Harley-Davidson said Tuesday that international sales of its motorcycles grew while domestic sales decreased in the second quarter, after the company angered President Trump by announcing it would shift some U.S. production overseas in response to his trade agenda.
The Milwaukee-based company reported that motorcycle sales in the U.S. dropped 6.4 percent to 46,490 for the quarter that ended on June 30, while international sales rose 0.7 percent to nearly 31,938. European sales grew 3.6 percent and Latin American sales grew 9.1 percent, while sales in Asia dropped 7.1 percent.
Total revenue dropped slightly to $1.53 billion for the quarter, as overall motorcycle sales dropped 4 percent. Net income dropped 6.3 percent to $242 million.
“Our results in the second quarter reflect business performance that is in line with our expectations. With the focus of every employee and dealer, we are making progress building the next generation of Harley-Davidson riders in line with our long-term objectives,” Chief Executive Officer Matt Levatich said in a statement.
Harley-Davidson also said it would publicize at the end of July a strategy to grow its customer base by 2 million in the U.S., increase its international business to account for 50 percent of the total annual sales and launch 100 new motorcycles.
The company earlier this year announced it would move some U.S. production overseas to avoid retaliatory tariffs imposed after President Donald Trump levied a new 25 percent tariff on steel imports and 10 percent tariffs on aluminum imports on the European Union and other trading allies. Several countries responded with retaliatory tariffs.
Chief Financial Officer John Olin told investors that the tariffs would add from $45 to $55 million in additional costs in 2018.
“This includes incremental costs of approximately $15 to $20 million for steel and aluminum and approximately $30 to $35 million for EU tariffs,” he said. “We expect to absorb a signification portion of these incremental costs through disciplined business management.”
The company lowered its overall operating margin to 9 to 10 percent for 2018, down from the prior estimate of 9.5 to 10.5 percent. Olin said it would take at least through 2019 to fully address the added costs from the new tariffs.
“We’re analyzing the capacity options that we have, manufacturing costs, supply chain logistics,” he told investors. “You should not expect that those costs should be mitigated fully in 2019. Some portion of them will be mitigated, but not the full amount.”
The company has a “constant dialogue going on with the respective parties” to try to lift the new tariffs, Olin said.
Trump charged that Harley Davidson was using the tariffs as a ploy to defend against slowing U.S. sales.
“Harley-Davidson is using that as an excuse, and I don’t like that because I’ve been very good to Harley-Davidson. And they used it as an excuse. And I think the people that ride Harleys are not happy with Harley-Davidson, and I wouldn’t be either,” he recently told reporters.
The company’s tax rate dropped over 10 percent to 24.1 percent as a result of the GOP-led tax law. Harley Davidson spent $69, 293 on capital expenditures in the second quarter, but expects to spend $250 to $270 million by the end of 2018.
