10-K: Harley-Davidson Faces Headwinds: 2025 Earnings Decline Amid Soft Demand

Harley-Davidson, Inc. reported a significant decline in 2025 net income and motorcycle sales, attributing the downturn to a challenging macroeconomic environment and high interest rates, while its financial services segment saw a one-time boost from a strategic transaction.

Summary

• Net income attributable to Harley-Davidson, Inc. for 2025 decreased to $338.7 million, or $2.78 per diluted share, down from $455.4 million, or $3.44 per diluted share, in 2024.
• Consolidated operating income in 2025 fell by $30.0 million compared to 2024, primarily due to unfavorable results in the Harley-Davidson Motor Company (HDMC) segment.
• HDMC segment reported an operating loss of $28.7 million in 2025, a substantial drop from an operating income of $277.8 million in 2024, driven by lower motorcycle shipments and retail sales.
• Worldwide dealer retail unit sales of new Harley-Davidson motorcycles decreased by 12.4% in 2025 compared to 2024, with declines of 12.9% in the U.S. and 11.5% in international markets.
• Harley-Davidson's U.S. market share for new 601+cc motorcycles decreased to 34.5% in 2025 from 37.3% in 2024, and European market share dropped to 3.4% from 5.0%.
• LiveWire segment's operating loss improved to $75.0 million in 2025 from $109.6 million in 2024, mainly due to cost reduction initiatives, despite a 2.6% revenue decrease.
• Harley-Davidson Financial Services (HDFS) segment's operating income significantly increased to $490.4 million in 2025 from $248.4 million in 2024, primarily due to a $191.4 million release of allowance for credit losses and a $27.9 million gain on the sale of securitization beneficial interests as part of a strategic transaction.
• HDFS's retail credit losses on a managed basis increased to 3.37% in 2025 from 3.31% in 2024, and the 30-day delinquency rate rose to 5.77% at December 31, 2025, from 5.34% at December 31, 2024.
• The company incurred approximately $67 million in costs from new or increased tariffs in 2025, with an estimated impact of $75 million to $105 million for 2026.
• A $35 million refund (or $42 million remeasured to U.S. dollars) was received on February 23, 2026, related to an appeal of EU tariffs, which will impact Q1 2026 results.
• The company is pausing near-term discretionary share repurchases, with the exception of shares due under its Accelerated Share Repurchase (ASR) program at December 31, 2025, until a new strategic plan is announced.
• The company achieved $103 million in cost productivity savings in 2025, contributing to a total of $360 million since the beginning of 2022, and aims for over $400 million by the end of 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with a negative sentiment due to significant declines in core motorcycle sales and profitability, deteriorating credit quality in the financial services segment, and a cautious outlook for 2026, despite some positive cost management efforts and a one-time financial services boost.

Positives

• LiveWire segment's operating loss decreased by $34.6 million in 2025, primarily due to successful cost reduction initiatives.
• HDFS segment's operating income increased significantly by $242.0 million in 2025, driven by a release of allowance for credit losses and a gain on sale of securitization beneficial interests.
• The company successfully appealed certain EU tariffs, resulting in a $42 million refund received in February 2026.
• Achieved $103 million in cost productivity savings in 2025, contributing to a total of $360 million since 2022, demonstrating effective cost management.
• Maintained strong health and safety performance with a 0.23 Recordable Case Incident Rate, 0.16 DART rate, and 0.03 DAFWII rate for 2025.

Negatives

• Net income attributable to Harley-Davidson, Inc. decreased by $116.6 million, and diluted EPS fell by $0.66 in 2025 compared to 2024.
• HDMC segment shifted from an operating income of $277.8 million in 2024 to an operating loss of $28.7 million in 2025.
• Worldwide retail unit sales of new Harley-Davidson motorcycles declined by 12.4% in 2025, reflecting weakened consumer demand.
• U.S. and European market shares for 601+cc motorcycles decreased by 2.8 and 1.6 percentage points, respectively, in 2025.
• HDFS experienced higher retail credit losses (3.37% in 2025 vs. 3.31% in 2024) and increased 30-day delinquency rates (5.77% in 2025 vs. 5.34% in 2024).
• The company incurred $67 million in costs from new or increased tariffs in 2025, with higher costs projected for 2026.
• A $72.6 million loss on debt extinguishment was recognized in 2025 related to HDFS debt restructuring.
• The company is pausing near-term discretionary share repurchases, indicating a more cautious capital allocation strategy.
• LiveWire's revenue decreased by 2.6% in 2025, and the segment continues to incur significant operating losses.

