Harley-Davidson profit beats view, sales soft

Harley-Davidson Inc reported a better-than-expected 29.7%-rise in quarterly profit, but its shares slid 5% in early trading on concerns about weakening retail sales of its motorcycles.

Executives said on Wednesday they were taking a more guarded view on growth in the second half of the year, in the face of weaker demand in Europe.

"We're being cautious in our expectations for retail in the back half of the year, given the economic uncertainty in many markets," said chief executive Keith Wandell, on a conference call with analysts.

The Milwaukee-based manufacturer noted that unit sales fell 6.4% in Europe, the Middle-East and Africa in the quarter, with continued softness in southern Europe and the United Kingdom and slowing growth in northern Europe.

"We believe June growth in particular was below consensus expectations," said UBS analyst Robin Farley, noting that unseasonably warm weather in the first quarter had pulled sales forward out of the second quarter.

Harley said second-quarter earnings rose 29.7% to USD 247.3 million, or USD 1.07 per diluted share, compared with USD 190.6 million, or 81 cents per share, a year earlier.

Its profit came in 2 cents per share higher than analysts had forecast, according to Thomson Reuters I/B/E/S.

Revenue rose 14.6% to USD 1.73 billion from USD 1.51 billion a year earlier.

The US manufacturer said on Wednesday that its production rates would drop in the third and fourth quarter as it makes some changes in its York, Pennsylvania and Kansas City factories to make them more flexible.

The company held steady its full-year forecast, which called for a 5% - 7% increase in the number of motorcycles it ships to dealers, with gross margins of 34.75% to 35.75%. But it noted that it expects shipments to drop in the third quarter from prior-year levels as it changes some procedures at its York, Pennsylvania, factory.

Harley's rivals include Japan's Honda Motor Co, Suzuki Motor Corp, Yamaha Motor Co and Italy's Ducati, which is owned by Volkswagen AG. It's shares fell USD 2.23 to USD 41 on the New York Stock Exchange.