Harley-Davidson Inc. executives are cautious about the economic outlook despite a strong U.S. sales performance in the first half.
The Milwaukee-based motorcycle maker on Wednesday reported a 30 percent surge in profit for its second quarter. Finance chief John Olin said the company's streamlining of production was paying off, but that Harley faced "very challenging economic environments" around the world, particularly in Europe.
Keith Wandell, chief executive officer, noted in an interview that U.S. consumer confidence remained low and the job market had cooled in recent months, reported The Wall Street Journal. Though the housing market had shown some tentative signs of recovery, he said, many people still had little or no equity in their homes and so were less able to splurge on motorcycles. Before the housing bust, many customers had used home-equity loans to buy Harley machines.
Retail sales of Harley motorcycles in the U.S. rose 4 percent in unit terms in the second quarter after soaring 26 percent in the first quarter. Harley officials said an unusually mild winter "pulled forward" some of the demand that normally doesn't appear until spring. For the first half, U.S. unit sales were up 12 percent while international sales grew 4.5 percent.
Mr. Wandell said the U.S. sales gains partly reflected "pent-up demand" as some customers who held off during the recession finally returned to the market. He also said Harley was gaining market share, partly through its efforts to market more effectively to younger people, women and minority groups.
Harley reported profit of $247.3 million, or $1.07 per share, up from $190.6 million, or 81 cents per share, a year earlier. According to FactSet, Wall Street analysts had expected earnings of about $1.05 per share in the latest quarter. Revenue grew 15 percent to $1.73 billion.
Harley said much stronger sales in Latin America helped make up for a decline in Europe. A new dealer network pumped up sales in Brazil, the company said. Tougher competition on pricing hurt sales in Japan. The fall of the euro, Brazilian real and other currencies hurt the value of overseas sales when translated into the dollar, and that effect is expected to remain a drag on results in the second half, Harley executives said. But the company has benefited recently from falling prices for metals and fuels.
The company expects to ship 51,000 to 56,000 motorcycles in the current quarter, a decrease of between 9 percent and 17 percent from the year-earlier period, amid expected production disruptions at a York, Pa., plant as the company installs new software.
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