Thank you for standing by, and welcome to the Harley-Davidson 2026 third quarter investor and analyst conference call. Please be advised that today's conference is being recorded. After today's prepared remarks, we will host a question- and- answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to hand the conference over to Faisal Ghori, Head of Investor Relations and Strategy. Please go ahead.
Thank you. Good morning. This is Faisal Ghori, Head of Investor Relations and Strategy at Harley-Davidson. You can access the slides supporting today's call on the Internet at the Harley-Davidson IR website. As you might expect, our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in today's earnings release and in our latest filings with the SEC.
Joining me for this morning's call are Harley-Davidson CEO, Artie Starrs, and Chief Financial and Commercial Officer, Jonathan Root. With that, let me turn it over to Harley-Davidson CEO, Artie Starrs.
Thank you, Faisal. Good morning, everyone, and thank you for joining us today. Before I get into the quarter, I want to thank our Harley-Davidson employees and dealers around the world. The progress we are seeing reflects your focus, urgency, and commitment to this brand. I also want to thank our riders and the broader motorcycle community for supporting Harley-Davidson and holding us to the high standard this company has earned over 123 consecutive years. We are well into our first year of executing Back to the Bricks, and I am pleased with our continued progress.
From the start, we said this work would require discipline, stronger execution, and renewed focus on our dealers, riders, and the fundamentals that make Harley-Davidson distinctive. It would not happen overnight, but we would move urgently and measure progress through tangible proof points. This quarter provided several of those proof points. At the end of September, we hosted our 2026 Global Dealer Forum, bringing together approximately 2,000 dealers, team members, and employees.
We further aligned on strategy, prepared for 2027, and previewed the motorcycles and initiatives defining our next phase. The energy was strong, the engagement candid, and the enthusiasm clear. I also completed my third North American dealer roadshow. Across nine U.S. stops, our team met with dealers to discuss our long-term shared vision for Harley-Davidson and our near-term areas of focus, including parts and accessories, the Sprint 440 and Sportster 883 launches, and inventory optimization. Internal category leaders joined me for these conversations, connecting dealers directly to our Milwaukee teams to reinforce our core messaging.
That dialogue helps us move faster, sharpen decisions, strengthen dealer economics, and improve the rider experience. The quarter's results reinforce that progress. Domestic retail rose more than 9%, extending strength in our home market. It shows that riders respond when we put the right motorcycles, dealer engagement, and marketing support in the market. We also improved dealer inventory health and quality. More than 88% of global dealer inventory is model year 2026 product, marking our seventh consecutive quarter of year-over-year inventory declines.
We remain disciplined in aligning wholesale with retail demand, improving channel quality, and strengthening dealer margins. Dealer health is non-negotiable and foundational to Harley-Davidson's long-term earnings power. With the right inventory, timing, and margin profile, dealers can focus on serving riders, building community, and growing the brand. North American dealer profitability has made tremendous strides quickly. Dealer enthusiasm is strong, and we look forward to updating you in the first quarter of 2027 on 2026 performance against target.
More work remains in North America, though average profitability improvement is tracking ahead of plans communicated earlier this year. Continued progress against our strategy will accelerate and broaden that improvement. Significant work remains internationally, especially in Europe. Our product work provides another early proof point of Back to the Bricks. Super Glide's second quarter success and Deadwood's third quarter success are generating brand enthusiasm and improving dealer economics through strong sell-through.
These are authentic Harley-Davidson motorcycles with real character, designed for customization, and a stronger emotional connection with riders. Riders have responded well to our initial portfolio adjustments. Sell-through is strong, MSRP realization is at a two-year high, and we have gained significant market share, particularly in U.S. Softail. The signal is clear. The market responds to desirable, authentic Harley-Davidson motorcycles supported by a sharper go-to-market approach. Our marketing is also working harder.
The messaging is resonating, especially through grassroots partnerships with custom bike builders and shop owners around the Super Glide and Deadwood launches. These partnerships put the brand in the hands of people who live motorcycle culture every day. That is Harley-Davidson's home and where we belong. Parts and accessories is tracking ahead of our plans, and our newly formed P&A leadership team is actioning to expand our 2027 portfolio, supporting model year 2027 launches. This will include P&A for Harley-Davidson Sprint and Sportster launches. Customization is core to the Harley-Davidson experience.
It deepens rider connection, creates dealer opportunity, and supports a stronger, more diversified revenue model. Apparel and licensing, which we have rebranded MotorClothes internally, consistent with our Back to the Bricks strategy and department heritage, is also tracking ahead of our beginning of year plans. HDFS is also executing well. It remains a strategic asset and critical enabler for dealers and customers. The team continues advancing a more capital-efficient model while supporting retail sales, dealer financing, and the rider experience.
Together, progress in domestic retail, dealer inventory and profitability, product launches, parts and accessories, apparel and licensing, and HDFS gives us confidence to raise our full-year guidance. We are still early, but the business is moving in the right direction. Our strong balance sheet and disciplined capital allocation also enabled us to repurchase approximately $91 million of shares in the quarter. That reflects confidence in the business, our commitment to returning capital, and restored enterprise free cash flow. That said, we also have areas where we need to improve and areas where the operating environment remains uncertain.
