Harley-Davidson relaunches Sportster and Street swap deal as sales plummet
As U.S. motorcycle sales continue on a rocky road, Harley-Davidson Inc. reported a further decline in profits on Tuesday and said “significant additional steps” were forthcoming to improve performance.
Harley also said it is relaunching a Sportster and Street motorcycle sales program that guarantees the trade-in value of these bikes when traded in for one of the company’s most expensive motorcycles.
For the three months ended April 1, Harley reported net income of $174.8 million, or $1.03 per share, down 6.2% from $186.4 million. dollars, or $1.05 per share, in the first quarter of 2017. Analysts had on average expected earnings of 90 cents per share, according to Thomson Reuters I/B/E/S.
Revenue last quarter was $1.54 billion, up from $1.5 billion a year ago, as the company launched new bikes and saw improved sales in some overseas markets.
Sales of Harley motorcycles in the United States were down 12% from a year earlier, while the overall US heavy-duty bike market was down 11%.
The company’s sales in the United States have been declining for about three years.
Year after year, Harley and other manufacturers of cruiser and touring motorcycles have seen their sales plummet as baby boomers begin to age and fewer young people take their place.
“Retail is as bad as we expected, worse than others expected,” analyst Robin Farley of UBS Investment Research said of the quarter.
“Investors may welcome the idea that management may finally acknowledge Harley’s structural sales slowdown, but there may be equal concern about what new management might be like – and investors hope that isn’t only electric motorcycles,” Farley said in a note to customers. .
International sales increased 0.2% in the quarter, with the strongest growth in Latin America, Europe, the Middle East and Africa, offset by declines in Asia and Canada.
Worldwide, including the United States, sales fell 7.2%.
“The company is currently refining its plans and this summer intends to reveal significant additional milestones to improve performance and value creation through 2022,” Harley said in a statement, without providing further details.
The summer news seems to be mostly about electric vehicle technology, according to Farley, who wonders if Harley-Davidson can be the leader in this area.
Harley has failed in other efforts to attract different types of riders, Farley said, citing the Buell and MV Agusta motorcycle brands he once owned.
Harley-Davidson said it has reinstated a motorcycle trade-in program aimed at boosting sales.
From now until August 31, customers can buy a new or used Sportster or Street from a dealer and get the purchase price refunded if they trade in for one of the most popular bikes. company’s biggest and most expensive in the year.
“It’s really boosted Sportsters sales,” Todd Berlin, sales manager for Suburban Harley-Davidson in Thiensville, said of similar past programs.
Sportster and Street motorcycles are the most affordable Harley motorcycles. The Sportster is a line of bikes that Harley-Davidson has been producing continuously since 1957, while the Street was introduced in 2013 and is the bike of choice in Harley-Davidson Riding Academy courses.
Dealers say there’s not much markup on these bikes, and the profit comes later when they’re traded in for a more expensive Harley, like an $18,000 Heritage Softail Classic.
Eleven states, including Illinois, do not allow this type of trading program. But aware of the changes in the market, Harley now says it has six bikes under $10,000.
The company also says it is more focused on increasing ridership, long-term, through multiple initiatives including rider training and e-bikes.
The 10-year strategy is to train 2 million new American riders, grow international business to 50% of sales, and launch 100 new “high-impact” motorcycles.
Harley’s mindset has shifted from “building bikes to building riders,” CEO Matt Levatich said on a conference call with analysts.
In March, the company said it had acquired part of a California-based company that has been making electric dirt bikes for eight years and that it will work with Alta Motors on future electric motorcycles.
Harley says its first e-bike will be available for purchase before 2020.
“We consider electricity to play a very important role. … There’s no shifting, no clutching, no heat. The low-speed handling makes it particularly useful in urban environments,” said Levatich.
While U.S. motorcycle sales are expected to remain down this year, Harley reaffirmed the number of motorcycles it will ship to dealerships, raising hopes that its business may stabilize.
For the current quarter, the company expects to ship around 67,500 to 72,500 motorcycles, up from 81,807 a year earlier.
International sales should continue to grow as the company adds new dealerships.
Used bike prices have improved in the United States, helping to stimulate trade and encouraging someone to buy new rather than used.
“We are moving in the right direction,” said chief financial officer John Olin.
Last week, the company announced it was giving away free motorcycles to eight students joining its summer internship program.
They will have the enviable task of getting paid to ride and share their experiences on social media.
Harley says he will teach the trainees to ride, pay them for their work and trips, and let them keep their motorcycles. The company says it’s looking for those who have the ability to create multimedia content on the fly, who are creative and who can take great photos and videos.
Applicants must be 18 years or older and looking for a career in social media.