Harley-Davidson Earnings Fall as it Plans Cutbacks

By IMANI MOISE for the Wall Street Journal.

Harley-Davidson Inc. said its third-quarter earnings fell as tepid demand continued to weigh on the motorcycle manufacturer’s top line.

Responding to slow growth industrywide, the company said it would streamline its business in the final quarter and expects to spend between $20 million and $25 million in severance and reorganization costs.

The company also forecast that it would ship between 44,200 to 49,200 motorcycles in the fourth quarter, compared with 48,149 motorcycles shipped a year ago. For the full year, Harley backed its expectation to ship between 264,000 and 268,000 motorcycles, which could mean either a 1% increase or decrease from last year.
Harley is the sales leader in the U.S. motorcycle market, accounting for about half all large motor bikes sold each year, but is facing increased competition for market share from foreign rivals as it copes with slow demand. In a September survey conducted by Robert W. Baird & Co., 35% of Harley dealers indicated inventory was too high. In July, the company said it was lowering shipments in an attempt to tighten inventory.

Motorcycle shipments for the quarter decreased 9.1%, and revenue from motorcycles slipped 2.9% to $788.9 million. Parts and accessories revenue fell 8.3% to $231.3 million.

Over all for the quarter, the Milwaukee-based company reported a profit of $114.1 million, or 64 cents a share, down from $140.3 million, or 69 cents, a year earlier. Revenue from motorcycles and related products was $1.09 billion, down from $1.14 billion a year earlier. Overall revenue was $1.27 billion, and gross margin fell to 33.6% from 34.6%.

Analysts polled by Thomson Reuters had forecast earnings of 64 cents on revenue of $1.09 billion.

During the third quarter, the company settled a case with the federal government and agreed to pay a $15 million fine. In July the company noted that it had reserved money for the case and didn’t expect the payments to have an adverse effect on the company’s financial condition.

Shares closed at $49.70 on Monday and were down 0.3% premarket. The stock has fallen 10% over the past 12 months.