First, Europe remains challenging, and we are dissatisfied with our performance. We are making portfolio adjustments that we expect to help significantly over time and applying the same discipline used across the business. Better alignment of product, price, customer demand, dealer economics, and local market needs. European dealers are excited about the near-term Harley-Davidson Sprint and Sportster 883 launches. These smaller displacement motorcycles were critical to Europe's mix and are essential to healthy, durable dealer profitability.
Second, we continue working through supplier challenges, primarily in the U.S. Our team has managed them well, but margins remain affected. We are improving reliability, reducing supply chain friction, and supporting our manufacturing and product teams to deliver consistent quality. Third, tariff uncertainty persists. The environment continues to evolve, and although mitigation actions are underway, we are watching it closely. Harley-Davidson is centered in the U.S. with a deep commitment to U.S. manufacturing, and we will manage tariff impacts with discipline.
We are clear-eyed about these challenges. Back To The Bricks is not a campaign, it is a sustained reset of how we operate, support dealers, bring products to market, and connect with riders. Our progress gives us confidence in our plan and the targets we have set. Lastly, I want to acknowledge LiveWire's announcement this morning that conditions and events raise substantial doubt about the company's ability to continue as a going concern, and that LiveWire has withdrawn its guidance. On Monday, LiveWire announced that a special restructuring committee has been formed.
As was previously stated, we do not intend to fund the company's operating losses. Looking ahead, the foundation is stronger. Dealer inventory is healthier, down nearly 26% year- over- year. Dealer profitability has improved and is tracking favorably against our goal of doubling it in 2026. New motorcycles are generating enthusiasm and strong sell-through. Marketing is more focused and connected to the community. Parts and accessories and apparel and licensing are ahead of plan. HDFS is executing well, and our teams are operating with greater focus and urgency.
Significant work remains, but the early evidence supports our strategy. We will keep listening to dealers and riders, making disciplined choices on inventory, product cost, and capital, and holding ourselves accountable for translating the Harley-Davidson brand into stronger, more durable performance. I want to close by thanking again our employees and dealers and our riders and the motorcycle community. This brand is strongest when it stays close to the people who ride, customize, sell, service, and celebrate these motorcycles.
Back To The Bricks puts that truth at the center of the business. In the coming weeks, I look forward to seeing riders and enthusiasts at SEMA, a large automotive aftermarket event, and EICMA, the world's largest motorcycle show, which takes place in Milan. I'm also eager to meet dealers and market while in Asia and Europe later this quarter to learn how we can serve them even better. Harley-Davidson Sprint will launch first internationally, and enthusiasm is strong among dealers who have recently test-ridden the bikes.
Finally, formal planning is underway for Harley-Davidson's 125th anniversary in 2028. The motorcycle lineup has been in development for some time, and our rider-centric events and engagement will be our best yet. We will use 2027 to build excitement across the motorcycle community for an extraordinary celebration. More to come. With that, I will turn it over to Jonathan.
Thank you, Artie, and good morning to all. I plan to start on page six of the presentation, where I will start on HDMC retail performance. in Q3, North American retail sales of new motorcycles were up 9% versus prior year, with over 25,000 motorcycles sold. In Q3, North America and APAC were positive, while EMEA and Latin America experienced declines. Retail sales of new motorcycles outside of North America were down 3% versus prior year, with just over 10,000 motorcycles sold, resulting in total Q3 global retail sales of new motorcycles being up 5% versus the prior year, with a total of approximately 35,800 retailed.
We are pleased with the performance, particularly as we displayed strength in the U.S. and mindful of weakness in EMEA. In North America, Q3 retail sales were up 9%, accelerating from 3% in the previous quarter. Results were driven by continued strength in Trike and Softail combined. This translated into continued significant market share, with Harley-Davidson reaching 37% of the U.S. 601+ cc market, up by 3 percentage points versus prior year. Dealer inventory in North America declined 26% year-over-year.
In EMEA, Q3 retail sales posted a decline of 5%, an improvement from Q2, albeit still negative. In the quarter, overall performance reflected a subdued economic environment in Europe. Although the region did experience positive results in the Touring, including Trike and Sport families. In addition, from a market share standpoint, we are now at 4% share, up from 3% in the previous quarter. In Asia-Pacific, Q3 retail sales were up a modest 1%. From a regional standpoint, Australia and New Zealand led Asia-Pacific with growth of 15%.
At the motorcycle level, the region experienced positive results in the Sport and Softail family categories. In Latin America, Q3 retail sales were down 7%. At the motorcycle level, Touring and Trike categories continued to show growth, while the other categories were negative. Turning to page 7, delivering on the commitments already discussed. Dealer inventory at the end of Q3 of 2026 was down 26% versus the end of Q3 of 2025 and down 6% versus the end of Q2 of 2026. Specifically, North America dealer inventory was also down 26%, and dealer inventory outside of North America was down 25%.
This has allowed Harley-Davidson dealers to continue through the 2026 riding season with what we believe is a largely appropriate or balanced setup. At the end of Q3 in North America, 91% of dealer inventory was comprised of current model year 2026 motorcycles. This number was 87% for Q2. We expect this combination of lower total inventory levels and healthier inventory model year mix to pay dividends in future periods and to set Harley-Davidson and our dealers up for greater success.
As we think about dealer inventory longer term, we must recognize that as we broaden our product portfolio and aim to achieve our Back to the Bricks strategy metrics, inventory levels will need to adjust accordingly. With that, before we get into revenue, let's conclude with some information on wholesale shipments. From a wholesale shipment perspective, in Q3 of 2026, we delivered 33,600 units compared to 36,500 units in Q3 of 2025, which is down 8% year-over-year.
