Tariffs are hurting Harley-Davidson in the United States. But its international sales growth is promising.
The motorcycle maker said Tuesday that it is cutting its profit forecast by 10% because of rising trade tensions. Tariffs from the United States and the European Union will cost the company an extra $45 million to $55 million this year.
“We’re working with the administration and all governments we can get to get these tariffs removed” CEO Matt Levatich said in an earnings call.
Harley is in the process of moving some motorcycle production from the United States to Thailand. The move was planned before the tariffs began. But Harley said moving to Thailand became critical after the European Union implemented a 31% tax on motorcycles in response to Trump’s tariffs on steel and aluminum imports from Europe.
President Trump blasted Harley’s plan to move. He wrote on Twitter last month that he was surprised Harley “would be the first to wave the White Flag.”
There is some good news for Harley (): The company posted stronger-than-expected second quarter earnings Tuesday.
The company’s profit is up 6%, buoyed by a 0.7% increase in overseas sales compared to the same period in 2017. Profits topped Wall Street estimates for the sixth straight quarter.
Sales in the United States slid 6.4% because Americans are buying fewer big bikes. Sales also fell 3% to $1.71 billion.
By 2027, Harley plans to grow its international business to 50% and launch 100 new “high impact motorcycles and do so profitably and sustainably,” the company said. More details of the strategy will be unveiled on July 30.
“We will take bold actions that leverage our vast capabilities and competitive firepower,” Levatich said in a statement.
MILWAUKEE – Swept up in President Donald Trump’s trade war, Harley-Davidson said Tuesday it faces up to $100 million in European Union tariff costs in 2019.
That’s in addition to about $50 million this year as the company calculates the damages from recently imposed tariffs.
The European Union imposed the levies in retaliation to Trump’s tariffs on imported steel and aluminum. The company said recently that it would shift some production out of the U.S. to avoid the tariffs, a prospect that drew a concerned tweet from Trump.
“We are doing everything we can as a company to absorb the costs,” Chief Financial Officer John Olin said during a conference call with analysts. “But we can’t eat the whole $45 million to $55 million,” so the company has lowered its motorcycle-segment profit margin this year to reflect the tariffs.
Harley now says the margin will be between 9 and 10 percent, down from an estimate of 9.5 to 10.5 percent before the tariffs.
The $90 million to $100 million in European Union tariffs in 2019, if unchecked, would represent most of the company’s profit in that market.
“We are making every effort to mitigate the costs,” Olin said.
Olin’s comments came as Harley-Davidson said U.S. motorcycle sales fell in the second quarter ended July 1.
Harley, based in Milwaukee, said a strategy announcement is coming July 30. It could address new products, ways to reach customers and strengthen dealerships.
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.
With sales slumping, Harley said its net income fell to $242.3 million, or $1.45 per share in the second quarter ended July 1, down from $258.9 million, or $1.48 per share, a year earlier.
Revenue fell 3.3 percent to $1.71 billion.
However, the company’s financial results zoomed past the earnings per share and net income forecasts of Wall Street analysts.
Harley’s U.S. motorcycle sales were down 6.4 percent, while international sales were up 0.7 percent. Worldwide, including the U.S., sales fell 3.6 percent.
The company’s share of the U.S. heavyweight motorcycle market was 48.4 percent in the recent quarter.