Despite a two-week production shut down at the height of the selling season, Harley-Davidson heads into Sturgis on the right track according to The Motor Company’s CEO. “Reaffirming our guidance for the year, despite the production suspension, demonstrates the effectiveness of our Hardwire strategy and the power of our brand,” claims Jochen Zeitz, Chairman, CEO and President, Harley-Davidson, Inc. “Now with the suspension being behind us, we are fully focused on mitigating the impacts of the volume loss with the ambition to deliver on our Hardwire II goals, in year two of our five-year strategy.”
Global motorcycle shipments were down 15% in Q2, caused by a two-week production suspension stemming from a regulatory compliance matter at a third-party supplier. Revenue was down 5% as global pricing and growth within Apparel offset much of the negative impact from the production suspension. Other Q2 factors included:
• HDMC Operating Income margin of 15.1% was up 1.2 points versus last year; pricing, lower operating expense and lower EU tariffs offset the impact of the suspension
• HDFS Operating Income decline of 9% was driven by the continued normalization of credit losses in-line with expectations
• GAAP diluted EPS of $1.46 was up 10% vs last year; Harley-Davidson repurchased $64 million of shares (or 1.7 million shares) on a discretionary basis in Q2
Consolidated revenue was down 4% in the second quarter, driven primarily by HDMC revenue being down 5%. The revenue decline was driven by the production suspension in the second half of May. Consolidated operating income decline of 1% reflects 3% growth at HDMC and a decline of 9% at HDFS due to an expected higher provision for credit losses as the credit environment normalizes.
The bottom line for Harley-Davidson:
Global retail motorcycle sales in the second quarter were down 23% versus prior year, adversely impacted by lower inventory and the production suspension.