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Home / Government / As Harley looks abroad to juice sales, tariffs hit home

As Harley looks abroad to juice sales, tariffs hit home

MILWAUKEE (AP) — With sales stagnant at home, Harley-Davidson has looked increasingly overseas for buyers of its well-known motorcycles.

The economic headwinds it faces are increasing, however, as tariffs that were adopted overseas in retaliation for U.S. duties on steel and aluminum begin to take hold.

On Tuesday, the company out of Milwaukee cited the tariffs when lowering its expectations for its operating margins this year, taking them from 9.5 percent to 10.5 percent, to 9 percent to 10 percent.

The company’s profits have been pressured for some time, but Harley-Davidson has consistently topped Wall Street expectations in part by slashing costs. In June, while pursuing that same plan, it walked into the trade crossfire, saying that the production of Harley-Davidson motorcycles sold in Europe must be moved from U.S. factories to sites overseas.

The change, it said, came as a result of the retaliatory tariffs the EU is imposing on American exports.

The importance of overseas markets to Harley-Davidson is discernible every quarter in the company’s sales numbers.

The company’s U.S. sales slid by 6.4 percent in the most recent quarter, and they’re down 8.7 percent at the halfway point of the year. Sales in Canada fell 0.5 percent over the past 3 months, and are down 4.9 percent over the past six months.

At the same time, international sales increased by 0.7 percent in the quarter, and 0.5 percent over the past six months. Its sales in Europe, the Middle East and Africa rose 3.6 percent in the quarter, and are up 4.8 percent over the past six months. Its sales in Latin American sales rose 9.1 percent in the quarter.

The company wants to keep that momentum going overseas but in doing so, it has incensed Trump, who lashed out directly at Harley-Davidson after it said it would need to move some production overseas.

“We won’t forget, and neither will your customers or your now very HAPPY competitors!” Trump tweeted. He then said that the administration would court motorcycle companies that want to move to the U.S.

Harley was one of the most prominent American companies singled out by the Europe for tariffs, along with bourbon makers and Levi’s jeans. Those tariffs took effect right at the end of the most recent quarter, on July 1, so the full effects have not yet hit Harley.

For the three months ending on July 1, Harley-Davidson Inc. earned $242.3 million, or $1.45 per share. A year earlier, the company earned $258.9 million, or $1.48 per share.

Stripping out the cost of making various improvements to Harley’s manufacturing processes, the company’s earnings were $1.52 per share. That easily beat the $1.35 per share that analysts surveyed by Zacks Investment Research were calling for.

The company’s revenue from motorcycles and related products dropped to $1.53 billion, from $1.58 billion, as sales in the U.S., Asia Pacific region and Canada declined. Sales in Latin America rose 9.1 percent and sales in the EMEA region increased 3.6 percent.

The company’s revenue topped the $1.42 billion that analysts had predicted. At the opening bell, Harley’s shares rose more than 4 percent.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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