Risks

• Ability to develop and successfully introduce new, innovative, and compliant products while maintaining premium pricing in a highly competitive and evolving motorcycle market.
• Increasing competition from diversified motorcycle companies, other powersports markets, automotive markets, and emerging electric vehicle (EV) sector companies.
• Reliance on suppliers for raw materials and components, facing inflationary pressures, supply chain disruptions, logistics issues, and potential supplier failures (e.g., First Brands Group, LLC bankruptcy).
• Increased supply and/or declining prices for used motorcycles and excess supply of new motorcycles adversely impacting retail sales.
• Product defects, manufacturing process issues, and component failures leading to recall campaigns, warranty costs, litigation, and regulatory investigations (e.g., brake hose assemblies issue with Proterial Cable America, Inc.).
• Dependence on a network of independent dealers and distributors for retail distribution and their ability to adapt to evolving retail landscapes and manage cash flow needs.
• Significant cybersecurity incidents or data privacy breaches disrupting IT environments, impacting business operations, and affecting reputation, revenue, and earnings.
• Reliance on a limited number of contract manufacturers, leading to risks in delivery schedules, quality assurance, production costs, and intellectual property protection.
• Operations dependent on unionized labor, with collective bargaining agreements expiring in 2027 and 2029, posing risks of work stoppages or labor disruptions.
• Impact of weather and weather-related events on retail sales of motorcycles and parts/accessories.
• Substantial liabilities for employee pension and healthcare benefits, subject to factors outside the company's control.
• Reliance on third-parties for certain operating and administrative functions, posing risks of unfavorable pricing, untimely service delivery, or poor quality.
• Ability to attract and retain skilled employees, including executive officers and senior leaders, and manage leadership transitions and return-to-office impacts.
• Adverse impacts from Artificial Intelligence (AI) technology, including risks to confidential information, legal actions, employee misuse, or failure to timely adopt AI.
• Uncertainties related to the new Chief Executive Officer and the development of a new strategic plan.
• International sales and operations subject to political and economic instability, tariffs, trade barriers, foreign government laws, and anti-U.S. sentiments.
• Dependence on the continued strength of the Harley-Davidson brand, vulnerable to negative publicity, infringers, or inconsistent representation by stakeholders.
• Activist shareholders causing substantial costs, hindering strategic plan development, or negatively impacting reputation.
• Uncertainties in the timing and amount of the company's share repurchase strategy.
• LiveWire segment's emerging status in the EV sector, facing significant expenses, continuing losses, funding challenges, competition, and slower-than-anticipated EV adoption.
• Inadequate insurance coverage to protect against product liability, litigation, accidents, and cybersecurity incidents.
• Potential failure to realize desired benefits from the HDFS strategic transaction with KKR and PIMCO.
• HDFS segment's exposure to credit risk on retail and wholesale finance receivables, influenced by economic conditions and motorcycle values.
• Market risk from changes in foreign currency exchange rates, commodity prices, and interest rates, impacting revenue, margins, and affordability of motorcycles.
• Compliance with evolving governmental laws and regulations (environmental, safety, emissions, financial services, anti-corruption, trade sanctions, climate change).
• Geopolitical conflicts and tensions impacting global economy, supply chains, and consumer demand.
• Potential future legal proceedings and commercial or contractual disputes, leading to significant costs and diversion of management attention.

