By Bianca Flowers and Kannaki Deka
(Reuters) -Harley-Davidson Inc. revised its sales outlook for the year after profit fell 17.5% in the second quarter as a suspension of production hit motorcycle shipments, the company said on Thursday.
Company executives attributed the earnings miss to production being temporarily halted in June at the company’s York, Pennsylvania, assembly plant for the second time in just over 12 months due to a parts shortage.
The 120-year old manufacturer revised its full-year revenue target and is anticipating sales growth of flat to 3% from its previous forecast of 4-7%. Operating margins are expected to be between 13.9% and 14.3%.
A slower economy compounded with higher borrowing costs is causing consumers to spend less, which is bringing demand back down to a level commensurate with supply.
Net profit fell to $178 million, or $1.22 per share, in the second quarter, from $215.9 million, or $1.46 per share, a year earlier.
Sales from motorcycles and related products fell about 4.4% to $1.19 billion in the quarter, which ended June 30.
Harley’s price increases and surcharges for popular models have lifted the manufacturer’s earnings per share in previous quarters, but analysts say the slowing demand is reflective of consumers becoming less tolerant of price hikes.
Tighter credit for American borrowers is denting consumers’ ability to purchase big ticket leisure items. Harley has sustained margin growth through its wealthier customer base but hasn’t been as successful luring younger riders with the release of the Sportster S models and electric bikes that retail for nearly half the price point of its top selling bikes.
Worldwide retail sales were up 3% year-over-year, while bike shipments declined 10%.
The company’s financial services division saw a 19% increase in revenue growth but operating income was down 31% from the year prior.
(Reporting by Bianca Flowers in Chicago and Kannaki Deka in Bengaluru; Editing by Sriraj and Conor Humphries)
