Harley-Davidson posted increased profits in its second quarter despite a two-week shutdown of its production plants. The motorcycle company managed to weather the hiatus and reported a profit of $215.8 million. Harley has now disproven analysts estimates that projected lower earnings compared to the previous fiscal year, according to Reuters.
Harley-Davidson attributed the unexpected profits to lower operating expenses and lower tariffs on steel and aluminum in the European Union. Executives said these lower expenses and lower tariffs buoyed the company through its recent shutdown. And it seems the regulatory compliance issues — at a third-party parts supplier, not the motorcycle company — which forced the production shutdown have now been resolved.
So, Harley production is back online, and profits are up. Harley-Davidson CEO Jochen Zeitz followed up, saying, “Now with the suspension being behind us, we are fully focused on mitigating the impacts of the volume loss.” Even though production and profit is steadily increasing, Harley has yet to solve its issues with number of units produced and deliveries made.
Harley dealers report inventory backlogs and longer times between restocks, with both issues predating the production shutdown. The backlogs have hurt the company: sales are down by about five percent. The lower number of bikes being made at Harley-Davidson plants is mainly due to supply chain issues, which are affecting the entire industry — not just Harley. But the motorcycle company has raised prices to make up for production losses.
Higher prices are reportedly not discouraging Harley buyers, however, and the bike maker says demand for its motorcycles has been strong throughout the COVID-19 pandemic and subsequent lockdowns. The global pandemic may have wreaked havoc on supply chains and transportation, but it has also produced a spike in demand for so-called “leisure activities.” Harley says that demand is driving orders up.
The pandemic’s push-and-pull effect has resulted in lower production and higher demand as Harley bikes trickle to dealers. The cycle yields higher prices, which is not an ideal situation for buyers, but it’s helping Harley sell high-margin models. And the cycle finally comes to a close at the quarterly report, which reflects the sweet, sweet profits. Reuters reports that Harley-Davidson revenue is nonetheless down by 4 percent, or about $1.47 billion.