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Harley-Davidson’s first-quarter sales improved, but profits fell sharply. Global retail motorcycle sales rose 8% year over year, led by a 14% increase in North America, but consolidated revenue fell 12% and EPS dropped to $0.22 from $1.07 as tariffs, restructuring costs and changes at HDFS weighed on results.
The company unveiled a new “Back to the Bricks” strategy. Management plans to refocus on core brand strengths, grow dealer profitability, and expand parts and accessories, including the return of the Sportster in 2027 and a new Sprint model in the second half of 2026.
Harley-Davidson reaffirmed its guidance despite tariff pressure. The company expects 2026 tariff costs of $75 million to $90 million, but said they should ease later in the year and maintained its outlook while targeting long-term growth in retail units, margins, and EBITDA.
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Harley-Davidson (NYSE:HOG) reported higher first-quarter retail motorcycle sales but sharply lower earnings as the company absorbed tariff costs, restructuring expenses and the effects of a new capital-light model at Harley-Davidson Financial Services.
The Milwaukee-based motorcycle maker also introduced a new strategic plan, called Back to the Bricks, which Chief Executive Officer Artie Starrs said is designed to restore volume growth, strengthen dealer profitability and refocus the company on its core brand strengths.
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“In what remains a challenging consumer environment, these results reflect the impact of the actions we've taken to drive demand and improve execution,” Starrs said on the company’s first-quarter investor call.
Harley-Davidson said global retail sales of new motorcycles rose 8% year over year in the first quarter to about 34,000 units. North America led the gains, with retail sales up 14% to roughly 24,000 motorcycles. U.S. retail sales increased 16%, while Canada declined 8%.
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Jonathan Root, chief financial and commercial officer, said the North American performance was driven by strength in Touring and Trike models, the company’s 2026 motorcycle launch and targeted incentives. Harley-Davidson’s share of the U.S. 601cc-plus market rose to 38%, up 2 percentage points from a year earlier.
Outside North America, retail sales fell 4% to about 10,000 units. In Europe, the Middle East and Africa, sales declined 3% amid what Root described as a subdued economic environment, although he said the RevMax platform and Adventure Touring category outperformed the broader portfolio. Asia Pacific retail sales fell 9%, while Latin America sales rose 21%, helped by gains in Brazil and Mexico.
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The company also reduced global dealer inventory by 22% year over year. North American dealer inventory was down 21%, and inventory outside North America was down 23%. Root said inventory quality improved as well, with about two-thirds of North American dealer inventory made up of current model-year 2026 motorcycles, compared with a little less than half a year earlier.
Consolidated revenue declined 12% in the quarter, primarily because HDFS revenue fell 54% following the completion of a transaction that shifted the finance arm to a more capital-light business model. Under that model, Harley-Davidson sold a significant portion of its retail loan book and expects to sell about two-thirds of future originations.
Consolidated operating income fell to $23 million from $160 million in the first quarter of 2025. Earnings per share declined to $0.22 from $1.07.
At the Harley-Davidson Motor Company segment, revenue fell 2% to $1.1 billion. Motorcycle revenue was $836 million, while parts and accessories plus apparel totaled $200 million. Licensing and other revenue was $20 million. Wholesale shipments declined 3% to about 37,300 units.
HDMC gross margin fell to 25.3% from 29.1% a year earlier. Root attributed the decline to several factors, including $45 million in increased tariff costs, lower net pricing and incentive spending tied to prior model-year inventory sell-through, product mix, lower volumes and higher-than-expected supply management costs related to a supplier situation. These pressures were partly offset by tariff recoveries from prior years and favorable foreign exchange.
Operating expenses at HDMC rose by $49 million to $248 million, including $15 million in restructuring costs tied to role eliminations and other charges. Additional costs included higher warranty spending related to select product recalls, executive team changes, higher Marketing Development Fund spending and other discrete operating expenses. HDMC operating income fell to $19 million from $116 million.
HDFS revenue fell to $112 million, while operating income was $22 million. Root said lower interest income reflected the smaller retail receivables base, while other income benefited from servicing fees, investment income and gains on third-party loan sales. HDFS retail loan originations increased 14% to $671 million, and the annualized retail credit loss ratio on managed loans improved to 3.6% from 3.8%.
LiveWire revenue increased 87%, driven by electric motorcycle and STACYC electric balance bike units. The segment’s operating loss improved to $18 million from a $20 million loss a year earlier.
