Shares in the Milwaukee-based company fell 4.2 per cent to $56.91, taking the company’s year-to-date losses to 2.5 per cent. Harley said global retail sales, which represent sales from dealers to the final consumer, fell 4.2 per cent from a year ago — against Wall Street’s estimates of a 1.7 per cent rise. While sales in Latin America were strong, those in the US dropped 5.7 per cent from a year ago — against consensus estimates of 2.4 per cent growth — partly influenced by its decision to reduce shipments of model year 2017 motorcycles.
Analysts at Morgan Stanley noted that the weakness in retail bike sales arrived despite strong economic and credit conditions and noted that it was unclear if delayed tax returns could have influenced results.
“We don’t think the market likes this number very much, leaving a high cash generating franchise butting up against fundamental/leveraged buyout value,” said the bank.
Harley’s net income slid to $186.4m in the first quarter from $250.5m a year ago, while earnings per share fell 22.8 per cent to $1.05 — but topped analysts’ estimates of $1.02. Revenues from motorcycles and related products fell nearly 16 per cent to $1.3bn, short of analysts’ expectations.
The company also unveiled a long-term strategy to build 2m new Harley riders in the US by 2027 and grow international businesses to half of its annual motorcycle volume over the same period. Harley-Davidson also said it aims to launch 100 new, high-impact motorcycles over the next decade.
The decline in Harley shares accompanied a sell-off on Wall Street, with the S&P 500 down 0.3 per cent to 2,342.19. The Dow Jones Industrial Average slid 0.6 per cent to 20,523.28 with a 4.7 per cent drop in shares of Goldman Sachs weighing on the price-weighted index. The Nasdaq Composite was off by 0.1 per cent to 5,849.47.
The $12bn distributor of industrial parts said it now expects sales to grow between 1-4 per cent and a range of $10 to $11.30 in 2017 for earnings per share as its campaign of aggressive discounting erodes profitability. The group had previously forecast sales growth of 2 to 6 per cent and earnings per share of $11.30 to $12.40.
Shares in the company tumbled 11.4 per cent to $197.57.
For the three months to end of March, net sales rose just 1.3 per cent to $2.54bn, just shy of the $2.56bn the market was expecting. Net income meanwhile fell to $173.3m, compared to the $184.9m recorded in the prior year period. Adjusted net income of $171.6m, or $2.88 per diluted share, also came in below forecasts of $177.1m or $2.99 a share.
“Overall, the first quarter clearly fell short of our expectations, driven primarily by the stronger than anticipated customer response to our US strategic pricing actions, with a greater volume of products sold at more competitive prices,” said chief executive DG Macpherson.
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