Harley-Davidson Reports Third-Quarter 2015 Earnings

Harley-Davidson, Inc. third-quarter 2015 net income was $140.3 million on consolidated revenue of $1.32 billion compared to net income of $150.1 million on consolidated revenue of $1.30 billion last year. Dealer new motorcycle sales were down 1.4 percent worldwide for the third quarter compared to last year, with sales down 2.5 percent in the U.S. and up 0.9 percent internationally.

Dealer new motorcycle sales were down 1.4 percent worldwide for the third quarter compared to the year-ago period, with sales down 2.5 percent in the U.S. and up 0.9 percent internationally.

“We expect a heightened competitive environment to continue for the foreseeable future, and now is the time for us to dial things up with significant additional investments in marketing and product development,” said Matt Levatich, President and Chief Executive Officer, Harley-Davidson, Inc. “We have a strong plan, built on our incredible foundation, to further assert Harley-Davidson’s substantial market leadership and accelerate growth. We have great confidence in our plans to drive demand and grow our reach and impact with customers globally.”

The company intends to fund the increased demand-driving actions by reallocating existing spending. Harley-Davidson expects to incur one-time expenses of approximately $30 million to $35 million in the fourth quarter of 2015, primarily for employee separation and reorganization costs related to this reallocation.

“In the short term, because the third quarter did not unfold as we expected, we are lowering full-year shipment guidance. Our ongoing commitment to manage supply in line with demand and maintain the premium nature of the brand remains a top priority for Harley-Davidson,” said Levatich.

Company Highlights Four Focus Areas for Increased Investment

In 2016, Harley-Davidson will increase its investment in customer-facing marketing by approximately 65 percent above 2015 levels. The company also plans to increase its investment in new product development by approximately 35 percent from 2015 levels. These changes represent an approximate $70 million increase in investment to drive demand compared to 2015.

These investments will be focused in four primary areas:

Increasing product and brand awareness
Growing new ridership in the U.S.
Increasing and enhancing brand access
Accelerating the cadence and impact of new products

The company will provide additional information during its earnings conference call this morning, including details on the company’s five objectives:

Lead in every market.
Grow the sport of motorcycling in the U.S., in part by growing the number of U.S. core customers and growing the number of U.S. outreach customers at a faster rate.
Grow U.S. retail sales and grow international retail sales at a faster rate. In support of this objective, the company has a target to grow its international dealer network by 150 to 200 new dealerships by 2020.
Grow revenue and grow earnings faster than revenue through 2020.
Outperform the S&P 500.

Retail Q3 Harley-Davidson Motorcycle Sales

Dealers worldwide sold 72,178 new Harley-Davidson motorcycles in the third quarter of 2015 compared to 73,217 motorcycles in the year-ago quarter. In the U.S., dealers sold 48,918 new Harley-Davidson motorcycles in the quarter compared to sales of 50,167 motorcycles in the year-ago period.

In international markets, dealers sold 23,260 new Harley-Davidson motorcycles during the third quarter compared to 23,050 motorcycles in the year-ago period, with sales up 5.1 percent in the Asia Pacific region and 2.4 percent in the EMEA region, and down 11.5 percent in the Latin America region and 1.7 percent in Canada.

Harley-Davidson Q3 Motorcycles and Related Products Segment Results

Operating income from motorcycles and related products (the “motorcycles segment”) was $143.1 million during the quarter compared to operating income of $146.3 million in the year-ago period.

Third-quarter revenue from motorcycles was $812.4 million compared to revenue of $815.4 million in the year-ago period. The company shipped 53,472 motorcycles to dealers and distributors worldwide during the quarter compared to shipments of 50,670 motorcycles in the year-ago period.

Revenue from motorcycle parts and accessories was $252.2 million during the quarter compared to revenue of $239.7 million in the year-ago period. Revenue from general merchandise, which includes MotorClothes® apparel and accessories, was $69.0 million compared to revenue of $69.3 million in the year-ago period.

Gross margin was 34.6 percent in the third quarter of 2015 compared to 34.9 percent in the third quarter of 2014. Third-quarter operating margin for the motorcycles segment was 12.5 percent compared to operating margin of 12.9 percent in last year’s third quarter.