February 7, 2011-Harley to increase ’11 build

A better-than-expected retail sales market in the fourth quarter has convinced Harley-Davidson to slightly increase its production for 2011.
Harley’s U.S. sales were essentially flat in the fourth quarter, but its profit was up both for the quarter and for its full fiscal year. Harley reported full-year income of nearly $260 million for 2010, a significant increase over its 2009 profit of $70 million.
“We feel good about our 2010 results,” Harley CEO Keith Wandell said in a press release.
For 2011, the manufacturer plans to increase its build 5-8 percent over its 2010 production total of 210,000 bikes.
“We exceeded expectations on our retail sales in the quarter,” Harley Chief Financial Officer John Olin said during the company’s earning report. “At this point, given the feedback from our dealers and all the data that we have internally, we believe inventories are too low as we exit the quarter and therefore look to replenish a little bit.”
Harley expects to build between 221,000-228,000 units, a total that it believes will surpass what dealers will sell at retail next year. This is a strategic departure for the company as Olin noted Harley has not done this for several years.
Olin notes the move will “balance the inventory” needs for Harley and did not indicate whether Harley believes the move could impact the prices for used bikes.
“We believe used bike values have improved and are above year-ago levels,” he said of the used market.
Harley did note its overall dealer inventory levels are improved from last year, with those inventories down 11,800 units compared to a year ago.
Also improving for Harley is its U.S. market share. Its U.S. sales were only off 0.2 percent while the entire heavyweight market (bikes over 651cc) was down nearly 15 percent. As a result, Harley’s market share grew 1.6 percentage points to nearly 55 percent.
“In the U.S., we are the market share leader in new on-road motorcycle sales, not only to boomers but to young adults, women, African-American and Hispanic riders,” Wandell said.
Harley’s worldwide sales declined just 1 percent in the fourth quarter, its best performance of its fiscal year and the third straight quarter the company has seen single-digit percentage drops for worldwide unit sales.
Harley’s sales in Europe declined 6.5 percent in its fourth quarter but finished 2010 up 2.5 percent to more than 37,000 units. Wandell noted Harley is now No. 2 in market share in heavyweight motorcycles in Europe.
2010 marked a turnaround for Harley’s financial services division. Last year, this segment finished with a loss of $118 million. This year, the division posted income of $43.5 million in the fourth quarter and $181 million for the year.
Other notes from the recent Harley earnings report included:

  • Thirty-six dealer points closed during 2010, the company said. Harley officials said they expect more dealer closures in the coming year, but would not indicate what number they expect that to be.
  • Full-year U.S. sales declined nearly 12 percent to 143,000 units. PSB

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