Harley-Davidson third quarter profit falls, plans job cuts

The company's shares plummeted nearly 10% as its earnings fell below analysts' forecasts, and the company cut its 2015 operating profit guidance

Harley-Davidson Inc. said on Tuesday it would chop jobs to help fund increased spending on marketing and product development as it posted a lower quarterly net profit due to weaker global sales.

The company's shares plummeted nearly 10 percent as its earnings fell below analysts' forecasts, and the company cut its 2015 operating profit guidance.

The company said it plans to incur a one-time charge of $30 million to $35 million in the fourth quarter for reorganization costs and job cuts.

It now expects full-year 2015 operating profit margin of approximately 16 percent to 17 percent for the motorcycles segment, compared to prior guidance of 18 percent to 19 percent.

It also cut its forecast for the shipment of motorcycles in the United States, where sales fell 2.5 percent in the third quarter and market share declined by 3.9 percent.

Worldwide sales fell by more than 1 percent, cushioned by an 0.9 increase in international sales, and the company said its reorganization plans included opening up to 200 new dealerships abroad.

The iconic motorcycle manufacturer has faced headwinds during the year including increased competition from foreign motorcycle manufacturers who have slashed prices. The strong U.S. dollar has translated into softer overseas sales due to the unfavorable foreign exchange.

Harley-Davidson is traditionally a market leader is the United States, but with U.S. sales lagging the company has revised its full-year 2015 shipment outlook down to 265,000 to 270,000 which is flat to 2 percent lower than in 2014. The latest shipment projection was revised downward from previous guidance of 276,000 to 281,000.

"In the short term, because the third quarter did not unfold as we expected, we are lowering full-year shipment guidance. Matt Levatich, President and Chief Executive Officer, Harley-Davidson, Inc. said in a statement.

"Significant reductions to Harley-Davidson's shipment guidance and operation margins will likely raise questions regarding the overall health of the US consumer while reignited the age-old debate about unfavorable demographic trends," Adam Jonas, analyst at Morgan Stanley said in a research note.

According to data from the Motorcycle Industry Council, overall motorcycle and scooter sales have fallen about 47 percent in 10 years as of 2014. Sales in 2014 were at 560,000 down from 1,063,000 in 2004.

The Milwaukee-based motorcycle maker reported a net income of $140.3 million, down about 6.5 percent from $150.1 million from a year earlier.

Diluted earnings per share were 69 cents per share in the third quarter the same a year earlier.

Analysts had expected earnings per share for the quarter of 78 cents per share.