Even with a down second quarter and flat growth for the first half of the year, executives at Harley-Davidson are confident the company will grow its motorcycle revenue 5% to 10% for the year.
Harley saw its motorcycle revenues decline 5% in the second quarter as a regulatory compliance issue at a brake part supplier led to a more than two-week shutdown of production. Net income for the overall company was up 5% at $216 million.
The company was producing around 4,500 motorcycles per week prior to the shutdown and Gina Goetter, chief financial officer at Harley, estimated the suspension cost Harley 10,000 to 12,000 units. Overall motorcycle shipments were down 15% in the quarter, a decline of 8,500.
Retails sales were down 23% worldwide to 50,500 units, including a 28% drop in the North American market. Jochen Zeitz, chairman and chief executive officer of Harley-Davidson, said it is difficult to quantify the actual among of retail sales lost because of the shutdown.
The decline leaves Harley’s motorcycle revenues essentially flat for the year at $2.57 billion. Exiting the first quarter, the company said its first half revenues would be up in the mid-single digits with high-single digit increases in the second of the year.
Harley now expects low-to-mid double digit increases for the second half of the year. Hitting the revenue guidance for the year would require a $220 million to almost $450 million increase in revenue for the second half of the year compared to 2021.
Zeitz said the company is continuing to work through the knock-on effects of the shutdown, which was caused by an in issue with brake hoses provided by a tier 2 supplier to one of Harley’s tier 1 suppliers.
“We’ve ramped up production and we believe that we’ll be able to make up for the lost production throughout the remainder or the year,” Zeitz said.
Goetter said meeting the company’s guidance of motorcycle sales being up 5% to 10% for the year is dependent on recouping lost production, although she noted Harley is now producing more than the 4,500 motorcycles it was building each week prior to the shutdown.
“In terms of our confidence, that is all supply related right now,” Zeitz said.
Like many manufacturers, Harley has dealt with supply chain issues over the past year. In some cases, the company has begun offering some models at lower price points with options removed to allow customers to still purchase. In other cases, the company has been hampered by lack of available semiconductor and electronic components.
Harley has seen some of the issues and inflationary pressures moderate. Logistics costs, for example, were up more than 100% last year and 50% in the first quarter. In the second quarter, those costs were up 7% and they are expected to be flat in the second half of the year.
At the same time, Harley’s confidence in meeting its revenue guidance comes amidst growing concerns about a recession.
“We do not see softening among our core consumers,” Zeitz said.
He acknowledged the company’s datapoints are somewhat complicated by the production shutdown, which curtailed an already limited inventory of motorcycles at dealers, but said there still seems to be good demand for motorcycles. The average bike is on a dealer floor for just 23 days and new bikes are selling for 1% over MSRP on average.
The company also has not seen weakness in the economy show up in loan loss and delinquency in its Harley-Davidson Financial Services business, Goetter said.
“We’re not yet seeing it play through on just the customer side from a payment standpoint,” she added.
Zeitz noted retail sales of motorcycles at dealers rebounded after Harley was able to begin shipping again.
“The next couple of months will show where the consumer is heading, but right now we’re reasonably confident,” he said.