Despite Harley-Davidson Inc surging past Wall Street projections for first-quarter profits, concerns remain over falling U.S. sales and European Union import tariffs as the company remains committed to its full-year shipment forecasts of approximately 217,000 to 222,000 motorcycles.
Harley said on Tuesday first-quarter 2019 net income was $127.9 million on consolidated revenue of $1.38 billion versus net income of $174.8 million on consolidated revenue of $1.54 billion in 2018, a decline of 26.8 percent.
President Donald Trump, who has criticized Harley for moving some production overseas, said the EU tariffs have forced the company to do so.
“Harley Davidson has struggled with Tariffs with the EU, currently paying 31 percent. They’ve had to move production overseas to try and offset some of that Tariff that they’ve been hit with which will rise to 66 percent in June of 2021,” Trump tweeted. “So unfair to U.S. We will Reciprocate!”
The president did not provide details for a plan to push back against EU tariffs, according to Reuters.
Nevertheless, Harley outperformed Wall Street’s profit forecast by more than 30 cents per share despite U.S. retail motorcycle sales falling 4.2 percent in the first quarter with European sales down 2.1 percent.
A bright spot in the earnings showed that since Harley moved some operations to Thailand in late 2018, it has been expanding into markets in ASEAN—a 10-nation trading bloc in Southeast Asia that has reduced tariff barriers.
“The tariff mitigation realized by this strategy allowed more competitive pricing and helped drive a Q1 retail sales increase of 126 percent in these markets,” Harley said in its earnings report.
“We are acting with agility and discipline to take full advantage of rapidly evolving global markets,” said Harley-Davidson president and chief executive officer Matt Levatich in the earnings statement. “We, along with our dealers, are determined to lead and stimulate global industry growth.”
Harley-Davidson worldwide retail sales decreased 3.8 percent in the first quarter. International retail sales were down 3.3 percent. U.S. retail sales were down 4.2 percent in the first quarter driven by continued weak industry sales which were down 4.7 percent.
Under Harley-Davidson’s More Roads initiative, the company aims to build 2 million new riders in the U.S. by 2027 while increasing international business to 50 percent of annual volume by that same year. It also plans to launch 100 new high-impact motorcycles that are profitable and sustainable.
“Since we announced our More Roads plan, we continue to accelerate our progress to build the next generation of Harley-Davidson riders,” said Levatich. “During the first quarter we intensified our march by investing in our future and adding capabilities that we’re confident will inspire riders today and for generations to come.”
During the quarter, the company and its dealers continued preparations to launch LiveWire, Harley-Davidson’s first electric motorcycle, later this year, the earnings statement noted. The company also expanded its electric portfolio with the acquisition of StaCyc, a maker of electric two-wheelers for kids and released the Electra Glide Standard, which retails at $18,999.
