Biker Lifestyle

Harley- Davidson No Longer King -As profit falls, Harley-Davidson revives its Sportster and Street trade-in program. Dealers and Investors express concerns

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Source: jsonline.com

, Milwaukee Journal Sentinel

With U.S. motorcycle sales continuing down a rough road, Harley-Davidson Inc. on Tuesday reported another drop in profit and said “significant additional steps” are coming to improve performance.

Harley also said it was reviving a Sportster and Street motorcycle sales program that guarantees the trade-in value of those bikes when traded for one of the company’s more expensive motorcycles.

For the three-month period ended April 1, Harley said it had $174.8 million in net income, or $1.03 per share, down 6.2% from $186.4 million, or $1.05 per share, in the first quarter of 2017. Analysts on average had expected profit of 90 cents per share, according to Thomson Reuters I/B/E/S.

Revenue in the recent quarter was $1.54 billion, up from $1.5 billion in the year-ago period, as the company introduced new bikes and saw improved sales in some overseas markets.

Harley’s motorcycle sales in the U.S. were down 12% from a year earlier, while the overall U.S. heavyweight bike market was down 11%.

The company’s U.S. sales have been in decline for about three years.

Year after year, Harley and other makers of cruiser and touring motorcycles have seen sales fall as baby boomers begin to age out of riding and fewer younger people step up to take their place.

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“Retail is as bad as we had previewed, worse than some others had expected,” analyst Robin Farley with UBS Investment Research said of the quarter.

“Investors may welcome the idea that management may finally be acknowledging the structural downturn in Harley sales, but there may be equal concern about what the new direction could be — and investors hope it’s not just electric motorcycles,” Farley said in a note to clients.

International sales were up 0.2% in the quarter, with the strongest growth in Latin America, Europe, the Middle East and Africa, offset by declines in Asia and Canada.

Worldwide, including the U.S., sales fell 7.2%.

“The company is currently refining its plans and this summer intends to reveal significant additional steps to improve performance and value creation through 2022,” Harley said in a statement, not providing further details.

The summertime news sounds like it’s mostly related to electric vehicle technology, according to Farley, who questions whether Harley-Davidson can be the leader in that field.

Harley failed in some other efforts to attract different types of riders, Farley said, citing the Buell and MV Agusta motorcycle brands it once owned.

Harley-Davidson did say it’s brought back a motorcycle trade-in program aimed at stimulating sales.

From now through Aug. 31, customers can buy a new or used Sportster or Street from a dealership and get the purchase price refunded if they trade up for one of the company’s bigger, more expensive bikes within a year.

“It really pushed sales of Sportsters,” Todd Berlin, sales manager of Suburban Harley-Davidson in Thiensville, said of similar previous programs.

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Sportster and Street motorcycles are Harley’s most affordable bikes. The Sportster is a line of bikes that Harley-Davidson has produced continuously since 1957, while the Street was introduced in 2013 and is the bike of choice in Harley-Davidson Riding Academy classes.

Dealers say there isn’t much markup on those bikes, and the profit comes later when they’re traded for a more expensive Harley, like an $18,000 Heritage Softail Classic.

Eleven states, including Illinois, don’t allow this type of trade-in program. But conscious of changes in the marketplace, Harley now says it has six bikes priced under $10,000.

The company also says it’s more focused on increasing ridership, long-term, through multiple initiatives including rider training and electric bikes.

The 10-year strategy is to train 2 million new U.S. riders, grow international business to 50% of sales and launch 100 new “high impact” motorcycles.

Harley’s mind-set has shifted from “building bikes to building riders,” CEO Matt Levatich said during a conference call with analysts.

In March, the company said it acquired part of a California firm that’s been making electric dirt bikes for eight years, and that it will collaborate with the firm, Alta Motors, on future electric motorcycles.

Harley says its first electric bike will be available for purchase before 2020.

“We see electrics as playing a very key role. … There’s no shifting, no clutch, no heat. The slow-speed maneuverability makes it particularly useful in urban settings,” Levatich said.

While U.S. motorcycle sales are likely to remain down this year, Harley reaffirmed the number of bikes it will ship to dealers, offering hope that its business could be stabilizing.

For the current quarter, the company expects to ship about 67,500 to 72,500 motorcycles, down from 81,807 a year earlier.

International sales are expected to continue growing as the company adds more dealerships.

Used bike prices have been improving in the U.S., which helps stimulate trade-ins and provides an incentive for someone to buy new vs. used.

“We are moving in the right direction,” said Chief Financial Officer John Olin.

Last week, the company said it was offering free motorcycles to eight college students joining its summer internship program.

They will have the enviable task of being paid to ride and share their experiences on social media.

Harley says it will teach the interns how to ride, compensate them for their work and travels, and let them keep their motorcycles. The company says it’s looking for those that have the ability to create media content on the fly, are creative and can shoot great photos and videos.

Applicants must be 18 years or older and looking for a career in social media.

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