Despite a continued sales slump in the U.S., Harley-Davidson is aiming to add 2 million new riders over the coming decade. Its third-quarter results illustrated the challenges in the way of achieving that goal.
The world’s largest manufacturer of heavyweight motorcycles reported on Tuesday that net income fell 40% to $68.2 million in the three-month period ended Sept. 24. Operating margin slid 8 points as manufacturing costs rose and Harley shipped more lower-margin bikes.
Consolidated revenue dropped about 9% to $1.15 billion while retail unit sales fell 6.9% worldwide and 8.1% in the U.S., Harley-Davidson’s biggest market. Analysts on average had expected U.S. retail sales to fall 5.6%, and retail sales worldwide to decline 3.2%.
“In the U.S., Harley is caught between two customer demographic trends: millennials who aren’t widely embracing the motorcycling lifestyle, and baby boomers who are aging out of riding,” the Milwaukee Journal Sentinel said.
Internationally, sales were hurt by weak performance in Japan, Australia and Mexico. “International is really soft, and that definitely had been a bright spot,” said analyst Robin Diedrich with Edward Jones Co.
Bright spots in the quarter included the redesign of the Softail motorcycle lineup that represents the company’s largest product development project ever. Harley said the eight redesigned cruisers for model-year 2018 have been selling better than the 2017 models they replaced.
“The continued weakness in the U.S. motorcycle industry only heightens our resolve and the intensity we are bringing to the quest to build the next generation of Harley-Davidson riders,” CEO Matt Levatich said in a news release. “Launching one hundred new high-impact motorcycles is a critical part of our 10-year journey, and the all new Softail line-up is a significant statement of our commitment.”
Harley also noted that its U.S. market share increased in the latest quarter and its sales decline wasn’t as steep as that of the broader industry.
“Our investments in new product and marketing are targeted to drive ridership growth,” Levatich said. “We have the strategies, plans and people to make it happen.”