Harley-Davidson Profit Drops During Third Quarter

On Tuesday, Harley-Davidson Inc announced it would be cutting jobs to help fund higher spending on its product development and marketing as it posted net profit that was lower due to weaker sales globally.

Shares at the motorcycle maker plunged by close to 10% as earnings dropped below forecasts of analysts and the business cut its guidance of operating profit for 2015.

The company announced it was planning to incur a charge of one-off of between $30 million and $35 million during the fourth quarter for cost of reorganization and cuts in jobs.

It is now expecting its 2015 full year profit margin for operations of between 16% and 17% for its motorcycles compared to its guidance released earlier in the year of between 18% and 19%.

The company also cut the forecast for motorcycle shipments in the U.S., where its sales dropped by 2.5% during the just ended third quarter and its share in the market dropped by 3.9%.

Worldwide sales were down by over 1%, cushioned by an increase of 0.9% in sales overseas and the company said its plans for reorganization included the opening of as many as 200 dealerships abroad.

The motorcycle maker has been facing headwinds during this year, including more competition from foreign manufacturers of motorcycles who slashed their prices.

The strong dollar has created softer overseas sales because of the foreign exchange rate is unfavorable.

Harley-Davidson has been the traditional leader in the market in the U.S., but with sales in the U.S. lagging officials in the company revised its shipment outlook for the 2015 full year down from 270,000 to 265,000, which is from flat to 2% lower than 2014.

The latest projection for shipments was revised to show a downward trend from 276,000 previously released to 271,000.

According to new data from the Motorcycle Industry Council the overall motorcycle sales including scooter sales had dropped by 47% over the past 10 years to 2014. Sales during 2014 were only 560,000, which was down from 2004 of over 1 million.

 

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