch in the introduction of new models to
January from August.
Demand for motorcycles in the U.S. has been rising as riders
look to motorcycling as socially distanced recreation during the
coronavirus pandemic. Polaris Inc. said Tuesday that sales of its
Indian brand of motorcycles increased more than 40% during its
third quarter.
For the quarter ended Sept. 27, Harley said net income rose to
$120.2 million, or 78 cents a share, from $86.6 million, or 55 a
share, for the year-earlier period. Harley's adjusted profit
increased to $1.05 a share, ahead of the 30 cents expected by
analysts.
Harley said it generated $964 million in revenue from
motorcycles and related products, down from $1.07 billion for the
year-earlier period but ahead of the $844 million expected by
analysts.
--Micah Maidenberg contributed to this article.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
October 27, 2020 11:49 ET (15:49 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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