Please ensure Javascript is enabled for purposes of website accessibility

Harley-Davidson Sales Finally Hit Paydirt Again

By Rich Duprey - Apr 23, 2021 at 12:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's the motorcycle maker's best first-quarter performance in years.

Harley-Davidson (HOG 1.81%) finally turned in a good quarterly earnings report Monday as first-quarter U.S. motorcycle sales jumped to their highest level in four years and earnings per share nearly quadrupled.

The gains follow a change in when the bike maker introduces its new models, from late summer to early in the calendar year, to coincide with when bike riders are most interested in buying, and suggests the "Rewire" roadmap CEO Jochen Zeitz has laid out for turning the company around is gaining traction.

Harley-Davidson Pan America adventure touring motorcycle

The new Pan America 1250 adventure touring motorcycle. Image source: Harley-Davidson.

A broad-based recovery

Revenue of $1.4 billion in the first quarter was up 10% year over year as motorcycle segment revenue rose 12% from 2020 on the back of strong demand for Harley's touring bikes. That's also without the full benefit of the introduction of its first adventure touring bike, the Pan America 1250, which was unveiled in February.

Zeitz has a vision for Harley as a somewhat smaller, more focused motorcycle company aligned with its dealer interests that also caters to its core customer while exploring new markets with growth potential. The LiveWire electric motorcycle is one such market, adventure touring another.

But former CEO Matt Levatich's plan to all but abandon the U.S. market in favor of international growth has been thrown overboard. International growth is still important, but the number of markets the company will have a presence in has been narrowed, with the least profitable ones rejected.

That change showed up in Harley's results as shipments to foreign markets were down precipitously, but they were much more profitable. The commitment to the U.S. is paying off, too, as Harley sold over 7,250 more motorcycles this quarter than a year ago, a 31% increase from last year.

Pointing to the realignment of Harley's priorities, which include making sure its incentives are on the same page as its dealers, Zeitz said, "We can see the initial signs of consumer excitement and optimism returning and I am confident Harley-Davidson in 2021 is a significantly leaner, faster, and more efficient organization."

Trade war redux

Unfortunately a wrench was thrown into the machinery after European regulators announced Harley motorcycles will suffer from dramatically higher tariff rates that were a result of the trade war that began in 2018. 

The EU's Economic Ministry in Belgium notified the bike maker it will have to pay a 56% total tariff on its motorcycles regardless of where they're built beginning June 1. Previously, only bikes imported from the U.S. were subject to a stiff tariff (31%), which raised the cost of each bike by about $2,200, while motorcycles from Harley's other global plants only had to pay 6%. Harley had been able to avoid some of the pain associated with the trade spat by moving production of bikes for the European market to its plants in Brazil, India, Australia, and Thailand.

Now the trade ministers have determined all of Harley's motorcycles will be covered by a new, higher tariff.

The bike maker is appealing the ruling, but bike sales in Europe, which had been its second-biggest market before the pandemic, could very well plummet further.

Conversely, the global coronavirus outbreak showed Harley how it can live without Europe for the most part. First-quarter sales amounted to just 4,900 bikes, a 36% year-over-year decline, and 15% fewer than the 5,800 it sold in the Asia Pacific region.

Time will tell

Despite the overall good numbers, Harley-Davidson still needs to prove this isn't a one-off effort, as there was an obvious benefit from the stimulus checks that hit bank accounts in March, which the bike maker ran promotions around. 

It needs to show the demand for its high-end motorcycles remains when consumers don't have the benefit of being artificially incentivized to spend. Second-quarter results will begin to hint at whether the turnaround is real, but it's a welcome reprieve that Harley is once again reporting real growth.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
HOG
$32.57 (1.81%) $0.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.