Harley-Davidson Shares Plunge On Sales Figures; Production Cuts Planned

Shares of Harley-Davidson Inc HOG plunged to a one-year low Tuesday after the motorcycle company reported a drop in sales that would require it to cut production and hourly workers.

The company said its sales were down 6.7 percent worldwide and 9.3 percent in the United States from the second quarter a year ago.

Shares dropped 9 percent in morning trade before edging up to a decline of 7.9 percent at $47.89 at time of publication.

New Engine Fails To Stem Decline

Second-quarter net income was $258.9 million on consolidated revenue of $1.77 billion versus net income of $280.4 million on consolidated revenue of $1.86 billion for the same period in 2016.

Bernstein analyst David Beckel, in a note previewing Q2 sales based on interviews with 43 Harley dealers, said sales of models with a new engine - the Milwaukee Eight, only the third “Big Twin” by the company in 80 years - were tepid.

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Harley has a lot riding on the engine. It’s available this year only in fully kitted touring bikes, but is expected to expand to other models in the future.

Harley has been plagued by an aging consumer base and the fact that many Baby Boomers are unloading their motorcycles on the used market, cannibalizing sales of the new models. Harley also faces competition from Japanese and European manufacturers with their own brand of big-bore cruisers.

Production Cuts Planned

“Given U.S. industry challenges in the second quarter and the importance of the supply and demand balance for our premium brand, we are lowering our full-year shipment and margin guidance,” Matt Levatich, Harley president and CEO, said in a statement.

For the first six months, Harley-Davidson’s 2017 net income was $445.2 million on consolidated revenue of $3.27 billion compared to six-month 2016 net income of $530.9 million on consolidated revenue of $3.61 billion. Through six months, worldwide retail motorcycle sales were down 5.7 percent from the same period in 2016.