Harley-Davidson (NYSE: HOG), has its expenses largely clubbed under its cost of goods sold and Selling, Administrative and engineering expenses, which together accounted for about 95% of the company’s total expenses in 2018. However, this is an increase from 92% of total expenses that these two cost heads accounted for in 2015. Over the years, along with a decrease in Revenue, Harley-Davidson’s Cost of Goods Sold (as percentage of Revenue) has also increased cutting into its Net Income Margin. The Net Income margin went down from 12.5% in 2015 to 9.3% in 2018. Trefis expects the margin to fall further to 8.9% in 2019.
You can view the Trefis interactive dashboard – Harley-Davidson: Breakdown Of Total Expenses – to better understand how the company’s total expenses have moved over the years and what is causing this change. In addition, here is more Consumer Discretionary data.
- Harley-Davidson’s total expenses have fluctuated from $5.2 billion in 2015 to $5.3 billion in 2016 and back to $5.2 billion in 2018.
- Most of this was driven by a high fluctuation in cost of goods sold (COGS).
Following is how each expense head has moved over the years. For more details of each expense please visit our interactive Dashboard on Harley-Davidson’s Total Expenses:
- COGS, which contributes 64% to Harley-Davidson’s total expenses (in 2018), includes primarily cost of Motorcycles, Financial Services Interest expenses, and other operating costs. COGS as % of Revenue has increased over the years from 60.4% of Total revenue in 2015 to 64% of Total revenue in 2018. Trefis estimates the metric to remain flat at 64% of Total revenue in 2019.
- Selling, Administrative and Engineering expenses, which contribute 21.9% to Harley-Davidson’s total expenses (in 2018), includes advertising and marketing cost, selling and distribution expense, engineering expenses and other general expenses. Selling, Administrative and Engineering expenses as % of Revenue has increased over the years. Trefis estimates the metric to increase to around 22.8% of Total revenue in 2019.
- Other Expenses (net) includes Restructuring expense and other non-operating expense (net of income). The metric jumped to 1.6% of Total Revenue in 2018 due to a restructuring expense of $93 million. Trefis estimates it to be around -0.10% of Total Revenue in 2019.
- Interest expenses have increased till 2017 in both absolute terms and as % of Revenue. In 2018 there was a small reduction in the same. The metric was just 0.5% of Total Revenue in 2018 and Trefis estimates it to be around 0.6% of Total Revenue in 2019.
- Income Tax expenses saw a dip in 2018 due to the fall in the statutory rate. In 2019 we expect the statutory rate to be constant but expect overall Income Tax to be around 3.8% of Revenue.
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