Harley-Davidson Inc. mentioned it began tacking on surcharges on choose motorbike fashions this month, however that solely partially offsets uncooked supplies and freight inflation that’s anticipated to final not less than via the top of the 12 months.
Earlier Wednesday, the corporate reported second-quarter revenue and income that beat expectations, as motorbike gross sales doubled from a 12 months in the past, however remained under ranges seen in the identical interval in pre-pandemic 2019.
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rapidly reversed early intraday positive aspects of as a lot as 0.7%, to stoop 6.4% in afternoon buying and selling. That put the inventory on monitor to shut at a three-month low.
Concerning provide chain “issues,” Chief Government Jochen Zeitz mentioned on the post-earnings convention name with analysts that whereas they’ve improved in North America, they proceed to impression worldwide operations. He indicated that the challenges are being managed on a day-to-day foundation, as they don’t seem to be one thing that may be predicted.
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Concerning inflation, nevertheless, the corporate instructed analysts, in line with a FactSet transcript:
“We now have continued to see inflation throughout all modes of freight, in addition to uncooked supplies, and we’re forecasting this to proceed all through the fiscal 12 months.”
For uncooked supplies, the corporate mentioned essentially the most elevated prices had been primarily within the aluminum and metal markets, whereas lumber prices have began to calm down.
To struggle the results of inflation, CFO Goetter mentioned the corporate carried out a mean 2% pricing surcharge on choose motorbike fashions within the U.S., beginning July 1, for the rest of mannequin 12 months 2021.
On condition that enter prices are anticipated to stay “elevated” via the second half of the 12 months, “the two% surcharge is not going to utterly offset what we’re seeing come at us however it…will do , good half in offsetting a lot of that.”
If there may be excellent news for Harley, it’s that inflation is widespread sufficient that prospects do appear to be upset about paying extra for bikes.
“We now have not seen any pushback,” Harley executives instructed analysts, in line with a FactSet transcript. “Clearly it’s early days, however general I feel the market understands and sellers and prospects perceive that we would have liked to cross on a few of the worth will increase within the worth pressures we’re seeing available in the market.”
Whether or not the two% surcharge will final into 2022, nevertheless, has not but been determined.
Harley’s inventory has gained 11.8% 12 months to this point, whereas the S&P 500 index
has superior 15.9%.