Harley-Davidson profit report suggests turnaround plan is working

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U.S. motorcycle maker Harley-Davidson on Wednesday reported a better-than-expected quarterly profit, as it benefited from its focus on selling high-margin touring and cruiser bikes under a new turnaround plan.

Harley, which has struggled to increase sales beyond its core baby-boomer market, in February unveiled a plan to boost profits by shifting its focus back to big bikes, while eliminating slow-selling models and exiting money-losing dealerships and markets.

Although the company’s performance in the latest quarter was exaggerated by a favorable statistical base as most of its dealerships in the United States were hit by pandemic-linked lockdowns last year, it offered signs that Chief Executive Officer Jochen Zeitz’s strategy was gaining traction.

For example, unit sales of its bikes in the United States — Harley’s biggest market — were higher than in the second quarter of 2019.

Similarly, the motorcycle maker has been able to drive up sales despite spending less on marketing and promotions.

“We are starting to see the initial proof points as we execute our Hardwire Strategy,” Zeitz said in a statement.

The company revised down operating income guidance from motorcycle sales to 6% to 8% in 2021 from 7% to 9% estimated earlier, citing higher tariffs on its bikes in the European Union, its second-biggest market.

It, however, lifted the operating income growth forecast for its financial services segment.

On an adjusted basis, Harley earned $1.41 per share in the quarter, beating analysts’ average estimate of $1.17 per share, according to IBES data from Refinitiv.

Revenue from motorcycles and related products nearly doubled to $1.33 billion. The company said its shipments doubled to 56,700 units in the second quarter.

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