July 21 (Reuters) – Harley-Davidson Inc (HOG.N) provided evidence on Wednesday that its turnaround plan was gaining ground as the U.S. motorcycle maker reported better-than-expected quarterly profit.
The 118-year-old American brand, which has been steadily losing market share in the United States amid declining retail sales for the past six years, has once again focused on big bikes, traditional markets like the United States. and Europe, and on older and richer customers in an attempt to increase profits.
As part of CEO Jochen Zeitz’s strategy, the company is phasing out slow-selling models and leaving dealers and markets losing money. This is the start of a ten-year effort to increase market share and attract younger riders with cheaper, newer models.
Although the company’s performance in the last quarter was overstated by a favorable statistical base, as most of its dealerships in the United States were hit by lockdowns related to the pandemic last year, it showed that the new strategy was working.
For example, unit sales of its bikes in the United States – Harley’s largest market – were higher than in the second quarter of 2019.
Likewise, the motorcycle maker significantly reduced the share of cheaper, lower-margin models in overall shipments and was able to increase sales despite lower spending on marketing and promotions.
The measures mitigated an impact of around $ 16 million in the quarter due to higher tariffs on its bikes in the European Union – its second largest market.
Harley products in the EU are now subject to a 31% tariff after a ruling revoked credentials that allowed it to ship motorcycles to the Single Currency Zone from its international manufacturing facilities at a duty by 6%. Read more
Citing the higher tariff, the company downgraded its operating profit forecast from motorcycle sales to 6% to 8% in 2021, from an earlier estimate of 7 to 9%.
However, it raised the forecast for growth in operating income for its financial services segment.
On an adjusted basis, Harley earned $ 1.41 per share in the quarter, beating the average analyst estimate of $ 1.17 per share, according to IBES data from Refinitiv.
Reporting by Rajesh Kumar Singh in Chicago and Ankit Ajmera in Bengaluru; Editing by Anil D’Silva, Steve Orlofsky and Nick Zieminski
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