Used Bike Sales Increase Harley-Davidson Financial Services Originations 9.3% in Q3

Harley-Davidson Inc. released its third-quarter earnings results and originations increased 9.3% year over year for Harley-Davidson Financial Services, according to the earnings report.

HDFS had $893.4 million in originations, compared to $817.5 million in the same three-month period last year. The increase in originations comes despite the drop in domestic motorcycle sales. Retail sales of bikes dropped 13% to 36.2 million year over year. This drop was due to sales being “adversely impacted by soft used bike prices,” with hurricane Florence contributing a “nominal impact,” Chief Financial Officer John Olin said on the earnings call.

Increased used bike sales were seen as the primary driver behind HDFS’s origination growth, as used bikes prices remain historically low for Harley-Davidson.

While Harley-Davidson continues to face challenges in domestic new bike sales, the company increased revenue 14.3% year over year. The revenue growth could be reflective of current vehicle values or other factors of Harley’s business plan, Scott Yarbrough, editor of the Black Book Official Motorcycle & Powersports Value Guide, told Powersports Finance.

“Based on what we see on the used side of things, the higher-end Touring bikes are what have been soft value-wise for a while,” Yarbrough said. “You would assume this transfers over to the new [bike] side, so either Harley new sales are still weighted heavily on the higher end, their mid- and lower-range bikes have greater profit margins, they have been very successful in streamlining operations, or there is some other financial reason for the increase.”

Harley-Davidson is addressing its challenges in the U.S. industry through its More Roads to Harley-Davidson accelerated plan for growing ridership. Harley unveiled the plan in July, which focuses on new 2019 models (such as the electric LiveWire), a broader marketing approach, and stronger dealers. The plan has been “well received,” president and CEO Matt Levatich said on the earnings call, who added Harley has “challenged ourselves to fund this strategic shift while keeping our current investment and return profile and capital allocation strategy intact through 2022.”

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