Harley Rises as Motorcycle Maker Cuts Spending During Sales Slump

(Bloomberg) -- Harley-Davidson Inc. profit beat estimates as the motorcycle maker pared back spending plans to partially offset shrinking sales in the U.S., its biggest market.

• Adjusted earnings fell to 70 cents a share in the third quarter, the Milwaukee-based manufacturer said in a statement Tuesday, exceeding analysts’ average estimate for 67 cents. Harley shares climbed as much as 8.8%.

Key Insights

• Harley trimmed capital-expenditure plans for the year to a range of $205 million to $225 million, dropping both ends of its forecast by $20 million. The company is having to tighten its belt as demand in its home market has slumped for 11 consecutive quarters.
• U.S. retail sales fell 3.6%, as the company continues to struggle to attract younger customers and cheaper used bikes erodes demand for new ones. But this was the smallest decline for Harley since the fourth quarter of 2016.
• CEO Matt Levatich backpedaled on long-term growth targets during an investor day in Milwaukee last month. He now wants to add 1 million new U.S. riders in the decade through 2027, down from 2 million. Still, RBC Capital Markets analyst Joe Spak questioned the feasibility of the less ambitious plan in a Sept. 24 report.
• Harley managed to temper sales declines in Europe, with a 0.6% dip in the last three months following the 12.5% plunge in the second quarter. Harley plans to ship bikes to the European market from an assembly plant in Thailand to sidestep EU tariffs on U.S. products.
• Harley is entering smaller bike segments to broaden its appeal oversees and also electrifying its lineup. While the company halted production of LiveWire -- its first battery-powered bike -- earlier this month to inspect a charging-related issue, it has resumed production.

Market Reaction

• Harley shares rose 5.2% to $39 as of 9:50 a.m. in New York after trading as high as $40.36 earlier. The stock touched an almost nine-year low on Aug. 27.

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• The EU last year imposed a 31% tax on U.S.-built motorcycles as retaliation for the Trump administration’s steel and aluminum levies. Harley won approval from European regulators to ship bikes from Thailand in order to circumvent that rate, but the company said has said the approval process took “considerably longer” than expected.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

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