Harley-Davidson rides boom in leisure spending, lifting profit and shares

By Bianca Flowers and Aishwarya Nair

(Reuters) -Harley-Davidson Inc reported higher-than-expected quarterly profit on Thursday as a boost in bike shipments, coupled with strong pricing, allowed the motorcycle maker to navigate cost inflation and deliver on pent-up demand.

Shares in the U.S. company rose as much as 9.6%, the biggest one-day move since last quarter's results.

The manufacturer has either beaten or met Wall Street earnings forecasts for the previous seven quarters, benefiting from strong demand for leisure purchases despite high inflation dampening consumer confidence.

Harley-Davidson said it expects revenue from its motorcycle business to grow in 2023. The company rebounded from a production slowdown in May, which executives attributed to a parts issue from a third-party supplier. Showrooms that were at a deficit during the summer are starting to be replenished with new and used models.

"We ended the year in a healthier inventory position and are set up for a solid start to the riding season," Gina Goetter, chief financial officer, told shareholders on a conference call.

Consumer interest in outdoor recreational activities has been a boon to the bike manufacturer, even as it faces challenges such as lingering supply-chain shortages.

Executives warned of challenges in the year ahead, however, such as an anticipated decline of 20% to 25% in operating income for Harley's financial services business as borrowing costs become more expensive.

"A higher interest rate adds to the cost of the bike -- when you hear talk of a recession, companies get cautious and people get cautious," said Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC.

The Milwaukee-based company posted a 12% jump in fourth-quarter revenue to $918.63 million, topping expectations of $909.97 million in a Refinitiv survey of analysts.

A combination of price increases and surcharges for its popular cruisers, trike models, and longer-range Grand American Touring bikes padded the bike maker's bottom line given high raw material and expedited-shipping costs.

Global motorcycle shipments rose to 34,000 from 28,900 a year ago.

Sales of the company's motorcycles and related products rose 9% to $4.89 billion in 2022. The company expects revenue from that segment, its main business, to grow 4% to 7% in 2023.

The company's net profit rose to $39.7 million, or $0.28 cents per share, in the quarter ended Dec. 31, outpacing forecasts of 6 cents per share.

Shares of Harley-Davidson have risen more than 30% in the past 12 months.

(Reporting by Aishwarya Nair in Bengaluru and Bianca Flowers in Chicago; editing by Maju Samuel, Susan Fenton and Nick Zieminski)