This disciplined wholesale shipment volume, which was less than the growth in retail delivered, allowing for improved dealer profitability. Inventory management and discipline continues to remain very important to all of us. Now, turning to page 8 and HDMC revenue performance. In Q3, as wholesale motorcycle deliveries were reduced, HDMC revenue decreased by 10%, coming in at $964 million. From a business line standpoint, motorcycle revenue came in at $734 million, P&A came in at $153 million, apparel and licensing came in at $60 million, and other came in at $18 million.
Changes in P&A and A&L revenue on a year-over-year basis are explained as we are in the early innings of our Back to the Bricks strategy, which is built around serving riders through our dealers rather than e-commerce. Now, turning to page nine and 10 in HDMC margin performance. In Q3, HDMC gross profit came in at 28.1%, which compares to 26.4% in the prior year or up 173 basis points versus prior year. Gross profit was impacted favorably by manufacturing and other costs, including tariff and supplier recoveries that benefited gross profit as well as foreign exchange effects.
The favorability was offset by the following unfavorable impacts: product mix, net pricing, and raw materials. In Q3, operating expenses totaled $227 million, which was $2 million favorable compared to prior year, driven primarily by lower marketing and warranty and recall. This amount includes $14 million in restructuring expense in Q3. Before restructuring expense, Q3 operating expenses would be $16 million favorable compared to prior year. In Q3, HDMC had operating income of $44 million for an operating income margin of 4.6%, which compares to operating income of $54 million in the prior year period and a margin of 5.0%.
This amount includes $14 million in restructuring expense in Q3. Before consideration of restructuring, Q3 HDMC operating income would be $58 million for an operating income margin of 6.0%, favorable by a full percentage point. At the EBITDA level at HDMC in Q3, HDMC adjusted EBITDA came in at $94 million for an adjusted EBITDA margin of 9.7%, which compares to an adjusted EBITDA of $94 million in the prior year period and an adjusted EBITDA margin of 8.7%, with the drivers similar to those previously mentioned.
Some brief comments on tariffs in Q3 and the full year 2026. Turning to tariffs. Year- to- date, we've incurred approximately $94 million in gross tariff-related costs, compared with $45 million in the same period last year. At our second quarter call, we estimated full-year gross tariff costs of $75 million-$90 million. As a result of the changing tariff environment, we now expect full-year 2026 gross tariff costs of approximately $105 million-$120 million. The gross tariff is higher due primarily to supplier reciprocal charges as they respond to a dynamic environment and pass costs on.
Recoveries are higher by a very similar amount to the change in growth. This means we net to virtually no change in 2026 operating income impact due to tariffs. All of the improvement that resulted in an increase in HDMC operating income guidance is due to the underlying performance of the business. Looking ahead and assuming the current tariff structure stays in place, we don't expect gross tariff costs in 2027 to be higher than in 2026. We've already offset part of the tariff impact through overall business performance, and we expect that to continue.
We do not anticipate any further recoveries in 2027 as of now, unless there are further changes to tariff structure. The tariff environment remains uncertain, with frequent policy changes and ongoing legal challenges. Turning to HDFS and page 12. At Harley-Davidson Financial Services, Q3 revenue came in at $111 million, a decrease of 58%, driven by lower interest income due to the decline in retail receivables related to the sale of loan assets as part of the HDFS transaction that was completed last year. HDFS operating income was $11 million in Q3, representing an operating income margin of 9.7%.
The sale of loan assets also resulted in a release of the allowance for credit losses on retail finance receivables, reclassified to held-for-sale status in advance of their sale in the fourth quarter of 2025. As a result, the provision for credit losses provided a $301 million benefit in the prior year, compared to a $20 million provision this year, driving a year-over-year reduction in HDFS operating income. On the expense side, interest expense was significantly lower, which was due to the decreased size of the retail loan portfolio and related debt on a year-over-year basis and as expected with the change in strategy associated with the HDFS transaction.
HDFS operating expenses came in at $47 million for Q3, which was 1% less than the prior year. Turning to page 13. In Q3, HDFS's annualized retail credit loss ratio on managed loans was 3.0%, which compares to 3.2% in the year-ago period. We are pleased with the HDFS loan origination activities as total retail loan originations in Q3 were up 4%, coming in at $786 million in Q3. Total gross financing receivables were $2.7 billion at the end of Q3, where retail receivables were $1.7 billion and commercial receivables were $1.0 billion. Turning to slide 14 for the LiveWire segment.
In addition to Artie's comments, for the third quarter of 2026, LiveWire revenue increased 41% over prior year's same quarter, driven by increased unit sales of both electric motorcycles and STACYC brand electric balance bikes. Turning to slide 15 and 16. Wrapping up with consolidated Harley-Davidson, Inc. financial results, we had net cash of $276 million from operating activities in Q3, which compares to $417 million of cash provided by operating activities in the prior year period.
Operating cash flow was lower than the prior year, primarily due to reduced cash inflows at HDFS under its new capital-light model. As part of our share buyback strategy, in Q3, we repurchased a total of 3.4 million shares worth $91 million on a discretionary basis. Returning capital to shareholders is a top priority at Harley-Davidson, especially via share buybacks. We will continue to maintain the liquidity required to operate the business through the seasonal cycle and fund our product investments.
