H-D Q2 North America retail down -17% global shipments -28%; HDFS Deal with KKR and PIMCO
Harley's embrace of 'other people's money' deepened, in parallel with its ongoing collapse in unit sales in Q2, when it sold some 10% of its HDFS (Harley-Davidson Financial Services) loan book equity to tow United States investment houses - New York based KKR (Kraus Kohlberg Roberts) and Allianz, Germany subsidiary PIMCO (Pacific Investment Management Company, Newport Beach, California) in a needed cash generation move.
HDFS has agreed to sell each of the two investors a 4.9% common equity interest to investment vehicles managed by KKR and PIMCO with HDFS agreeing to sell approximately two-thirds of HDFS future retail loan originations at a premium on an annual basis for five years.
The transaction is projected to unlock $1.25bn in discretionary cash, representing approximately 40% of Harley-Davidson's (shockingly low) current market capitalization of around $2.9bn. HDFS has agreed to sell over $5bn of existing gross consumer retail loan receivables and residual interests in securitized consumer loan receivables at a premium.
The KKR and Pimco transaction values the HDFS business at approximately 1.75x post transaction book value. HDFS expects to use a portion of the proceeds to reduce indebtedness to optimize its post transaction capital structure. HDFS operating income margin was 27.1%. Based on the HDFS transaction, Harley says it now expects HDFS operating income of $525-550 million for full year 2025.
Meanwhile, back at the day job that is supposed to make such financial gymnastics unnecessary, Q2 saw Harley delivering diluted EPS of $0.88 with HDMC operating income margin of 5.9% on revenue that was down by 23% year-over-year, with global motorcycle shipments down a massive 28% - "due primarily to planned dealer inventory reduction and soft demand". This in a market where Harley reports global motorcycle retail sales down 15% year-over-year.
Harley's global dealer inventories were also down by 28%, compared to Q2 2024 - "as we continued to prioritize reducing global dealer inventory".
The cost of new or increased tariffs implemented in 2025 was put at $13m in Q2 of 2025.
Despite Q2 revenue coming in ahead of investor fears, Harley's profit margins came under pressure with consolidated revenue in the second quarter down 19% versus prior year. Q2 consolidated operating income was down 53 percent, driven largely by a decline of 69% at HDMC.
At the LiveWire segment, the operating loss 'improved' by $10m, which was 34% lower than the prior year's loss. Consolidated operating income margin in the second quarter of 2025 was 9% relative to 15% in the second quarter a year ago.
LiveWire revenue for the second quarter decreased by 7% versus prior year, due to lower electric motorcycle unit sales. LiveWire's operating loss of $19m, $10m less than a year ago, and said to be "in line with expectations".
Outgoing Chairman, President and CEO Jochen Zeitz was quoted as saying that Harley's second quarter results "continue to be impacted by a challenging commercial environment for discretionary products, and an uncertain tariff situation."
He stated that the cash from the HDFS transaction will be used "to reduce our debt by $450m and accelerate the $1bn share buyback program announced last year by the purchase of $500 million in the second half of '25. We also have the flexibility to invest up to $300m of additional funds into future growth opportunities."
Second quarter global motorcycle shipments decreased 28% versus the prior year. Revenue was down 23% driven primarily by the planned decrease in wholesale shipments and partially offset by favorable global pricing and favorable foreign currency. Parts & Accessories revenue was down 4% and Apparel revenue was down 13%.
Second quarter gross margin was down 3.5 points due to the negative impact of lower volume on operating leverage and due to the cost of new or increased tariffs implemented this year - partially offset by favorable foreign currency, favorable pricing, and favorable mix.
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Seen here on July 12, the third day of the 2025 Homecoming Rally, The Milwaukee Journal Sentinal reported attendance of around 60,000 for the Veterans Park gigs - some 25% down from the 80,000 or so cited for 2024. The 2026 Rally is confirmed (at this stage) as another four day brand appreciation gathering from July 9-12, 2026.
Second quarter operating income margin was down 8.8 points due to the factors above, while operating expense was $2m higher than a year ago.
Global retail motorcycle sales in the second quarter were down 15% versus the prior year, reflecting soft demand and unfavorable consumer confidence due to a high-interest rate environment and an uncertain economic outlook.
