Harley-Davidson Inc. (HOG) saw its first-quarter net income tumble 81% to $25 million, or $0.22 per share, compared with $133 million, or $1.07 per share, a year earlier. Revenue slid 12% to $1.17 billion, while operating income plunged 85% to $23 million. Despite the sharp profit decline, global retail motorcycle sales rose 8% to 33,507 units, with North American retail sales jumping 14% to 23,803 units.
The Milwaukee-based iconic motorcycle maker is pivoting hard under new CEO Artie Starrs, who took the helm in early 2026. The company unveiled its "Back to the Bricks" strategy, which centers on lower-priced motorcycles, expanded dealer support, and tighter cost controls. The plan aims to attract younger, more budget-conscious riders, a departure from the previous focus on high-end touring bikes under former CEO Jochen Zeitz.
A ,000 Bet on the Next Generation
At the heart of the new strategy is the Sprint, an entry-level 440cc model with an expected price tag of around $6,000. Starrs described the bike's size and handling as tailored to what younger riders want, positioning it as a gateway to the brand. Harley is also reviving the Sportster with a fresh 883cc model priced at about $10,000, with U.S. assembly returning to York, Pennsylvania. These moves narrow the price gap with competitors like Honda's Rebel 500 (starting at $6,799), Yamaha's MT-03 ($4,999), and Royal Enfield's Classic 350 ($4,599).
The pivot to affordability comes as big-ticket buyers remain cautious amid higher borrowing costs and household bills. Tariffs and incentives have also squeezed profits. The company recorded $45 million in tariff-related expenses in the first quarter and now expects full-year tariff costs between $75 million and $90 million, down from a prior high-end estimate of $105 million.
Dealer Profitability and Cost Cuts
Dealers are central to the turnaround. Harley aims to double dealer profitability in 2026 and again by 2029, while targeting a rebound in market share across new and used bikes, parts, accessories, apparel, and licensing. The company is also tightening production, ending the quarter with global dealer inventory 22% lower than a year ago, aligning supply with real demand.
Starrs credited a 14% jump in North American retail performance to stronger demand and leaner inventories. "We are excited to activate our new Back to the Bricks strategy," he said in the earnings release.
Medium-Term Targets and Margin Pressure
Harley is targeting over $350 million in EBITDA at the Harley-Davidson Motor Company by 2027, with mid-single-digit annual retail unit growth and an EBITDA margin of 10% to 12% for the motorcycle segment. However, the margin for error is thin. Gross margin in the motorcycle division fell 3.9 percentage points in the first quarter, pressured by tariffs, pricing moves, sales incentives, and product mix shifts. The company also logged $15 million in restructuring expenses and termination benefits related to the strategic overhaul.
For 2026, Harley maintained its forecast for global retail sales and wholesale shipments in the 130,000 to 135,000 range, with operating income for the motorcycle segment ranging from a $40 million loss to a $10 million gain—signaling that the turnaround has yet to impact the bottom line.
As Harley-Davidson bets on affordability to win back younger riders, the success of the Sprint and revived Sportster will be critical. With tariffs still a headwind and margins under pressure, the company's ability to execute its "Back to the Bricks" plan will determine whether it can steer back toward sustained profitability.