Nov. 8, 2010 – Financial services boost Harley profits

Although Harley-Davidson continues to see decreased U.S. retail bike sales, the company is reporting both significantly improved finance earnings and a dealer network that is largely handling the difficult retail environment.
In its third-quarter earnings report, the company outlined a much-improved net income over the year-ago quarter. That improvement largely stems from the performance of its financial services division, which finished the quarter with operating income of nearly $51 million after finishing the year-ago quarter with a $31.5 million loss.
Harley attributed the turnaround to a lower cost of funds and an improvement in credit losses. The company’s 30-plus day retail delinquencies has improved more than 17 percent since a year ago, a Harley official said. Harley’s 30-plus day retail delinquencies now are at 4.8 percent, although this rate traditionally increases in the second half of the year.
U.S. retail sales continued to decrease, although they remain better than the heavyweight motorcycle industry as a whole, Harley officials said. Harley’s third-quarter U.S. retail sales decreased more than 9 percent compared to the year-ago quarter. Industry-wide, the heavyweight market (651cc-plus) has declined 14.4 percent from a year ago.
Harley’s overall quarterly bike sales dropped nearly 8 percent as the decrease in international markets was slighter than in the United States.
“Despite the continued challenges in the economy, we are making solid, steady progress at transforming our business,” Harley-Davidson CEO Keith Wandell said in a press release.
Wandell said the progress includes its dealer network’s inventory mix, which has significantly fewer noncurrents than a year ago.
Harley officials also said its dealer network remains largely profitable, although they are expecting and encouraging some decreasing of the network. Harley said it had 35 dealership closures in its first quarter this year and a “handful” in its second and third quarters. In 2009, Harley said it had about 3.5 percent of its retail operations — either dealerships or dealers’ Secondary Retail Locations — close in the United States.
Other news from the report included:

  • The company narrowed in on its expected 2010 motorcycle shipment number, expecting to ship 207,0000-212,000 units to dealers. That’s a decrease of 5-7 percent compared to a year ago.
  • The company incurred $108.4 million loss net of tax from discontinued operations of MV Agusta, which it recently sold. This total included operating losses as well as fair value adjustments, Harley said. PSB

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