What Factors Drove Harley-Davidson’s Q1 Revenue Down?

Harley-Davidson’s first-quarter revenue

In the first quarter, Harley-Davidson’s (HOG) global revenue from its Motorcycles and Related Products segment stood at ~$1.20 billion, down ~12.3% on a YoY (year-over-year) basis. The company’s first-quarter revenues were slightly better than analysts’ consensus estimate of $1.19 billion. Now, let’s take a closer look at some factors that drove HOG’s first-quarter revenue down.

HOG makes a large portion of its revenue from the US market. The same goes for its auto giant (XLY) peers General Motors (GM), Ford Motor Company (F), and Fiat Chrysler Automobiles (FCAU).

What Factors Drove Harley-Davidson’s Q1 Revenue Down?

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Product mix deteriorated

A lower contribution of Harley’s touring motorcycles to its total shipments compared to its cruisers and street motorcycles was one of the key drivers of its revenue fall in the first quarter. The company’s touring motorcycles are typically sold at a higher price than its cruiser and street and Sportster motorcycles.

In the first quarter, the contribution of Harley-Davidson’s touring motorcycles to its global shipments fell to 42.5%, ~5.8 percentage points lower than in the first quarter of 2018. In contrast, its cruiser and street and Sportster motorcycle shipments’ contributions rose 1.0 percentage point and 4.8 percentage points, respectively.

In the quarter, HOG shipped ~58,891 motorcycle units, down 7.9% YoY, which also negatively affected its revenue.

Among other key negative drivers, an unfavorable foreign currency exchange also affected Harley’s first-quarter revenue. On the positive side, higher YoY pricing acted as a tailwind to the company’s net revenue in the quarter.

US market share update

In the US market, HOG maintains its largest market share in the heavyweight motorcycle segment (601+cc motorcycles). The company’s market share rose marginally by 0.6 percentage points to 51.1% in the segment.