Harley "Delivers Solid Q3 Financial Results"
Commenting on its Q3 results, Harley chairman, CEO and president Jochen Zeitz is quoted as stating that "Harley-Davidson delivered a solid third quarter and we have seen many of our Hardwire strategic initiatives perform well.
"Our teams continue to work to mitigate the impact of the ongoing supply chain challenges that our sector faces, however, our performance underlines that we are on course to deliver our long-term Hardwire strategy."
Total HDI revenue grew 17% behind increased shipments and favorable motorcycle unit mix, with Motorcycles and Related Products segment operating margin at 8.4% (3.6 percentage points better than Q3 2020) driven by unit mix, pricing and reduced restructuring expense offsetting the cost increases across the supply chain and the impact of EU tariffs.
Harley's Q3 North America retail performance was up over last year, offset by declines across international markets.
Total net income growth of 36% was driven by growth across both the Motorcycles and the Financial Services segments.
In the quarter that saw the launch of the Sportster S, the all-new Sportster motorcycle built on the Revolution Max platform, revenue from the Motorcycles segment was up significantly during the third quarter of 2021 - primarily driven by a 12% increase in wholesale shipments, favorable motorcycle unit mix and pricing.
Parts & Accessories third quarter revenue was down slightly, while General Merchandise was flat to Q3 2020 as both businesses faced strong prior year Q3 comparisons as dealers reopened after pandemic-related closures.
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| Jochen Zeitz, chairman, president and CEO - "Our teams continue to work to mitigate the impact of the ongoing supply chain challenges. Our performance underlines that we are on course to deliver our long-term Hardwire strategy." |
Third quarter gross margin was down 3 percentage points to Q3 prior year as a margin benefit attributed from stronger volume, profitable mix and pricing was more than offset by the negative cost headwinds across the supply chain and higher EU tariffs (2.5 percentage point impact). Q3 operating margin finished up versus prior year as the company's comparison period included heavier Rewire restructuring charges.
Global retail motorcycle sales in the third quarter (down 6% to prior year) were impacted by the strategic decisions made as part of the Rewire strategy, including the exit of unprofitable product segments and markets, as well as macro supply chain challenges, including slower shipping times to the international markets. The Financial Services segment saw operating income growth of $15m over Q3 2020, driven by lower interest expense.
Harley-Davidson generated $926m of cash from operating activities year-to-date in 2021. Cash and cash equivalents were $2.1bn at the end of the third quarter, down $1.5bn to the end of Q3 2020 as the company has brought down cash balances. The company paid cash dividends of $0.15 per share in Q3 2021.
For the full-year 2021, the company says that its Motorcycles segment guidance remains unchanged relative to prior guidance. The company continues to expect Motorcycles segment revenue growth to be 30 to 35%. Cash allocation priorities remain to first fund growth through The Hardwire initiatives, then to pay dividends, and the company may also choose to execute discretionary share repurchases.