Harley-Davidson s (NYSE: HOG) Profit is not as good as the market seems to think. Just because the motorcycle manufacturer has surpassed Wall Street's pessimistic forecasts does not mean it has slipped out of the dangerous curve.
In fact, that was a terrible quarter for Harley-Davidson because the second quarter is the biggest quarter of the year. When the warm weather comes, the drivers want to go out and go on the road, and in the past they have been shipping to Harley dealers in the months of April, May and June to buy a motorcycle.
This year Harley sold only 46,490 motorcycles in the US during that time. This is the lowest number since the second quarter of 2009, when markets were still in the abyss of the Great Recession and only 35,000 bicycles were sold. This is not a performance that could get excited about.
Whatever Harley-Davidson's intention to increase international sales, which is half of its volume, is a good target, but right now the US remains the largest at 59% of sales and most important market. If it is only able to achieve international parity because its business is in freefall in the US, that's no achievement at all.
U.S. Revenue declined 6.4% this quarter, down 6.3% from the overall market. Sure, it's better than the 1
In contrast, Polaris Industries (NYSE: PII) just reported the result, and although it's not nearly as transparent as Harley, how many motorcycles it sells, it says retail sales of its Indian motorcycle brand actually rose in the low single-digit percentage range.
A global problem
But the international markets are not That is also very robust, with sales up just 0.7% over the period. In other words, Harley-Davidson sold 218 more motorcycles overseas than a year ago. At least it's gaining ground, but that's hardly the stuff of dramatic change that will drive global markets.
Last quarter Harley made a big announcement about where she would reveal her strategy for the future. Among the goals it aims to achieve are the aforementioned international sales, which account for 50% of its total value, bring 2 million new drivers to the Harley brand and produce 100 new motorcycle models in 10 years.
Although many people expected Harley to write the presentation alongside his earnings report, the bicycle manufacturer instead opted for a second event on July 30, which was dedicated to the unveiling of the initiative. It's going to be a sensational spectacle if it really wants to change its mind, because until now, Harley-Davidson has done everything possible to achieve all of these goals. And now it has to be in a delicate trading environment.
It faces increased costs both abroad and in the US after President Donald Trump imposed tariffs on imported steel and aluminum, and Europe, Canada and Mexico with tariffs of their own on Harley-Davidson.
The bicycle manufacturer has said that the cost of higher import duties will increase the price of its motorcycles on average by $ 2,200, but it has decided to absorb the cost. In this way, its international dealers do not really need to raise bike prices, and Harley said it will shift production of motorcycles for the European market to its overseas assembly plants.
The US will have to deal with high raw material costs as US steel and aluminum prices have risen by 45% since the beginning of the year. While Harley-Davidson largely ignored the impact of the president's trade policy, he has downgraded his guidance for operating margins, which he now rates in the range of 9% to 10% compared to his previous estimate of 9.5% 10.5%, because of the impact of tariffs
The market seemed to find encouragement in Harley's sales results, which are slightly less bad than in the last quarter, but that is cold convenience because of the company burglary remains at a low level with little indication of how it will pull out. Perhaps the upcoming strategy event will really tear the cover off Harley-Davidson to achieve its ambitious goals, but the bicycle manufacturer is not exactly known for life-changing news, and it's quite possible that it will simply be more the same. And that's a disturbing possibility.