Beyond those needs, we remain committed to disciplined return of excess capital to shareholders, including through opportunistic share repurchases. At the end of Q3, we had $2.1 billion of cash and equivalents. This compares to $1.8 billion a year ago at the end of Q3 of 2025. Turning to slide 16, we point out the unique balance sheet of each business segment. For the HDMC balance sheet, cash on its balance sheet is $1.4 billion at the end of Q3, versus total debt of $297 million at the end of Q3, resulting in a very attractive net cash position at HDMC.
For the HDFS balance sheet, net debt is $1.9 billion at the end of Q3, versus total finance receivables that are held for investment of $2.2 billion. Now, turning to slide 17 of the presentation. I will briefly summarize the consolidated financial results for the third quarter at the Harley-Davidson, Inc., or HDI, level. Consolidated revenue in Q3 was down 19%, driven primarily by HDFS revenue being down 58% as it moved into a new capital-light model after the closing of the HDFS transaction.
Consolidated operating income in the third quarter came in at $37 million, compared to operating income of $475 million in Q3 of 2025. In Q3, earnings per share was $0.40, which compares to $3.10 in Q3 of 2025. Turning to page 18, we are beginning to see some early results from our successful execution of the Back to the Bricks strategy, giving us greater confidence in full-year numbers. For the full year 2026, the company now expects the following. For HDMC, global motorcycle retail sales in the range of 135,500- 139,000 units, an increase from the previous range of 133,500 to 138,500.
Global motorcycle wholesale shipments in the range of 135,500- 139,000 units, an increase from the previous range of 133,500- 138,500. Note, we envision dealer inventory ending broadly flat with prior year with these guidance figures. Operating income at HDMC is expected in the range of $25 million-$55 million. This is an increase from the previous range of $10 million-$50 million and includes the year-to-date headwind of $31 million of restructuring costs. At HDFS, operating income in the range of $60 million-$70 million, an increase from the previous range of $55 million-$70 million.
At LiveWire has withdrawn guidance. And for HDI, capital investment of $140 million-$165 million, a reduction from prior guidance of $175 million-$200 million. And with that, I will turn it back over to Artie.
Thanks, Jonathan. Before we go to Q&A, I am pleased with our results in the quarter and year-to-date, specifically on North American retail and dealer profitability, two key tenets of our Back to the Bricks strategy. Our recent motorcycle launches of Super Glide in Q2 and Deadwood in Q3 have our community highly engaged. Despite higher tariff costs, we remain on track to deliver $150 million in fixed cost savings and remain committed to $350 million in HDMC EBITDA in 2027. Our confidence to raise our full-year 2026 guidance comes from stronger than expected retail, and our strategy gives us multiple ways to win.
We have built the business to be resilient as conditions change. With the Harley-Davidson Sprint and Sportster motorcycles coming, we are very excited about 2027. Thank you, and now we will turn it over for questions.
We will now begin the question- and- answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Spencer Hanus from Wolfe Research. Your line is now open. Please go ahead.
Good morning. Thank you for the question. Dealer inventories were well managed again in the quarter. Just curious how comfortable you are with the amount of product in the channel today. Are there any pockets where you see inventories need to be worked down further? Ultimately, how do you see this translating to better dealer profitability over time?
Yeah. Thanks, Spencer. Appreciate the question. I think the first thing I would say is that five months ago, we came out with this strategy. We put dealer profitability at the center of the actions we were taking, and prudent inventory management was a big part of that. When we look at dealer profitability in North America year-to-date, we came out and said, Hey, we'd like to double that number from prior year, and we're on track to do that, frankly, pacing ahead of where we thought we'd be.
Certainly, the profitability improvements, it can vary by region, it can vary by dealership, but by and large, most dealers that are experiencing the improvement. The opportunity forward is, as you alluded to continue to be more consistent with that widespread improvement. When we look at the portfolio going forward, we think we have the product and the motorcycles and the parts and accessories to do that. Sprint coming shortly, and then obviously Super Glide and Deadwood over the summer were outstanding proof points.
High MSRP realization, bikes that move quickly at price points that we had holes in our portfolio. In terms of the levels across the portfolio and with specific dealers, I would characterize we're in a relatively good place, meaningfully better than a year ago. High 20% reduction, which is extremely encouraging. A year ago, the phone calls that I was getting when I started were probably 80%-90%, we need help selling through some of these bikes. That's completely flipped. Most dealers are asking for more bikes.
I think when we look at the guide in Q4, we are set up well going into 2027 and balance of year. We raised guidance on retail, we raised guidance on wholesale with the portfolio expansion. We feel like we are right on track from that perspective. There are dealers that certainly are a little bit heavier and dealers that are certainly a little bit lighter, and I view that as that is an opportunity for us to get better at Harley-Davidson. I was just on the road last week across nine cities.
We hit about half of the dealer network just a couple weeks after our roundtables, and it was really helpful for my team to hear directly from dealers on how we could serve them better. I am very optimistic that we have additional opportunity to improve that sort of regional allocation that can serve our dealers better. It was really a good quarter across the board from my perspective, and the inventory levels are a big part of the success that we are seeing with the improvement in the dealer network.