Future Outlook

The company expects 2026 wholesale shipments and worldwide dealer retail sales of Harley-Davidson motorcycles to be between 130,000 and 135,000 units, with shipments lower in Q1 and Q3 and higher in Q2 and Q4. HDMC operating results are projected to be in the range of a $40 million operating loss to $10 million operating income, impacted by reduced production and increased tariffs. LiveWire's operating loss is expected to be between $70 million and $80 million. HDFS operating income is anticipated to significantly decrease to $45 million to $60 million in 2026 due to the HDFS Transaction, though it is expected to rebound to approximately three times 2026 levels by 2029. The company aims to achieve over $400 million in cost productivity savings by the end of 2026 and expects to identify at least $150 million in total annual savings at HDMC and HDFS starting in 2027. Capital investments for 2026 are projected between $175 million and $200 million. Discretionary share repurchases are paused in the near term pending the announcement of a new strategic plan in Q2 2026.

Management Comments

• Management believes the challenging economic environment, including high-interest rates and depressed consumer sentiment, continued to adversely impact consumer demand for premium discretionary products, including the company's motorcycles, during 2025.
• The company plans to announce its new strategic plan in conjunction with its first quarter 2026 earnings release, following a comprehensive evaluation initiated by the new CEO, Artie Starrs.
• Management expects HDFS's operating income will be reduced as it earns less interest income on a lower retail finance receivable balance, partially offset by new retail loan servicing fees and ongoing sales of loans under the Forward Flow Agreement.
• The company is committed to ongoing efforts to increase productivity and is reevaluating its productivity targets in connection with the development of a new strategic plan.
• Management believes headwinds facing the broader powersports and discretionary leisure industries are even more complicated in the electric vehicle (EV) segment of the market, with indicators pointing to a much later EV adoption than originally anticipated.

Industry Context

StockSavvy.ai notes that Harley-Davidson's performance in 2025 reflects broader industry challenges, particularly in the discretionary consumer goods sector. High interest rates and inflation have significantly impacted consumer purchasing power and sentiment, leading to reduced demand for premium products like motorcycles. The decline in market share in both the U.S. and Europe suggests that competitors, potentially offering more affordable options or different product mixes, may be gaining ground. The slower-than-anticipated adoption of electric vehicles, as highlighted by LiveWire's continued losses and strategic shift towards mini-motorcycles, indicates a disconnect between initial market expectations and current consumer readiness for EV alternatives, a trend observed across various EV segments. The strategic HDFS transaction, while providing a short-term financial boost, also signals a recalibration of the company's financial services model in response to market conditions and funding needs.

Comparison to Industry Standards

• Harley-Davidson's U.S. market share of 34.5% for 601+cc motorcycles, while still substantial, represents a decline from 37.3% in 2024, suggesting a loss of competitive standing against rivals like Polaris Industries (Indian Motorcycle Company) or Japanese manufacturers (Honda, Yamaha, Suzuki) who compete in various segments.
• The European market share of 3.4% for 601+cc motorcycles is significantly lower than in the U.S. and indicates a struggle to compete effectively against European brands like BMW Motorrad, Ducati, or Triumph Motorcycles, which often have stronger regional presence and diverse product offerings.
• The increase in HDFS's retail credit losses to 3.37% and 30-day delinquency rate to 5.77% in 2025 suggests a deterioration in loan portfolio quality, which could be worse than industry averages for prime lenders, though specific comparable financial institutions are not provided. This trend is concerning given the general tightening of credit standards across the financial services industry.
• LiveWire's continued operating losses and slower EV adoption contrast with some automotive EV manufacturers that have achieved greater scale, though the two-wheeled EV market is still nascent and faces unique infrastructure and consumer acceptance challenges compared to four-wheeled vehicles.

Management Changes

Corporate Governance

Legal Proceedings

• Japan Fair Trade Commission (Japan FTC) initiated an investigation into Harley-Davidson Japan KK on July 30, 2024, for alleged improper activity, including setting excessive sales quotas for dealers. The company is cooperating and does not expect material future costs.
• A product liability lawsuit resulted in a jury award of approximately $288 million in August 2024, which was reduced to $81 million in November 2024. The matter was settled and fully resolved during the third quarter of 2025, with no remaining liability.
• Ongoing regulatory compliance matters related to brake hose assemblies from a Tier 2 supplier (Proterial Cable America, Inc.) led to production suspensions in Q2 2022 and June 2023. The company expects NHTSA to make 'inconsequentiality determinations' to avoid a recall, but estimates potential costs of $140 million to $450 million if a recall is required, with the intention to seek full recovery from suppliers.

