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Harley-Davidson Q1 Results Show Improvement

Harley-Davidson, Inc. generated increased earnings and worldwide dealer new motorcycle sales grew for the first quarter of 2011.

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Harley-Davidson, Inc. generated increased earnings and worldwide dealer new motorcycle sales grew for the first quarter of 2011.

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Harley reported first quarter income from continuing operations of $119.3 million, or $0.51 per share, compared to income from continuing operations of $68.7 million, or $0.29 per share in the year-ago period. Worldwide retail sales of new Harley-Davidson motorcycles grew 3.5 percent in the first quarter, compared to last year’s first quarter.

The improved first-quarter earnings performance was driven by operating income from financial services, which climbed 154.6 percent compared to the first quarter of 2010. Operating income from motorcycles and related products was flat with the year-ago quarter and was impacted by expected inefficiencies related to the restructuring and implementation of the new operating system underway at its manufacturing operations.

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On a worldwide basis, first-quarter new motorcycle sales grew 3.5 percent compared to last year’s first quarter. Dealers sold 17,904 new units in international markets, an 11.3 percent increase compared to last year’s first quarter, and 31,691 new motorcycles in the U.S., down 0.5 percent, compared to the year-ago period. Industry-wide U.S. heavyweight new motorcycle (651cc-plus) retail unit sales increased 3.1 percent in the first quarter of 2011 compared to the year-ago period.

The financial services segment recorded operating income of $67.9 million in the quarter, compared to operating income of $26.7 million in the year-ago quarter. The increase in year-over-year operating income is largely the result of continued improvement in credit performance.

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In a move related to what it believes will be a modest level of supply chain interruption to the company arising from the March 11 earthquake and tsunami in Japan, Harley-Davidson is widening full-year shipment guidance. The company now expects to ship 215,000 to 228,000 motorcycles to dealers and distributors worldwide in 2011, compared to prior shipment guidance of 221,000 to 228,000 motorcycles.

Harley-Davidson and its direct suppliers source a limited number of components and subcomponents, including motorcycle electronics, through suppliers in Japan, and the company has several of these subcomponent parts on close watch for possible shortages related to the situation there.

The manufacturer now expects 2011 gross margin to be between 33.5 percent and 35.0 percent, versus previous guidance of 34.0 percent to 35.0 percent, as a direct result of the anticipated supply chain interruption. Harley-Davidson continues to expect full-year capital expenditures of between $210 million and $230 million, including $60 million to $75 million to support restructuring activities.

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