Harley's retail sales misses estimates, margins slide

Harley Davidson bikers
Christophe Simon | AFP | Getty Images

U.S. motorcycle maker Harley-Davidson reported lower-than-expected quarterly retail sales as demand for its motorcycles stayed tepid and said operating margin slid 8 points as manufacturing costs rose and it shipped more lower-margin bikes.

Harley shares fell 2 percent to $45.63 in premarket trading.

The company, however, said it expected to ship more motorcycles in the fourth quarter than it had a year earlier, allowing it to maintain its full-year shipment forecast of 241,000 to 246,000 motorcycles.

Demand for Harley's motorcycles continues to be slow as the company's loyal baby boomer customer base ages and sells off used motorcycles due to health reasons. Younger riders favor cheaper, used Harleys, hurting sales of new motorcycles.

Shipments in the third quarter ended Sept. 24 slid 14.3 percent, while global retail sales - sales by dealers to customers -fell 6.9 percent. Retail sales in the United States, the company's biggest market, fell 8.1 percent.

Analysts on average had expected U.S. retail sales to fall 5.6 percent, and retail sales worldwide to decline 3.2 percent, according to Consensus Metrix.

Analysts said they expected sales to be hurt by Hurricanes Harvey and Irma and a tough comparison with the year-ago quarter, which benefited from the introduction of the Milwaukee-Eight engine on Touring bikes, Harley's most-selling motorcycle.

Operating margin fell 8 points to 2 percent in the third quarter.

The company shipped 23.6 percent more mid-priced cruiser motorcycles after Harley launched newer versions of these bikes with the Milwaukee-Eight engine in August. Shipments of the more costly Touring motorcycles slumped 37 percent.

Net income fell to $68.2 million, or 40 cents per share in the third quarter, from $114.1 million, or 64 cents per share, a year earlier.

Revenue from motorcycles and related products fell to $962.1 million from $1.09 billion.

Analysts on average had expected earnings of 39 cents per share and revenue of $953.3 million, according to Thomson Reuters I/B/E/S.