Yep. Got it. That is helpful. Just shifting to retail, it accelerated in 3Q. Curious what you have seen quarter to date and how the recent strength here has informed your view on 2027, because you are lapping over tougher compares in the third quarter, you still saw the acceleration. Just curious how you are thinking about retail going forward here.
Yeah, we are not going to say anything on Q4 beyond what we put in the guidance. Obviously, the guidance contemplates the business up until this point, so there is a little bit that we are seeing in there. By and large, we feel very good about how retail is progressing, and we look forward to updating you on the full quarter early next year.
Great. Thank you.
Your next question comes from the line of Joe Altobello from Raymond James. Your line is now open. Please go ahead.
Thanks. Hey, guys. Good morning. I guess first question for you, Artie, obviously, you've been traveling the country talking to dealers. You mentioned your roundtable. What specifically did you hear from them that they want to see from corporate in 2027?
I think just continue to action against the things that we've said we were going to do. I would say what I've heard as we get a check mark from, hey, we came out and said five months ago, here's what we're going to do. We listened to the dealers, and by and large, we've executed against them with speed and conviction and collaboration. I think it's more of the same. Obviously, the macro environment is dynamic. I'm very excited about the portfolio that we're putting forward.
Our dealers are very excited about our model year 2027 launch, in particular Sprint and Sportster. So just strong execution against the things that we said we're going to do.
Okay. Got it. Maybe one for Jonathan. You mentioned that dealer inventories will have to adjust, assuming retail continues to grow here, and I think you guys are talking about mid-single digit retail growth. I have, we handed around 14. What is the right number you think dealers should hold in a mid-single digit growth environment?
Sure. Yeah. So really good question, Joe. Nice to hear from you. I think as you go through and you look, obviously, with our Q4 guide, we have got ourselves to what continues to be alignment for the full year between wholesale and retail. So the 135.5- 139, obviously delivers a Q4 where you will see a couple more wholesale units than retail units as we get dealers set up in the right way. Some good questions on why is that happening.
Obviously, as you heard in Artie's script, Sprint is getting introduced in EICMA, so we are going to be over there in a few days to really leverage that launch and grow excitement among the dealer body and consumers around all things that Sprint does for this brand and for this portfolio. As we get that motorcycle in, that is a broadening of the portfolio and we do need to make sure that we have dealer coverage on that front. As we get the 2027 model year in, we are really excited about some things, so stay tuned for 2027 model year.
Some excitement in terms of what we are introducing and what is coming on that front. You will see an extremely disciplined approach to what we are doing from a dealer inventory standpoint, but do expect that there will be a little bit of growth in what we are putting out from a dealer inventory standpoint to make sure that they are supported with a widening range of products across the portfolio.
Okay. Thank you.
You are welcome.
Your next question comes from the line of Anthony Bonadio from Wells Fargo. Your line is now open. Please go ahead.
Yeah. Hey, guys. Thanks for taking our questions. I wanted to ask about margins and specifically commodity pressure. A lot of your peers talked about headwinds there into the front half of next year, just given price moves we have seen in freight and metals pricing. I guess, how to think about impact there, mitigation, and then just remind us how you guys think about hedging and the timing of those.
Sure. Thank you, Anthony. I can start with that. From a margin perspective, obviously, as you look within the quarter, we laid out where we landed from a margin perspective. So within there, you saw some improvement in where we were from a margin standpoint. I think you see the adjusted EBITDA margin in Q3 of 2026, up about 102 basis points versus Q3 of 2025. Obviously, a lot of that was driven on gross margin improvement within the business.
As we think about what we see from an overall inflationary environment, there is a lot of headwinds around where you see cost drivers and cost increases as we think about things like diesel elements that are outside of our control. Our team is doing a great job of managing cost out in a way that gives us confidence as we bridge toward the future and how we actually land and align in the ranges that we have talked about. But overall, if you take a look at the bridge that we provided on p age 10, you can see that inside of here, there was about a 1% headwind on gross margin percentage in the quarter for raw materials.
Then as we look at the manufacturing and other performance inside of the four walls of Harley-Davidson, we actually grew some really nice efficiency.
Okay, that is helpful. Then just maybe on market share, it looks like you guys saw some nice gains in Q3. Can you just talk a little bit more about what you saw there as you moved through the quarter and what you think is working well?
Yeah. The Super Glide and Deadwood launches were, I think, extremely successful. Going back to what we communicated in May, I would characterize them as early signs of pent-up demand for Harley-Davidson motorcycles that have our distinctive look, sound, and feel characteristics that are made to be customized. So these are, if you recall, the language we used was more blank canvas motorcycles. These were squarely in that category. And they were at price points that we had gaps in. If you recall the slide that we put out, which demonstrated, Hey, here is where the portfolio is from top to bottom in terms of MSRP.
We were able to quickly fill a couple of those holes. The work that our brand team is doing and our marketing team is doing in presenting and telling the stories around these motorcycles, it is always difficult to quantify, but the creative, the response, we are just getting outstanding response, and outstanding feedback. We are celebrating authentic people in the motorcycle community. We had the two gentlemen that were in the two ads at our dealer forum. It was super high energy.
And I think all this ladders up to enthusiasm in the rider community and our dealer network, which is just super exciting. So, more to come. It is early. We still have a lot of work to do, but Super Glide and Deadwood, when you look at the Cruiser market share gains, we can clearly point to those actions and the actions that we said we would take in the strategy.
