Harley-Davidson (NYSE:HOG) may have beaten Wall Street’s profit expectations, but that’s
because analysts had set the bar so low. The third-quarter for Harley-Davidson’s Earnings
Report was actually quite bad. In fact, it was even worse than you might think.
The motorcycle giant can’t move its bikes. Sales and shipments for the period are at their
lowest level since the Great Recession, and things are deteriorating rapidly. Harley shipped
fewer than 20,000 motorcycles to U.S. dealers in the third quarter — a shockingly low number —
and only half as many as it said it would last quarter. Management said the pullback was
purposeful, to clear out dealers’ inventory, yet that decision also hurt sales in addition to
Harley-Davidson’s Earnings Report.
Against these anemic results, guidance was ambitious. The fourth quarter is typically Harley-
Davidson’s slowest period of the year, yet the company expects to ship as many as 51,700
motorcycles this period. For comparison, even though sales are down 6% year to date from
last year, and Harley shipped only 42,400 bikes last year, it expects to ship 22% more bikes
Management asserted that because it has tightened inventory so much, it will be able to
drastically increase shipments in the months ahead. Certainly factoring into the projections
are the new models Harley-Davidson unveiled as part of its program to build 100 new models
over 10 years — it wants dealers to have sufficient inventory on hand for the spring buying
season. However, in the current U.S. market conditions, it’s not realistic to expect enough
demand to sustain that level of shipments, particularly because global sales are slumping too.
A worldwide slump
International sales once helped keep Harley’s situation from looking bleaker than it was, but these
days the company’s having trouble selling bikes overseas. While it was able to sell 163 more
motorcycles in Europe in the third quarter than it did a year ago, every other region saw lower
sales, with Japan suffering a 15% year-over-year drop and Latin America dropping 11%. Harley
has been pushing more bikes out into foreign markets in the fourth quarter, but that’s going to
be harder to justify now with international markets having suffered their fourth straight quarter
of lower sales in Harley-Davidson’s Earnings Report.