CHICAGO (Reuters) - U.S. motorcycle maker Harley-Davidson Inc (HOG.N) reported a lower-than-expected profit on Thursday as the ugly economic environment soured consumer spending and sent bike sales sliding.
But the company said it was responding to the slump, and protecting its brand, by cutting bike production far more aggressively than expected — a move that sent its shares higher.
Harley said the temporary production cuts, as well as more permanent job cuts and plant closures, would ultimately save it between $140 million and $150 million a year.
RBC Capital Markets analyst Ed Aaron called Harley’s latest production cuts “massive... more than what either the buy- or sell-side was expecting.”
Goldman Sachs analyst Patrick Archambault said the cuts would translate into “a significant reduction in dealer inventory which will ultimately better position the company for 2010.”
Harley-Davidson reported a second-quarter profit of $19.8 million, or 8 cents a share, down 91 percent from the $222.8 million, or 95 cents a share, it booked a year before.
Retail sales of new Harleys skidded 30.1 percent and revenue fell to $1.15 billion from $1.57 billion. Analysts were expecting $1.14 billion.
In the United States, the company’s biggest market, retail sales of the company’s bikes tumbled 35.1 percent from the year-ago period.
Harley slashed its 2009 shipment expectation to between 212,000 and 228,000 new motorcycles, down from the 303,479 it shipped in 2008. It had previously said it expected to ship 264,000 to 273,000 motorcycles this year.
As a result of the lowered shipment volume, the company said it would cut 700 more positions in its hourly workforce and slash the salaried workforce by about 300 positions. It said it plans to offer a voluntary separation incentive package to eligible salaried employees.
It had already announced cuts of 1,400 to 1,500 hourly production positions in 2009 and 2010 and about 300 salaried positions.
On average, analysts had expected the Milwaukee-based company to report a profit of 25 cents a share, according to Reuters Estimates, which said the company probably earned 24 cents per share on a basis comparable with the estimates, taking into account restructuring and goodwill charges.
Harley said it had reclassified a $72.7 million noncash provision to establish an initial credit loss allowance and a $28.4 million impairment charge to write off the goodwill recorded in connection with the 1995 purchase of its finance unit, HDFS.
Harley shares were up $1.10, or 6.3 percent, to $18.59 in late morning trade on the New York Stock Exchange.
Additional reporting by Christopher Kaufman; Editing by Tim Dobbyn