Thanks, guys.
Your next question comes from the line of Noah Zatzkin from KeyBanc Capital Markets. Your line is now open. Please go ahead.
Hi. Thanks for taking my questions. I guess maybe at a high level, could you kind of speak to the target customer for Sprint and Sportster? Is there maybe more of a focus on new riders than before? And then just any thoughts around the marketing approach and messaging around those launches to drive excitement? Thanks.
Yeah. Thanks, Noah. Had the good fortune of seeing the work come to life over the last few months as we've sort of finalized the storytelling, and I'm quite excited about it. If you'll allow me, I'll wait for the actual consumer reveal to go through the specifics, but I can talk to you about the insights that are embedded in it. The first thing I would say is, the Sprint is a motorcycle that we've had some of our most experienced riders here in Milwaukee riding it for some time, taking it out on the highway. It's an outstanding motorcycle.
Yes, it will appeal given its size, given its positioning, given its price point. It will appeal to some new riders. I will tell you, we're also getting enthusiasm from long-time riders who might be riding bigger bikes right now, that it's sort of a beckon for maybe their first bike, and they're excited for it to be something that they ride around town. So there's this balance of new riders and some experienced riders that are looking for a Harley-Davidson, for maybe a different use case. I'll give you a specific data point, in particular on the new rider side that's quite exciting for us.
We train in the U.S. approximately 50,000 riders every year through our category-leading Riding Academy programs across many of our dealerships. The yield on new bike sales for Harley-Davidson for those students, those prospective riders, it's quite low. It's only about 8%-10%. That number historically had been much higher when we had offerings like the Sportster 883 and others in prior years. And we know that many of these riders are just buying other bikes because we haven't had something that met their needs.
In visiting with dealers last week, in visiting with dealers who got to ride the motorcycle in Milwaukee during our dealer forum, there's tremendous enthusiasm that we now have a motorcycle that those with Riding Academy can present something that someone got to ride while they were learning how to ride and then immediately take it out on the road, which we think is a huge win. So more to come on that, but the target is people who love to ride. Naturally, those who are newer to riding are going to be attracted to this bike.
I'm telling you, we're seeing enthusiasm from many of our most experienced riders that are on big Touring bikes today.
Very helpful. And maybe just one, I know you kind of reiterated the path to $150 million of fixed cost savings in 2027, but just maybe any color on progress there or positioning ahead of capturing those savings would be helpful. Thanks.
Yeah. Our team's been working very hard on this. We restated the 350 and the 150 in my remarks. I'd say a couple of things. The strategy, I think, has been an outstanding exercise and tool for the company to filter decision-making. We've said the 150 is going to come from a balance of cost of goods and operating expenses. That remains true. I'd point you to the CapEx number for this year as maybe some early signs of the discipline that we're putting forward. CapEx will bounce up or down in future years.
That $175 million- $200 million range is the range that we expect. However, by galvanizing and focusing the org against the things that really matter, against dealer profitability, driving retail sales, expanding the portfolio methodically, we've been able to, I say, chalk up some early wins there. And we're excited to print 2027.
Thank you.
Your next question is from the line of Craig Kennison from Baird. Your line is now open. Please go ahead.
Yeah, thanks for taking my question. Wanted to focus on Europe, where you mentioned some challenges. I am just wondering, how much of that do you attribute to sentiment towards American brands today versus some Harley-Davidson specific issues?
Sure, Craig. I will start, and then Jonathan can chime in with some additional color, given his leadership of the commercial team. The first thing I would say is the market share numbers for us in Europe were stable to up, versus prior quarters. I happened to be at Wörthersee in Austria for European Bike Week, late summer. The enthusiasm for Harley-Davidson, saw many riders with Harley-Davidson H.O.G. vests and the American flag on them. I cannot speak to the entire continent. I can speak to those who are riding that there is a lot of raw enthusiasm from getting on their Harley-Davidson.
The challenges that we face in Europe, Germany certainly, France certainly, putting aside some of the current events, the actions that we are taking that our dealers over there are excited about is introducing the Harley-Davidson Sprint and reintroducing the Harley-Davidson Sportster 883. Those motorcycles were particularly important in Europe. They were important around the world, but in Europe, particularly important. Many of the markets that I visited, many of the dealers that I speak to, the Sportster was 30%-40% of the mix.
So pretty significant hole that we have had in the portfolio for some time for those dealers. And those who have gotten to ride the Harley-Davidson Sprint, they will soon get to ride the Sportster. I would just say significant enthusiasm about what that is going to do for foot traffic, dealer profitability, and if you recall, the balance of revenues and how dealers make money, having these motorcycles at $6,000 and $10,000 are going to be extraordinarily important in driving top line and bottom-line recovery for our European dealers. And Jonathan, if I missed anything, please add in.
Sure. Just a couple more details, Craig. Good question. As we look, we have effectively six sub-markets that we use to run the European business. Of those, Germany and France are two that are critical. Germany and France are the only two sub-markets where we are actually down and facing pressure. Certainly, as you look at macro, there are a lot of things that we have heard in headwinds. The French market is front and center, obviously, in a lot of the news at the moment.
But as you look at some of the smaller markets, we are pleased with the performance and what we saw in Q3 in Belgium-centered markets, as we look at what we are seeing in Eastern Europe and Spain, Portugal, Italy, U.K., Ireland. Those markets, we actually saw growth in all of them. That really is evidenced in what you heard Artie reference in the growth in share within the quarter. Overall, I think our team is doing a really nice job of managing along with the dealer network to drive growth in the places that we can.
