* Fourth-qtr profit of 31 cts/share below 32 cent consensus
* Revenue declines 1.5 percent
* Sees 2013 motorcycle shipments up 4.5 pct to 6.5 pct
By Scott Malone
Jan 29 Harley-Davidson Inc said it
expects profit margins to rise this year as the U.S. motorcycle
maker begins to benefit from a revamp of its factories to allow
them to react more quickly to shifts in demand.
The 110-year-old company has been working on upgrading the
computer systems at its big factories in York, Pennsylvania, and
Kansas City, Missouri, for more than a year. The upgrade will
allow it to carry less inventory and sell more of its
distinctive chrome-trimmed bikes at full price.
"We are seeing the benefits today," Chief Executive Keith
Wandell said of the system, based on SAP AG software.
"There are still some glitches that we work through on a
day-to-day, week-to-week basis," Wandell said in a phone
interview. "There will certainly be upside in our plants, in
terms of our ability to produce."
Harley forecast on Tuesday that 2013 operating margin would
rise to between 35.25 percent and 36.25 percent of sales, up
from 34.8 percent last year.
Its shares rose about 70 cents, or 1.3 percent, to $53.91 in
morning trading on the New York Stock Exchange.
"I like the changes that are being made and in the near term
there could be some upside," said Jaime Katz, an analyst at
Morningstar in Chicago. "But looking out further into 2014 and
beyond, it becomes a little bit harder to capture margin gains
and capture market share."
PROFIT SHY OF STREET
The company said profit was $70.6 million, or 31 cents per
share, compared with $105.7 million, or 46 cents per share a
year ago, when it booked a 22-cent tax benefit related to the
2010 sale of Italian motorcycle operation MV Augusta.
Analysts, on average, had expected Harley to earn 32 cents
per share in the quarter, according to Thomson Reuters I/B/E/S.
Revenue declined 1.5 percent to $1.01 billion from $1.03
billion a year earlier.
Retail sales of motorcycles by Harley's dealers - a measure
of end-market demand - rose 8.4 percent in the quarter in the
United States, Harley's largest market. Outside the United
States, the company saw declines in Canada and Europe, while
retail sales rose in Asia and Latin America.
"Given that our European business was down in 2012 and the
economic concerns that remain in Europe for the near term, we no
longer believe that we will meet our goal of international
retail sales exceeding 40 percent of total retail sales by
2014," Chief Financial Officer Jon Olin said on a conference
call with analysts.
About 35 percent of Harley's 2012 retail sales were outside
the United States.
Milwaukee-based Harley said it expects to ship 4.5 percent
to 6.5 percent more motorcycles in 2013 than it did last year,
and plans $200 million to $220 million in capital expenditures.
Harley's rivals including Japan's Honda Motor Co,
Suzuki Motor Corp and Yamaha Motor Co, as well
as Italy's Ducati, which is owned by Volkswagen AG.
As of Monday's close, Harley shares have risen about 20
percent over the past year, outpacing the 14 percent rise of the
broad Standard & Poor's 500 index.