Harley-Davidson Inc. said Tuesday its first-quarter profit fell 72 percent as sales of its high-end bikes remained sluggish.
Harley-Davidson CEO Keith Wandell said the uncertain economy is likely to make business conditions challenging throughout the year.
Still, the Milwaukee company's results beat analysts' forecasts, and investors were cheered by a return to profitability at its financial services unit. The stock gained $2.58, or 7.9 percent, to $35.35 in morning trading.
Harley-Davidson reported a profit of $33.3 million, or 14 cents per share, in the three months ended March 28. That's down from $117.3 million, or 50 cents per share, during the same period last year.
Excluding losses from discontinued operations, the Milwaukee company made 29 cents per share. Revenue during the quarter fell 19 percent to $1.04 billion.
Analysts expected a profit of 22 cents per share on $1.02 billion in revenue. Such estimates typically exclude one-time items.
The company said retail sales of its heavyweight motorcycles fell more than 18 percent worldwide, with sales in the U.S. falling by nearly a quarter. International sales fell a much smaller 2.8 percent.
The decline in Harley's domestic sales remains a challenge for the company, said Robin Diedrich, a senior consumer analyst at Edward Jones.
"We think it is more of a long term concern," she said. "There is a shift away from the heavy motorcycles, or just from the overall high discretionary spending."
Harley-Davidson has many factors working against it in the U.S., including an aging customer base and growing competition from rivals. The company has long said it is focusing more attention and investment in markets overseas, where it has more room for growth.
Highlighting this shift, Harley said six U.S. dealerships closed during the first quarter due to financial troubles. During the same period, five new dealerships opened in India. Meanwhile, four more are slated to open Mexico and one is set to open in Ecuador in the coming months.
Harley has said it wants international sales to make up 40 percent of its total sales volume by 2014, up from about one-third today.
"We think we're underserved in almost every region in the world," Wandell said.
The company reiterated its previous forecast to ship between 201,000 and 212,000 motorcycles to dealers in 2010, down between 5 and 10 percent from 2009. It plans to ship between 55,000 and 60,000 motorcycles in the second quarter.
The company has been cutting motorcycle shipments and streamlining its operations in recent years to deal with falling demand. Last year it announced the shutdown of its Buell sport-bike line and is trying to sell the premium motorcycle unit MV Agusta.
In December, Harley and its union agreed to a new seven-year contract at its main motorcycle assembly plant in York, Pa. Under the new contract, Harley is shutting down one of two factories there and laying off nearly half the unionized work force of about 1,950 employees.
A bright spot was a return to profitability for its captive finance arm, Harley-Davidson Financial Services. The subsidiary turned an operating profit of $26.7 million in the first quarter.
It attributed the improvement to lower borrowing costs and better credit performance in its portfolio of retail loans. The subsidiary was hit hard by the credit crisis and had lost money the previous three quarters.
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