Harley-Davidson's profit beats on strong demand for pricier Touring bikes

By Kannaki Deka

(Reuters) -Harley-Davidson's second-quarter profit beat Wall Street estimates, helped by strong demand for pricier Touring bikes during the summer riding season, sending the company's shares up more than 8% on Thursday.

The company's focus on its more expensive bike models to pad margins paid off as the industry grappled with most consumers cutting back on non-essential purchases due to sticky inflation and higher borrowing costs.

Harley CEO Jochen Zeitz said on a post-earnings call that high interest rates continued to impact the industry.

Under Zeitz, who took over as CEO in 2020, the company focused heavily on pricier Touring bikes relying on its wealthier customer base to boost profit.

"We grew our U.S. market share in a declining market, with notable unit growth of more than 11% in the important core category of Touring," Zeitz said.

Still, Harley lowered its revenue forecast for 2024 to reflect sluggish demand.

It now expects revenue from motorcycle and related products to be down between 5% and 9% in 2024, and an operating income margin of 10.6% to 11.6%. It previously forecast flat to down 9% revenue and an operating income margin of 12.6% to 13.6%.

Production cuts in the back half of the year will be more aggressive than initially anticipated, Chief Financial Officer Jonathan Root said.

"It has become clearer that volume will be toward the lower end of our original expectations."

Separately, Harley said it would buy back $1 billion of stocks through 2026.

Investor focus on the share buyback rather than forecast cut has buoyed shares, CFRA analyst Garrett Nelson said.

Harley's global retail motorcycle sales in the second quarter were down 3%, driven by weakness in China. North America retail sales were down 1%, while U.S. retail sales were slightly higher.

The company reported a second-quarter profit of $1.63 per share, above analysts' estimates of $1.40, according to LSEG data.

(Reporting by Kannaki Deka in Bengaluru; Editing by Shilpi Majumdar and Shounak Dasgupta)