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The
company is expected to report a drop in profit on lower revenue
from motorcycle sales when it delivers results on July 28.
The suspension of assembly and shipments of motorcycles,
excluding electric bikes, was limited to two of its
manufacturing plants in Wisconsin and Pennsylvania, due to a
regulatory compliance issue at a third-party parts supplier. The
production halt set back the schedule for the Milwaukee-based
company to re-stock dealer inventories. Harley did not disclose
specifics.
Surging raw material costs and global semiconductor shortages
have clipped Harley’s gross margins, even as demand for its
motorcycles remains strong.
Analysts expect the iconic motorcycle maker to post a decrease
in second-quarter profit of $164.35 million, down from $180.54
million a year ago, according to Refinitiv data.
The company forecast year-over-year revenue growth of 5% to 10%
for its motorcycle segment for 2022, but recouping profit after
the production stoppage will be a challenge, said Chris Hodson,
senior analyst at Edgewater Research.
"They probably have the ability to make that up over the course
of the next 12 months, but making that up during the fiscal
year, especially considering the seasonality of their production
schedule, could be a little more difficult," Hodson said.
Motorcycle shipments were relatively flat when the company
reported first-quarter earnings. Analysts have already factored
in cargo being negatively impacted after the manufacturing of
bikes paused. Shipments of bikes have been on a downturn since
the last recession, said Jaime Katz, senior equity analyst at
Morningstar.
"In 2008, they did more than 300,000 shipments and in 2009 they
did 223,000. It has continued to shrink from there," Katz said.
Harley did not comment when asked about analysts' forecasting a
decline in second-quarter earnings.
Meanwhile, local dealers aren't optimistic about shortages
easing as inventory has been tight across Harley's suite of
motorcycles, including parts to repair bikes.
Accessories for customized bikes have even been difficult to
secure, said Demo Diakoumakos, manager at the Harley-Davidson
dealer at Chicago's Wrigleyville location. While he's expecting
an additional 10 units to replenish the showroom, inventory of
bikes hasn't improved in the past two years.
"It's hard to sell someone a $40,000 bike that we don't have in
front of us."
(Reporting by Bianca Flowers in Chicago)
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