Related Party Transactions

• Harley-Davidson, Inc. has a support agreement with Harley-Davidson Financial Services Inc. to provide financial support if needed to maintain HDFS's fixed-charge coverage at 1.25 and minimum net worth of $40.0 million.
• In the second half of 2025, HDFS sold a collective 9.8% of its common equity interest to KKR and PIMCO, with each counterparty paying $23.3 million cash.
• Harley-Davidson, Inc. entered into an Amended and Restated Delayed Draw Term Loan Agreement with LiveWire Group, Inc. on November 9, 2025, providing access to up to $75.0 million, which LiveWire borrowed on December 15, 2025.

Stakeholder Impact

• Shareholders: Negative impact due to decreased net income, diluted EPS, and a pause in discretionary share repurchases. Potential for future dilution if HDFS non-controlling interests are exchanged for common stock.
• Employees: Potential impact from cost reduction initiatives and reorganization actions. Leadership changes and the return-to-office mandate could affect company culture and retention. Incentive-based compensation is subject to a clawback policy.
• Customers: Reduced demand for motorcycles due to macroeconomic conditions and higher interest rates. Potential impact from product recalls, though the company expects to avoid material costs for the brake hose issue. New product introductions aim to re-engage customers.
• Dealers/Distributors: Lower wholesale shipments and retail sales negatively impact their business. Increased motorcycle incentives were introduced to help reduce dealer inventory. HDFS's financing services remain crucial for dealer operations.
• Creditors: HDFS's ability to access capital markets is crucial, and credit ratings are closely monitored. The HDFS Transaction aimed to reduce funding risk, but increased retail credit losses and delinquencies pose a risk to loan portfolio quality.
• Suppliers: Vulnerable to supply chain disruptions, inflationary pressures, and potential financial difficulties, as seen with First Brands Group, LLC. The company seeks to recover recall costs from suppliers.

Next Steps

• Announce a new strategic plan in conjunction with the first quarter 2026 earnings release.
• Introduce a new small displacement motorcycle and an iconic classic cruiser starting in 2026.
• Continue expanding the shift of annual new model year launches from January to the preceding fall for additional models in future years.
• LiveWire plans to launch production versions of two concept mini-motorcycles.
• LiveWire will continue seeking external capital under its At-The-Market program.
• LiveWire plans to continue to drive additional significant cost savings to reduce operating losses.
• The company will continue efforts to mitigate the impact of tariffs, including engaging with governments, pursuing recovery, moving inventory, evaluating sourcing, and prudently managing costs.
• Conduct a review of its cost base to identify opportunities for at least $150 million of total annual savings at HDMC and HDFS segments beginning in 2027.

Key Dates

Recommendation

Harley-Davidson's 2025 results show significant declines in its core motorcycle business, with HDMC shifting to an operating loss and retail sales falling. While HDFS reported a strong operating income, this was largely due to one-time benefits from a strategic transaction, and its 2026 outlook is significantly lower. The company faces persistent macroeconomic headwinds, including high interest rates and depressed consumer sentiment, which are expected to continue impacting demand in 2026. The new CEO and strategic plan offer potential for future improvement, but the near-term guidance is weak, and the pause in discretionary share repurchases signals caution. Given the current challenges and uncertainties, a 'hold' recommendation is appropriate, awaiting clearer signs of a turnaround from the new strategic plan and improved market conditions.

Keywords

Harley-Davidson, Motorcycles, 10-K, Financial Results, SEC Filing, HDMC, LiveWire, HDFS, Retail Sales, Operating Income, Net Income, EPS, Market Share, Tariffs, Credit Losses, Share Repurchase, Strategic Plan, Electric Vehicles, Supply Chain, Risk Factors, Corporate Governance, Financial Services, Motorcycle Industry