Harley-Davidson reaffirmed its 2026 guidance while saying management’s optimism for the year had increased, largely because of North American retail results and early cost-reduction efforts.
HDMC wholesale units: 130,000 to 135,000
HDMC operating income: positive $10 million to a loss of $40 million
HDFS operating income: $45 million to $60 million
LiveWire operating loss: $70 million to $80 million
The company now expects increased tariff costs of $75 million to $90 million in 2026, down from its prior range of $75 million to $105 million. Root said the first quarter represented the largest year-over-year tariff impact expected this year, and tariff costs should decline sequentially through the remaining quarters.
Root noted that recent U.S. tariff regulations announced in early April included exemptions for certain motorcycles and for parts and accessories used in motorcycle manufacturing. He said Harley-Davidson is “very centered in and around the United States,” with three of its four manufacturing centers based in the U.S. and all U.S. core product manufactured domestically.
Starrs said the Back to the Bricks plan is built around Harley-Davidson’s brand, dealer network, financing capabilities and parts and accessories business. He said the company is moving toward a more “rider-centric” portfolio that is more accessible, more customizable and better aligned with a broader range of riding needs.
The company plans to bring back the Sportster in 2027 and introduce Sprint in the second half of 2026. Starrs described Sportster as “the most requested motorcycle from both our riders and our dealers” and said it historically served as an accessible entry point to the brand. He said U.S. Sportsters will be made at the company’s York, Pennsylvania, facility. Sprint is intended as a lightweight, customizable entry-level motorcycle.
Starrs said Harley-Davidson had “too many of too few” models on dealer floors and will use existing platforms and powertrains to broaden the lineup. He also said the company will put more emphasis on “blank canvas” motorcycles that riders can personalize through genuine parts and accessories.
Parts and accessories are a major part of the strategy. Starrs said Harley-Davidson sees potential for 20% to 30% sales growth over time and plans to reinstate about 30% of SKUs that had previously been eliminated. The company will focus on categories such as seats, exhaust, lighting, windshields and handlebars, while integrating parts and accessories more closely into motorcycle launches.
The company also expects at least $150 million in annual run-rate cost savings that will affect 2027 and beyond compared with 2025 levels. Root said Harley-Davidson sees a path to more than $350 million in EBITDA in 2027, supported by fixed-cost reductions, better wholesale and retail alignment, Sportster and Sprint, parts and accessories growth, and more disciplined promotions.
Root said Harley-Davidson repurchased 6.6 million shares worth $128 million in the first quarter, including shares delivered after the conclusion of a previously announced accelerated share repurchase agreement and additional discretionary repurchases. Since announcing a plan in 2024 to repurchase $1 billion of shares through 2026, the company has repurchased 26.8 million shares for $726 million.
Root said share buybacks remain part of the company’s capital allocation strategy, alongside dividends, reinvestment in growth initiatives and possible “opportunistic value-additive M&A.” Starrs said any acquisition activity would need to accelerate core growth areas, particularly dealer profitability or parts and accessories.
For the medium term, which Starrs defined during the Q&A session as three to five years, Harley-Davidson is targeting mid-single-digit retail unit growth, mid-single-digit growth in parts and accessories and apparel and licensing, gross margins approaching 30%, operating expenses below 20% of sales and a 10% to 12% EBITDA margin.
Root also said HDFS is targeting $125 million to $150 million in operating income by 2029 under its new capital-light model.
“We’re excited about the path forward,” Starrs said. “Our dealers are energized, and we’re seeing real enthusiasm from the rider community around Back to the Bricks.”
Harley-Davidson, Inc is a renowned American motorcycle manufacturer best known for its heavyweight cruiser and touring bikes. Founded in 1903 in Milwaukee, Wisconsin, the company has built a strong reputation for producing distinctive motorcycles characterized by their signature V-twin engines, chrome finishes and robust frames. Harley-Davidson markets its products globally through a network of franchised dealerships and focuses on delivering an immersive brand experience to its customers, emphasizing lifestyle and community alongside its motorcycles.
In addition to its core motorcycle business, Harley-Davidson offers an extensive range of parts, accessories and apparel under its Genuine Motor Parts & Accessories and MotorClothes lines.
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The article "Harley-Davidson Q1 Earnings Call Highlights" was originally published by MarketBeat.
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