North America retail performance was down 17%, reflecting lower than expected customer traffic at dealerships. EMEA retail performance was down 5%, with 'puts and takes' throughout the region. APAC retail performance was down 21%, with significant weakness in China and Japan. Latin America experienced modest declines.
HDFS' operating income decreased by less than $2m in the second quarter or 2% versus prior year. This was due to lower net interest income and higher operating expenses, partially offset by a lower provision for credit losses and higher other income, as financing receivables declined modestly.
Interest expense in the second quarter was largely flat. Total quarter ending financing receivables were $7.3bn, which was down 9% versus the prior year, due to a decrease in retail loan receivables and commercial finance receivables.
The YTD through Q2 saw Harley generate $509m of cash from operating activities, pay cash dividends of $45m, and repurchase $87m of shares (3.4 million shares) on a discretionary basis (with no shares purchased in Q2 2025). The company reported having cash and cash equivalents of $1.6bn at the end of the quarter. HDMC has continued its May 1, 2025 announced decision to withdraw from issuing a full year 2025 financial outlook.
For LiveWire the company updated its previously issued guidance related to Operating Loss to $59-$69m and a total cash use of $50-$60m.
The 'Spirit' Returns?
Five years ago, the outgoing Chairman, CEO and President's 'Rewind' document, the precursor to his 'Hardwire' five-year Strategic Plan, promised many changes that have since been quietly brushed aside or consigned to the dustbin of corporate footnotes and retelling.
One such was the decision to abandon trying to make profits from selling motorcycles at $10k or less. Never mind that in so doing the company was ripping up its used-units entry-level pathway premise – though hurrah for that.
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It would appear that the 2026 Sprint will see Harley setting a third production line in motion in Asia, for an altogether new low displacement model – likely with the existing Pan America and Sportster S partner at Rayong, Thailand. It is thought that Harley is reluctant to embrace the established models already being built for them in Asia – for a combination of reasons, including but not limited to compliance and tariff issues. Chinese automotive and motorcycle manufacturing giant Qianjiang – manufacturer of Benelli, MBP Moto (aka Morbidelli), QJ Motor, Keeway and some MV Agusta models (the 'Lucky Explorer'). Qianjiang produces the X350 and X500 models for Harley. Seen here, Hero MotorCorp produces the X440 for Harley in India. Recently, rather abruptly and mysteriously, Hero withdrew its own 'Maverick branded X440 iteration from sale. Pure coincidence?
That premise was based on the pretext of not being able to make street legal offerings that were worthy of the badge for profitable sale at $10-14k price-points, or less.
The company has already confirmed a new $10k cruiser for later this year, one that in price-point terms will sit alongside the existing reduced pricing on the basic Nightster.
The new bike will be called 'The Sprint' and is set for a 2026 launch with dealers likely to get to see it in advance at some stage this coming fall.
Writing in the Milwaukee Journal Sentinel, MSJ and other news outlets report it is, effectively, bringing back the school of low displacement single cylinder thinking that was the foundation behind Harley-Davidson's 1960 acquisition of a 50% stake in the Italian Aermacchi brand.
The company was taken wholly into AMF Harley-Davidson ownership in 1972 before being off-loaded to Cagiva in 1978. The original two-stroke single cylinder Aermacchi Harley-Davidson Sprint 350 started to appear around 1969. The new Harley-Davidson 'Sprint' is expected to be a street legal four stroke single selling in the United States and internationally.
In the quarterly investment call at the end of July, Zeitz stated that it had been in development since 2021. He is quoted as saying "Inspired by our heritage and the spirit of the iconic Harley-Davidson Sprint Motorcycle, this new bike embodies boldness, irreverence and fun, capturing the rebellious energy that defines the Harley-Davidson experience." Someone needs to explain to Jochen that he can put the Kool-Aid down now.
"We believe this motorcycle will not only be highly accessible, but also profitable, marking a significant step forward in driving Harley-Davidson's profitable growth and opening a new path in future years for key markets."
It's a shame that what is considered true now wasn't, in fact, considered true five years ago. The 'Sprint' is likely to be made for Harley in Thailand. Shame Harley hasn't already had 350, 440 and 500 cc manufacturing partners and China and India for several years already. Heigh-ho.
