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MILWAUKEE — Harley-Davidson's net income more than tripled during the first quarter, yet the U.S. economy still weighed on sales at home and will continue to do so as the company retools its manufacturing operations.
Harley posted a net profit of $119.3 million for the quarter Tuesday, up from $33.3 million a year ago. But the 51-cent-per-share earnings fell short of analyst expectations for 55 cents. Harley earned 14 cents a share in the first quarter last year.
The company reduced the low end of its estimate for motorcycle shipments this year, as a precaution, because of possible supply interruptions from the March 11 earthquake in Japan.
Profits, the company said, were driven by the financial services division, which saw operating earnings rise more than 150 percent. Operating income rose to almost $68 million for the quarter, compared with $26.7 million in the year-ago period, due mainly to continued improvement in credit performance.
Global sales also rose 3.5 percent, helping to offset a weak performance in the U.S., where sales fell 0.5 percent from the first quarter of last year.
The company reported motorcycle sales revenue of $1.06 billion, compared with $1.04 billion in 2010. That just edged out the expectations of most analysts.
CEO Keith Wandell said Harley pointed out continued growth worldwide "even as we continue to encounter some headwinds in the U.S. related to the challenging macroeconomic conditions."
Harley's sales have not bounced back like auto sales, which grew 20 percent in the first quarter, because the company's product remains a high-end luxury item for most, rather than a necessity.
Harley, he said, is still feeling the effects high unemployment, lagging consumer confidence and a decline in home values.
"I think it makes people a little more tentative," he said.
In the first quarter of 2007 before the recession began, Harley-Davidson sold more than 70,000 motorcycles across the globe, but it sold just under 50,000 in the same period this year.
The executives wouldn't say if they think the company will ever get back to the glory days. But Chief Financial Officer John Olin said they are making progress reaching new markets, such as female, Hispanic and African-American riders.
The company also is making big strides internationally, and saw sales 11 percent in the year's first three months, compared with last year.
Harley continues to pursue an extensive rework at its manufacturing hub in York, Pa., which will affect the company's finances until it is completed by the end of next year, Wandell said.
Harley is consolidating the operations that once took place at 40 different buildings into one building, with a single assembly line for all products. It must transfer thousands of parts, as well as people and tons of equipment, Olin said.
"As we get through this massive transformation, the inefficiencies will exit," he said.
Two years ago, Harley and its union agreed to a seven-year contract at its main motorcycle assembly plant in York that cut staffing sharply.
This year, of course, there were other events outside of the company's control, namely the earthquake in Japan.
Harley said its suppliers get a limited number of parts, including electronics, from companies in Japan. In particular, a part in radios could affect shipment volume, but the company believes it has viable options for the radios and other parts, it said.
The company lowered the bottom end of expectations and said it will ship 215,000 to 228,000 cycles worldwide this year, compared with previous guidance of 221,000 to 228,000.
Wandell said he expects to get through the parts shortages without shutting down any plants, but there could be some issues with timing as Harley switches to alternate suppliers.
"Every time you switch a supplier or have a new part, it takes a lot of testing," he said. "We're working hard to mitigate the impact to zero."
Shares in Harley-Davidson Inc. fell $2.04, or 5.1 percent, to $37.67 in midday trading.
