By Scott Malone
(Reuters) - Harley-Davidson Inc reported a better-than-expected fourth-quarter profit on a 12 percent rise in product sales, citing success in boosting sales of its motorcycles beyond its core market of baby boomers.
The company said it expects to sell 3 percent to 5 percent more motorcycles this year than it did in 2011, a forecast that some analysts said was lower than Wall Street had expected.
Chief Executive Keith Wandell said the company has a guarded view of the U.S. and European economies, as wary consumers are less likely to spend money for the high-end motorcycles on which Harley makes the bulk of its profit.
"People that are securely employed and aren't over-levered with debt, those people are certainly spending on higher-end consumer goods," Wandell said in an interview. "We're still concerned about the unemployment rate. We are still concerned about home equity values that are still somewhat depressed. I don't think we have worked our way completely through this housing issue yet. So you weigh both of those together and it makes for an interesting backdrop."
The Milwaukee-based company said it plans to ship 240,000 to 245,000 motorcycles in 2012. It expects a gross margin of 34.75 percent to 35.75 percent, up from 33.4 percent in 2011, as it cuts costs.
The 2012 shipment target was "a little to the light end" of expectations, UBS Investment Research analyst Robin Farley wrote in a note to clients.
Harley shares rose 1.6 percent to $52.53 on the New York Stock Exchange.
RETAIL 'FANTASTIC,' MARGINS WEAK
Retail sales of Harley-Davidson motorcycles were up 10.9 percent worldwide in the quarter, with U.S. sales rising 11.8 percent. Outside the United States, the strongest growth came in Latin America, where sales were up 42.2 percent, with European sales up 5.8 percent.
"The retail growth was fantastic," said James Hardiman, an analyst at Longbow Research. "The flip side is that if I knew that retail was going to be that strong, I would have expected earnings to have been better."
Net income was $105.7 million, or 46 cents per share, compared with a net loss of $46.8 million, or 20 cents per share, a year ago, a result that reflected heavy restructuring charges.
Profit from continuing operations was 24 cents per share, 1 cent above analysts' average forecast, according to Thomson Reuters I/B/E/S.
Revenue from motorcycles and related products -- which excludes the company's finance arm -- rose to $1.03 billion from $917.1 million a year ago, topping the $1.01 billion analysts had expected.
The weaker-than-expected profit margin reflected higher raw material prices and a lower percentage of highly profitable customized motorcycles made in the quarter. Executives noted that they were building up inventory ahead of the second quarter, when they plan to phase in a new software system at the company's York, Pennsylvania, factory and expect production rates to temporarily decline as workers learn it.
As of Monday's close, Harley shares had risen about 17 percent over the past year, sharply outpacing the 3 percent rise of the Standard & Poor's 500 index. (.SPX)
(Reporting By Scott Malone; Editing by Derek Caney,John Wallace and Gunna Dickson)
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