The only other part, Artie already said this, that I would just put an exclamation point on is so much excitement with what's coming from a Sprint perspective and getting that out there, which is why Artie made the decision to launch that globally at EICMA.
I will add one quick thing. The market share gains we saw in North America with Super Glide and Deadwood, we had to action getting those bikes to market so quickly. Those bikes were not in Europe. Europe has not benefited from the portfolio changes in the strategy in a material way yet. We are very excited to bring these bikes to market.
Thank you.
You are welcome.
Your next question is from the line of Andrew Didora from Bank of America. Your line is now open. Please go ahead.
Hi. Good morning, everyone. Thanks for the question here.
Hey, Andrew. How are you?
I just have one. Good, Artie. Just have one here, and Artie, you might have kind of alluded to this earlier, but just with the launch of Sprint and Sportster, just would like to get your thoughts around the potential cannibalization of the existing portfolio and maybe as you look to the launch, what are maybe the one to two KPIs you'll look towards just to show whether they're expanding the rider base rather than just kind of shifting buyers down the value chain?
Sure. Great question. This is something that we've done our own work on internally, as you might expect, with our analytics team and consumer insights team. Probably more importantly, the direct conversations and feedback that we've gotten from dealers and our dealer advisory councils around the world. Is there risk? Yes. The risk, we don't believe, is significant, however, for a couple of reasons. Number one, the price point, $6,000-$10,000, are not price points that we're currently really even close to.
They're really a class of motorcycle that we're not in. The second thing is the use case for these motorcycles, the customization opportunity for these motorcycles, is quite different than the middle of the fairway of our Softail lineup and our Touring lineup. So how riders are going to utilize these motorcycles day to day is just a bit different. The third thing is, we will have a marketing campaign and partnerships with dealers in terms of getting these bikes to move. Our part is the production levels for these bikes relative to historical demand.
We believe there's going to be a lot of demand for these bikes based on the first year that we're going to be in production. There's going to be, I think, a lot of enthusiasm to get them when they get on the floor. Once they get into Riding Academy later in 2027, we've got this sort of sell-through opportunity there. So we're very confident in the conversations we've heard from dealers that these bikes sort of fit a different need. We expect the sell-through to be extremely strong. We're being very judicious with the targets that we put forward against the production levels.
Great color. Thanks, Artie.
Thank you.
Your next question is from the line of Tristan Thomas-Martin from BMO Capital Markets. Your line is now open. Please go ahead.
Hey, good morning.
Hey, good morning, Tristan.
Good morning. You referenced tariff rebates or refunds in the quarter. Can you just kind of quantify what that is? And then, if you're expecting any 4Q, and then just on the cadence of Sprint and Sportster, when exactly are they hitting dealers? Thank you.
Yeah, let me take the second question. Then I will have Jonathan take the tariff recovery question. We will be introducing the Sprint at EICMA. The bikes have already begun shipping, and it will hit internationally first, before the end of the year. So there will be some markets that have the motorcycle in late Q4. Sprint will flow through into the balance of the world in early in the first half of 2027. Sportster, all we are saying is first half of 2027 at this point. More to come on that.
Yeah. Okay. From a tariff standpoint, obviously with what we have put out from a tariff perspective, this quarter, gross tariffs are higher due primarily to kind of supplier reciprocal charges as our suppliers catch up and pass costs on to us. As we have been kind of negotiating and working on that with each of them. Our recoveries are higher by a really similar amount. Obviously all of that nets us to virtually no change in the total supplier or no change as we think about tariffs and the impact that they have on our 2026 operating income.
With what we have put out, virtually all of the improvement that we are talking about for the year in operating income, so through what we put out in the guidance raise, is due to the underlying operating performance of the business. You can see in what we provided on page 11, that from an overall tariff impact perspective, you can see the growth and where we are year- to- date, and then what we are laying out for the full year estimate. You can see the same thing in what we provided from a net basis and then the comparison.
So I would refer you to page 11, what we included within the couple of tables to get really clear and clean on what was laid out there.
Okay. Got it.
Your next question comes from the line of James Hardiman from Citi. Your line is now open. Please go ahead.
Hey, good morning. Thanks for fitting me in.
Hey, James.
So, seems like the biggest headline number here. Hey, good morning. So 5% retail growth, globally 9% domestically. We've talked around it, but maybe put a finer point on what you think the why is behind such strong retail growth with a particular look at the sustainability of that growth? Obviously, 9% is probably not sustainable, and you've got some difficult Q4 compares. Your guide doesn't assume that that continues. But should we be thinking that this is a business that can grow organically into 2027?
Obviously, you've got the Sprint and Sportster, but even X that, the growth this year has been fantastic. And I think the number one question I get from investors is just to the sustainability question of what we've seen here in 2026.
Sure. Well, I will stick with the facts, which is we saw an opportunity five months ago, which we communicated that there were areas in our portfolio where there was real demand that we had holes. We quickly actioned two motorcycles in our largest market, but not around the world. It was not possible to do it as quickly. We got a fantastic response. Look, sound, and feel characteristics, the price point, and the advertising, I think are three things that I would point to that we view as repeatable.
