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HARLEY-DAVIDSON: RESTRUCTURING BENEFITS

At first glance, Harley-Davidson figures for the nine months of 2022 to date suggested a steady pattern of reasonable growth. But they actually masked firm recovery from a temporary production halt in the latter weeks of Q2 and rapid acceleration out of wholesale inventory shipment glitches in Q3. BDN financial editor Roger Willis reports.

Total revenue for the three quarters to the end of September increased by 6.6% to £4.012bn. Within that, turnover from motorcycles and related products was 7.6% up to £3.485bn, even though wholesale bike shipments to dealers worldwide had virtually flatlined, just 0.4% higher at 160,072 units. However, YTD operating profit put on 9% to £788m and net profit grew by 11.3% to £608.8m.

The secret of fast-tracking organisational shifts, changing model mixes to overcome supply-chain issues and speeding up dealer inventory replenishment came to fruition in Q3. Overall quarterly revenue climbed by 20.9% to £1.432bn. The contribution from motorcycles and related products came in 23.8% up to £1.248bn, as shipments stacked on 19% to 57,061. The pay-off was a 65.9% boost for operating profit to £294.4m and net profit 60.3% higher to £227m.

Naturally, Harley chairman and chief executive Jochen Zeitz credited this Q3 production and supply bounce-back to his own strategic initiatives. But he was also supported by well-respected Wall Street analyst Gerrick Johnson, previously often a source of criticism.

“Harley-Davidson surpassed expectations behind much better than expected margin, robust shipments and stronger pricing, once again illustrating the significant improvement in operations and execution accruing from restructuring actions taken over the past two years,” said Johnson in a research note. “We are lowering our estimates for Q4 and 2023, though, to reflect management’s prudent decision to tightly manage the dealer channel, given the current macro-economic backdrop. We still remain quite confident in an ongoing turnaround.”

Nevertheless, Harley’s domestic and retail bike sales are still clearly constrained by Johnson’s aforementioned macro-economic backdrop, and specifically shortfalls of model availability owing to component scarcity.

Global deliveries to customers for the year to date were 9.4% down to 145,208 motorcycles. North American retail declined by 14.4% to 98,344. The EMEA region (predominantly Europe) fell marginally by 2% to 24,095. Latin America was 9.3% lower at just 2365. Only Asia Pacific prospered, 11.7% up 20,404.

The Q3 portion proved to be a bit more promising. Total numbers sank by just 2.2% to 49,604. North American dealers sold 5% fewer bikes, on 32,154. EMEA retreated by 3.6% to 9054. Asia Pacific provided some light relief, gaining 17.7% at 7631. But Latin America plunged by 27% to a mere 765.

$-£ currency translation at forex rates applicable on 2 November  

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