Harley-Davidson cuts forecast after motorcycle sales slump

Harley-Davidson on Tuesday trimmed the forecast for shipments of its motorcycles in 2019 after worldwide sales in the second quarter slumped, hurt by higher tariff costs as well as weak demand in the United States.

Operating margin in the motorcycles segment, or how much profit the company makes per dollar of sales after accounting for production costs, was also revised down.

The revised outlook led to a 4 percent fall in the company’s stock price in premarket trade.

The Milwaukee, Wisconsin-based company now expects to ship about 212,000 to 217,000 bikes in 2019. This compares with the company’s original estimate of 217,000 to 222,000 bikes for the year.

Operating margin as a percent of motorcycle revenue is projected to be about 6 percent to 7 percent this year, lower than the 8 percent to 9 percent estimated earlier.

Harley’s challenges in the United States, which accounts for more than half of the company’s sales, are well documented – core customers are growing older and outreach efforts to attract new and young riders have yet to show results.

US retail sales were down 8 percent from a year ago in the second quarter.

In a reflection of the demographic headwind, the heavyweight motorcycle maker’s stock price has declined by 46 percent in the past five years. In comparison, the S&P 500 has gained 50 percent.

Compounding the company’s troubles is President Donald Trump’s trade war. In retaliation for the tariffs the White House placed on imported steel and aluminum, the European Union increased import duties on US-manufactured Harley bikes to 31 percent from 6 percent last June.

Similarly, China’s tariffs on the bikes exported from the US have increased to 55 percent from 30 percent as a result of the trade war between the world’s two biggest economies.

The incremental tariffs cost the company $34.4 million in the June quarter, contributing to a 12.5 percent plunge in retail sales in Europe.

Overall, worldwide sales in the quarter were down 8.4 percent from a year ago. However, in a silver lining for the American company, sales in emerging markets were up 7.6 percent year-on-year.

To mitigate the EU tariffs, Harley said it got the approval from the trading bloc to ship bikes from its Thailand facility.

In the latest quarter, Harley’s profits declined to $1.23 per share from $1.45 per share a year ago. Analysts surveyed by Refinitiv, on average, expected the earnings to come in at $1.20 per share.

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