Harley-Davidson on Thursday reported mixed fourth-quarter results, with revenue missing expectations but profit forecasts beat, as the iconic motorcycle maker struggles with slowing demand in its key North American market.
The Milwaukee-based company said global motorcycle shipments declined 13% from a year earlier as dealers kept less inventory at retail. Higher interest rates and “economic uncertainty” impacted consumer spending for big-ticket discretionary items, causing North American retail sales to fall 9%.
Harley’s full-year 2023 guidance calls for motorcycle revenue to decline 9%, well below analysts’ forecast of 0.43% growth. It’s a disappointing outlook as it tries to attract the next generation of riders, underscoring the significant obstacles facing the 120-year-old brand.
“High interest rates, economic uncertainty and lower sales of non-core motorcycles are adversely affecting North American retail performance,” Harley said.
To grow the business, the company has focused on selling fewer bikes at higher prices, but this strategy has alienated some riders and further reduced demand. Sales of motorcycles fell nearly 14% last quarter to $792 million, beating expectations of $880 million.
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However, significant tax benefits and other expense reduction measures allowed Harley to achieve earnings of $0.28 per share, easily beating estimates of just $0.04 per share. The excellent better-than-expected bottom line reflects management’s laser focus on expanding margins in difficult circumstances.
CEO Jochen Zeitz said, “We have made progress on key elements of our strategic plan—which we believe will continue to benefit the business as we focus on our most profitable products and markets.”
Harley’s turnaround strategy focuses on reducing unprofitable lines and withdrawing from weak international markets to focus on bigger bikes and wealthier customers. Early results have been varied; Margins have improved but volumes have declined.
Rival motorcycle maker Polaris forecast a decline in sales in 2024, citing a “difficult retail environment”. The entire electrical industry is under pressure from inflation, rising rates and recession fears.
Harley-Davidson has survived many crises in its long history, but the recent crisis is a reminder of the demographic challenges facing bike makers. The company may improve when interest rates fall and the economy stabilizes. But attracting new people is still important.