Harley-Davidson has reported worldwide retail motorcycle sales in the first quarter up by +1.4 percent (57,458 units), with a +4.5 percent increase in international sales (+8.8 percent EMEA, +6.6 percent Asia Pacific) compensating for broadly flat domestic US demand (-0.5 percent, 35,326 units).
International markets accounted for 38.52 percent of sales in the first quarter of 2016 (22,132 units in total) compared to 37.37 percent of sales in the first quarter of 2015 (21,173 units). EMEA remains Harley's largest international market, with sales of 10,210 units in the first quarter of 2016; the Asia Pacific region had its best first quarter ever with sales of 7,566 units.
Despite domestic US sales being down again, Harley is saying that "retail sales trends have significantly improved over previous quarters," and that "worldwide retail sales were driven, in part, by increased investments in marketing and new product introductions."
Harley has managed to increase its first quarter 2016 diluted earnings per share by +7.1 percent to $1.36 ($1.27 in the same period in 2015) on net income that is down by -7.2 percent ($250.5 million on consolidated revenue of $1.75 billion compared to net income of $269.9 million on consolidated revenue of $1.67 billion in last year's first quarter).
Gross profit was up very slightly for the first quarter, at $590.280m against $590.275m last year, on motorcycles and related products revenue that was up by +4.37 percent at $1,576.6m for the quarter, reflecting an increase in selling, administrative and engineering expenses that resulted in operating income from motorcycles and related products being down by -3.76 percent at $332.457million. Gross margin percent was down at 37.4 percent with operating margin percent down at 21.1 percent.
Harley's total current asset position is improved on the year-end 2015 position, but is down compared to the first quarter 2015; cash and cash equivalents are down by -3.9 percent compared to the end of 2015 and down by -40.6 percent compared to the first quarter of 2015, with increased long-term debt reflecting the share repurchase activity that Harley has been embarked upon.
Net cash generated by first quarter 2016 operating activities was substantially reduced at $41.131m compared to $174.700m in the first quarter of 2015.
With revenue generated by motorcycle sales up by nearly +5 percent (at $1,317.578m for the first quarter) Harley President and CEO Matt Levatich has stated that he is "pleased with how our first quarter results demonstrate the progress we're making in both driving demand and delivering business performance in a highly competitive environment.
"The increased marketing and new product investments are beginning to take hold and we anticipate continued progress across our focus areas as we dial in and ramp-up our approach."
Harley began shipping its two new "powerful" cruisers in March (the Low Rider S and the CVO Pro Street Breakout) and launched its "Live Your Legend" integrated marketing campaign.
"The Live Your Legend” message is a rallying cry to inspire new generations of riders to invest now in experiences that define their legacy," said Levatich. "It's one example of how we are creating powerful connections with new riders and strengthening our bond with our existing riders."
Harley says that in line with its strategic objectives it continues to "bring new riders into the sport of motorcycling, while also broadening brand appeal demographically." The company says that in 2015 one-third of their new motorcycle purchasers in the U.S. had not owned a motorcycle previously [Polk/IHS] and that in the U.S. they were "the number-one seller of new on-road motorcycles of all displacements to young adults ages 18-34, women, African Americans and Hispanics, as well as Caucasian men aged 35 plus."
Harley says it continues to expect that it will ship 269,000 to 274,000 motorcycles in 2016, an approximate 1 to 3 percent increase from 2015. In the second quarter of 2016, the company expects to ship 82,500 to 87,500 motorcycles compared to 85,172 motorcycles shipped in the year-ago period.
The company continues to expect full-year 2016 operating margin of approximately 16 to 17 percent for the Motorcycles segment. The company continues to expect 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.
On a discretionary basis, the company repurchased 3.4 million shares of Harley-Davidson common stock during the first quarter of 2016 for $144.6 million. In the first quarter of 2016, there were approximately 184.2 million weighted-average diluted common shares outstanding, compared to approximately 211.8 million shares in the year-ago quarter. At the end of the first quarter, 25.6 million shares remained on board-approved share repurchase authorizations.
