Harley-Davidson Earnings: Hardwire Initiatives Deliver Stellar Profits Despite Macro Concerns

Wide-moat Harley-Davidson printed impressive sales and profit margins at its motor company segment in its first quarter, benefiting from efforts to refocus on high return products as well as sell in to its 120th anniversary year. Motor company sales rose 21%, with volume contributing 12% growth and price adding 8% upside (net mix and currency accounted for the balance), which helped the segment deliver a 21.6% operating margin—a whopping 470-basis-point expansion. However, two factors temper our excitement. For one, the first quarter should represent the peak operating margin for the motor company segment in 2023, with the metric declining over the rest of the year. The second factor is Harley’s continued overall share losses in the motorcycle market (North American retail sales declined 17%), with Harley representing less than 40% of market share in the first quarter as consumers continue to shift away from heavy bikes. While Harley still represents above 70% market share in touring and cruising industries, such bikes represent a lower portion of the total market, signaling a secular shift in preferences.