"Best Days Are Yet To Come" - Harley Davidson's CEO

(RTTNews) - Cruiser and touring motorcycles maker Harley-Davidson Inc (HOG) reported better-than-expected results for the first quarter, but scaled down its financial forecast for fiscal 2015, citing increased levels of aggressive competitive discounting in the U.S.

The company said it remains intensely focused on a cost structure that will enable growth and continuous improvement to drive its business to be stronger, more flexible and more profitable.

Q1 Profit Up On Lower Expenses, Reduced Tax Rate

This Milwaukee, Wisconsin-based motor company's first-quarter net income rose to $269.9 million from $265.9 million in the prior year period. On a per share basis, earnings rose 5% to $1.27 from $1.21 earned a year ago.

On average, 18 analysts polled by Thomson Reuters expected earnings of $1.25 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated revenue slipped to $1.67 billion from $1.73 billion last year. Analysts had a consensus revenue estimate of $1.58 billion for the quarter.

Motorcycles and related products revenue slid to $1.51 billion from $1.57 billion last year.

Revenue from sales of motorcycles to dealers and distributors was $1.26 billion, compared to revenue of $1.31 billion in the year-ago period. The company shipped 79,589 motorcycles worldwide during the quarter compared to shipments of 80,682 motorcycles in the year-ago period.

Revenue from motorcycle parts and accessories was $183.9 million versus $198.1 million last year. Revenue from general merchandise, which includes MotorClothes apparel and accessories, was $66.4 million compared to $64.1 million in the previous year.

Dealers worldwide sold 56,661 new Harley-Davidson motorcycles in the first quarter, down from 57,415 motorcycles in the year-ago quarter.

In the U.S., dealers sold 35,488 new Harley-Davidson motorcycles in the quarter, down 0.7% compared to sales of 35,730 motorcycles in the year-ago period. The company believes increased, aggressive competitive motorcycle discounting was among the factors adversely affecting first-quarter U.S. retail Harley-Davidson sales.

In international markets, dealers sold 21,173 new Harley-Davidson motorcycles during the quarter compared to 21,685 motorcycles in the prior year period, with unit sales down 1.1% in the Asia Pacific region and 5.6% in the EMEA region and up 0.3% in the Latin America region and 5.7% in Canada.

"Given the first-quarter retail results, and ongoing, increased levels of aggressive competitive discounting in the U.S. which we expect will continue, we are taking the precautionary step of lowering our estimated growth rate for full-year motorcycle shipments in order to manage supply in line with demand and protect the premium nature of our brand," said CEO Keith Wandell.

For the first quarter, Harley-Davidson's effective tax rate was 34.4% down from 35.0% last year.

Looking Ahead...

Citing, continued pressure from significant price discounting by most of the competition, the company now expects to ship 276,000 - 281,000 motorcycles, down from prior guidance of 282,000 - 287,000 motorcycles.

In the second quarter, the company expects to ship 83,000 - 88,000 motorcycles, compared to 92,217 motorcycles shipped in the year-ago period. Harley continues to expect full-year 2015 operating margin of about 18% - 19% for the Motorcycles segment. The company also continues to expect 2015 capital expenditures for Harley-Davidson Inc. of $240 million - $260 million.

Competitive Dynamics

The company said it was going to lower its volumes by 6,000 units, but will sell full-margin motorcycles, and not offer discounts, like its foreign competitors are doing. The company expects the competition price discounting to continue for a few to several more quarters, but stated clearly that it was not going to participate in discounting, instead it is cutting down volumes.

Partially offsetting these challenges, Harley continues to experience success with its latest Rushmore models launched last August and with sales of its Street motorcycles. Street 750 sales continue to drive performance in the small cruiser segment, which grew double digits on a year-over-year basis.

During the latest first quarter, the company had a strong market share of 51.3%. However, Harley's share was down 4.7 points versus prior year. The company attributed the loss of market share for the reported quarter to increased price discounting by competition.

Over the last 15 years, Harley-Davidson lost market share twice, in 2000 and 2008, largely due to competitive discounting. In 2009, Harley gained back 8.5 points. The company expects this to happen again, but believes it will win back its market share in a short period of time.

Harley-Davidson Signs 75-Yr Agreement With Sturgis

Earlier this year, Harley-Davidson and Sturgis signed a 75-year agreement that makes Harley-Davidson the Sturgis Motorcycle Rally's official motorcycle.

As part of the agreement, a permanent plaza will be built on Main Street in Sturgis that will include a stage for events, concerts and even weddings. The year-round location, which will be completed in time for this year's 75th rally, will be the official Harley-Davidson destination for riders and fans alike.

"Harley-Davidson riders have attended the Sturgis Motorcycle Rally for decades. This new agreement will help fuel many more years of freedom, independence and rebellion for this iconic gathering," said Matt Levatich, president and chief operating officer at Harley-Davidson.

In The Recent Weeks...

Harley-Davidson has been placed in the top 10 in the Forbes ranking of top employers in America based on a national survey of more than 20,000 employees at U.S. companies.

And on the brand side, the company was named 2015 Motorcycle Brand of the Year in the EquiTrend, Harris Poll annual study of brands that's based on familiarity, quality and consideration.

Keith Wandell - Chairman, President & Chief Executive Officer, said, "...Our team's many accomplishments during my time here demonstrate the power of our strategy and being customer-led and I couldn't be more proud of everyone. And I personally believe Harley-Davidson's best days are yet to come."

Stock Movement

Harley-Davidson shares are currently trading at $56.46, up $0.74 or 1.32%. The stock has been trading between $54.22 and $74.13 in the past 52 weeks.