With U.S. motorcycle sales not expected to improve much anytime soon, Harley-Davidson Inc. on Thursday said it would reduce bike shipments for the year and remain cautious in its sales outlook.
The Milwaukee company said its profit fell 6.4% in the recent fiscal quarter, from $299.8 million a year ago to $280.4 million in the three-month period ended June 30.
Earnings per share increased to $1.55, from $1.44 a year ago. The number of shares outstanding at the end of the second quarter was 181.3 million compared with 208.6 million in the year-ago quarter.
Revenue was $1.86 billion — up from $1.82 billion a year earlier.
The company’s motorcycle sales in the United States were down 5.2% compared with the year-ago quarter, and the overall heavyweight motorcycle industry was down 8.6% for the same period.
Harley and other makers of cruiser and touring motorcycles have seen their U.S. sales fall as the economy has faltered in some states, such as Texas, where oil and gas production is down.
The U.S. market was far weaker than expected in the recent quarter, Harley CEO Matt Levatich said in a conference call with analysts Thursday.
Also, the company has faced pressure from Japanese and European motorcycle manufacturers, as well as rival Indian Motorcycle Co., based in Minnesota.
Increased competition has become the new normal for Harley, especially as other bike manufacturers discount their products to boost sales.
Harley said its motorcycle sales worldwide decreased 1.9% in the quarter, which included the 5.2% drop in U.S. motorcycle revenue.
International sales increased by 4.3% from a year ago, with the largest gain, 8.2%, in the Europe, Middle East and Africa region.
The impact on Harley’s international sales as a result of Britain’s vote to leave the European Union was unclear, according to the company.
“What we are certain of is Brexit does not provide any benefit to retail sales or consumer confidence in Europe,” said Harley Chief Financial Officer John Olin.
Olin also said the company would not respond to speculation that Harley was a takeover target, which boosted its share price earlier this month.
“We don’t comment on stock market rumors … that would consume our entire life if we did,” Olin said.
Harley’s U.S. market share for the quarter was 49.5%, an increase of 2 points over the same period in 2015.
This year, the company has said it plans to increase spending on marketing by about 65% and spending on product development by 35% — both areas aimed at boosting sales for years to come.
The market-share gain was “an important validation that our initial investments to drive (product) demand are working,” Levatich said.
For 2016, the company lowered its full-year motorcycle shipment guidance to between 264,000 and 269,000 bikes, down about 5,000 units, citing market softness in the U.S., the competitive environment and global economic uncertainty.
“It’s a more challenging market for the industry overall. Harley is not immune to that,” said analyst Robin Diedrich with Edward Jones Co.
Even the best marketing campaigns won’t convince someone to buy a new motorcycle if they are worried about the economy, their job and their finances.
There’s a lot of angst right now, partly fueled by the presidential election, said Chaz Hastings, owner of Milwaukee Harley-Davidson, a dealership on the city’s northwest side.
“Right now, if somebody is anxious and not looking to spend that kind of money, they’re probably not coming into a dealership,” Hastings said.
Still, Hastings said, he would be more worried if people were not signing up for rider training classes, and if they weren’t coming to the dealership’s weekly “bike nights.”
“Long term, I feel the metrics for success are still in place. It’s a little bit of a rough patch right now, but we have been through much worse,” Hastings said.
Harley’s recent-quarter results topped Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of $1.53 per share.
Harley-Davidson shares have increased 11% since the beginning of the year, while the Standard & Poor’s 500 index has increased 6%. The stock has decreased 12% in the last 12 months.
Thursday, Harley shares closed at $51.01, up 43 cents.