With record attendance it the recent 120th Homecoming in Milwaukee as a backdrop, Harley has reported slow but steady growth in the North American market but took a hit on deliveries due to the production stoppage at the York plant earlier this summer.
“Harley-Davidson showed continued progress in the delivery of our Hardwire strategy this quarter, despite the macro-economic conditions affecting both the business and our customers,” says Jochen Zeitz, chairman, president and CEO of Harley-Davidson. “Following the production suspension we experienced late in the quarter impacting motorcycle shipments, we achieved retail growth for the quarter in addition to a strong increase in gross margin. We are confident in our ability to navigate near-term headwinds and remain optimistic on the future, most notably following the successful launch of our game-changing CVO’s and the highly attended gathering of our community during our anniversary year, reinforcing the enduring power of the brand.”
Q2 2023 highlights and results
- Strategy remains grounded in desirability and profitability
- 120th Anniversary events in Budapest and Milwaukee reinforced overall brand strength
- Introduced two new CVO motorcycles, as well as new models in the Enthusiast and Icons collections
- HDMC Gross Margin of 34.8%, an increase of 400 basis points
- HDMC Revenue declined 4%, behind a 10% decrease in wholesale shipments related to an unplanned production suspension
- HDFS Revenue increased 19% on higher interest income and increased investment income
- Delivered diluted EPS of $1.22
- Company revises full year 2023 outlook
- First Half 2023 Highlights and Results
Second quarter global motorcycle shipments decreased 10% due to an unplanned production suspension that occurred in Q2. Revenue was down 4%, with global pricing partially offsetting unit declines. Parts & Accessories revenue was up 1%, driven by improved digital efforts, while Apparel revenue was down 14% compared to a strong Q2 period last year, as the bulk of seasonal product sales occurred in Q2 last year, compared to Q1 of this year.
Second quarter gross margin was up 4.0 points behind pricing, cost productivity, and shipment mix, more than offsetting the negative impacts from reduced volume and foreign currency. Second quarter operating income margin fell by 0.6 points due to higher operating expense, including higher people costs and marketing spend.
Global retail motorcycle sales in the second quarter were up 3% versus prior year. North America retail performance was up 1%, driven by strength in our core categories such as Grand American Touring and Cruiser, but offset by declines in the Sport motorcycle segment, following the discontinuation of legacy Sportster models in North America at the end of 2022.
Growth in APAC was driven by continued strong demand across key markets, including Japan, China, and Australia. The decline in EMEA of 6% was primarily driven by a market exit and the planned unit mix shift towards the profitable core product segments. Growth in Latin America was driven by modest growth in Brazil, partially offset by weakness in Mexico.
HDFS’ revenue was up $38 million in the second quarter, an increase of 19%, driven primarily by higher interest income and increased investment income. HDFS’ operating income decline of $27 million, or down 31%, was driven by higher interest expense and an increased provision for credit losses.
The moderate increase in the provision for credit losses was driven by several factors relating to the current macroeconomic environment. Total quarter-ending net finance receivables were $7.5 billion, which was up 6 percent versus prior year, driven primarily by an increase in wholesale receivables.
LiveWire revenue for the second quarter was down compared to the same quarter in 2022 due to lower unit sales of LiveWire ONE electric motorcycles and STACYC electric balance bikes. LiveWire’s operating loss of $32 million in the second quarter is in line with expectations and was driven by product development spending associated with the launch of the Del Mar electric motorcycle.
2023 Financial Outlook
For the full year 2023, the company is revising its HDMC guidance and its LiveWire unit sales guidance and now expects:
- HDMC: revenue growth of flat to 3% and operating income margin of 13.9 to 14.3%
- LiveWire: motorcycle unit sales of 600–1,000
For the full year 2023, the Company reaffirms the following guidance and continues to expect:
- HDFS: operating income decline of 20 to 25%
- LiveWire: operating loss of $115 to $125 million
- Harley-Davidson, Inc.: capital investments of $225 to $250 million