American Motorcycle Dealer AMD 229 August 2018 | Page 12

Harley’ s Q2 Fiscals have not, actually, been as bad as many had feared. Domestic U. S. unit sales for the quarter ended June 30, 2018 were down by-6.3 percent, with Harley’ s retail sales now nearly tracking the wider market atrophy at-6.4 percent for the quarter( 46,490 units) for a second quarter inclass market share of 48.4 percent and-8.7 percent( 75,800 units) YTD for a 49.2 percent share so far this year(-0.4 percent). Motorcycle shipments for Q2 were 72,593 units and 136,537 for the calendar YTD. Overall global retail sales were down by-3.6 percent for the quarter. Harley continues to work on managing inventory levels( dealer inventory was down by some 14,100 units in Q2), saying that doing so continues to deliver the intended results in terms of profits and MRSP maintenance as it plows the ground for MY2019 models. Levatich is quoted as stating that“ our results in the second quarter reflect business performance that is in line with our expectations. With the focus of every employee and dealer, we are making progress building the next generation of Harley- Davidson riders in line with our long-term objectives. Our manufacturing optimization, demand-driving investments and commitment to manage supply in line with demand remain on target and continue to strengthen our business.” The importance of Harley’ s international ambitions and the decision about where it will build bikes for European customers( in response to the tariffs farrago) were underlined by their Q2 international results. While sales in Asia Pacific and Canada remain challenged( Japan and Australia have been notably soft for Harley in the second quarter), the welcome news is that Latin American sales are up( thanks largely to growth in Brazil and Mexico), and in Europe( EMEA) sales were + 3.6 percent for the quarter and are tracking at + 4.8 percent YTD, giving Harley an improved market share of 10.4 percent. Harley says its European performance is being driven by“ strong Softail sales,” and the addition of another 12 international dealers can’ t have hurt as the company continues its plan to have added some 150 – 200 new dealers internationally in the four years to 2020. The effects of inventory management can be seen in the fact that total revenue( at $ 1,525.1 billion) was“ only” down by-3.3 percent despite-

11.3 percent lower shipments. YTD revenue was $ 2,889.1 billion; the average motorcycle revenue has increased“ behind favorable mix, higher pricing and favorable currency exchange.” The 2018 motorcycles segment gross margin is down somewhat on 2017 at $ 532.1 million( 34.9 percent of revenue) for the second quarter and $ 1,005.9 billion( 34.8 percent of revenue) YTD due to higher steel and aluminum costs, among other factors. Asked if the company felt there

was a disconnect between its apparent marketing success in terms of social media metrics and the stubbornness of sales to outperform the market, Levatich emphatically thought not.

Further asked about the reaction in Europe to Harley’ s decision to“ eat” the approximate $ 2,200 average on-cost of the increased tariffs imposed by the EU, he said the reaction among dealers had been universally positive and that the fact that the company would back their commitment to Harley in this way“ made them very proud” to be associated with Harley. Conversely, he said that the general reaction among U. S dealers to seeing some production transitioning overseas had been phlegmatic – he said that for the most part domestic dealers appeared to understand that the company“ had to do what’ s best” to keep itself healthy.

Income statements in THREE MONTHS ENDED SIX MONTHS ENDED $ 1,000s( except share) 2018 Q2 2017 Q2 2018 Q2 2017 Q2

12 AMERICAN MOTORCYCLE DEALER- AUGUST 2018 www. AMDchampionship. com