Certainly, you can expect motorcycles like that to be a part of our global portfolio going forward as we have had a little bit more time with production, engineering, and manufacturing, obviously, to get ready for 2027. We are quite optimistic about the portfolio we are putting forward, and we still have a lot of work to do, and we still have a lot of opportunity. What I have told our dealers this year, as recently as last week, when I look at our model year 2027 lineup, vis-a-vis the strategy that we put together, I think we are halfway there.
I see significant runway. Sprint and Sportster we have a lot of data points on because it has been just a core part of the portfolio for multiple decades, has not been in the portfolio for the last five years. We can look at the used market to see how much demand there is for that motorcycle and the residual values of those motorcycles, which is extremely powerful. Sprint, the last time that bike was in market was many years ago. I do not think we can point as clearly to that one in terms of like we can with the 883.
However, test riding against the competitive set, having dealers on the motorcycle, its ability to drive enthusiasm through Riding Academy. Frankly, the new news for me is the joy and the enthusiasm that our most experienced riders are having on that bike, which includes our dealers. I am sitting here in our product development center today, and many of the folks in our leadership team, we are extremely proud and excited about that bike and to see riders who have got tens of thousands of miles behind them get excited about that bike, it is quite encouraging.
Yeah. James, just a couple of pieces that I would add is, and I will stay focused on North America. As Artie has said, that is the place that we actually have really, really started to execute the Back to the Bricks strategy in light of the closeness. Obviously, a lot that is coming internationally with launching Sprint internationally at EICMA. As you go through and look within the quarter, really, really nice growth in Trike. The market reaction and responsiveness to the redesigned Trike has been really, really strong.
Softail, you have heard Artie talk quite a bit about sort of what were the key drivers around that and what did that do. We also are continuing to see growth in where we are from a custom standpoint. We take those elements together, Softail Custom in particular, and look at Cruiser with share again up 12 points in North America. As we take a look at Touring, a little more of a challenge as you think about the durability of that price point. Our share is up 4
points in North America within there. As we think and connect this back to what are we doing on dealer inventory, Touring dealer inventory is down 39%, CVO is down 46%. As we think about the ways that we are managing and connecting what we are doing in terms of what we are shipping in with sustained retail growth, I am really proud of the way the team is approaching things on that front.
Got it. That is great color. Thank you both. I wanted to ask about LiveWire. It is a sensitive topic. Obviously, we have got the going concern language, which is incremental. I think you have about $40 million of cash, or they have got about $40 million of cash, I guess I should say, at LiveWire. At the current pace, maybe that gets cut in half by the end of the year. The Street is modeling about $60 million of additional losses next year. Is that likely or even possible given what we now know about the trajectory and the funding possibilities?
We cannot really comment much beyond what has been publicly disclosed on LiveWire. I will just restate that it is consistent with what I have said over the last year. We do not intend to fund the operating losses of LiveWire going forward. The team there has been working on other forms of capital and what has been announced has been announced.
Understood. Thank you.
Thank you.
Your last question is from the line of Robin Farley from UBS. Your line is now open. Please go ahead.
Thank you. I just need to apologize because I have been hopping between earnings calls this morning. I do not think you addressed this when I was skimming the transcript as I was hopping between calls. I wonder if with the lower shipments than what you had guided in Q3, but you are raising Q4, how much of that higher shipment amount in Q4 is because retail maybe late in Q3 came in better than you thought? Or how much is due to maybe a change in timing difference of new model shipping that maybe we did not even know was your plan?
You have plans about new model shipping that we would not know. Just how much of it is those two factors and maybe something else that I am not thinking of? Thanks.
Great. Thanks, Robin. Great question. I will let Jonathan take it.
Yeah. Thank you, Robin. I think as we go through and we take a look at what we are doing from a timing perspective, we obviously are ensuring that we are careful in not getting ahead of anything from a retail standpoint. As you have heard Harley talk through repeatedly an extreme amount of discipline inside of this company in managing the relationship between wholesale and retail. As we look at what we are doing from a Q4 2026 perspective, you can back into our numbers with the guide that we have provided and what that implies for Q4.
We obviously are excited about what we are doing in terms of model year timing change and thinking about the way that we are going to end up with health of model year and what is shipping into the dealer network on that front. We think sets us up really well for a solid 2027. Overall, I think some thoughtfulness in the discipline between retail, wholesale, what that implies for dealer inventory. You have heard Harley talk a lot about 2027 getting alignment between production, wholesale, and all of that being guided by retail.
That is the other piece that we end up with in terms of the benefit that occurs really beginning in Q4 of this year as we begin rolling forward.
I will add one thing. Obviously proud of how our team and partners with our dealers have actioned inventory and sell-through, but also the current model year versus prior balance. As we look at 2027s being introduced to the market here in Q4, the floors are just in such better condition as riders come in and see what we have. It is quite exciting what riders and prospective buyers are going to see walking into a dealership in Q4 of 2026 with model year 2027 versus Q4 of 2025 with model year 2026. It is really exciting.
Oh, thank you. Just to clarify, it sounds like you are saying obviously the model year timing change would drive an increase in shipments, and we knew that before today. You knew that before today. Is the incremental change in your Q4 shipments compared to your implied increase back in July? It sounds like, I think you are saying that has been driven by retail demand and not by any sort of timing of delivery of certain models. Is that correct?
Clearly, retail demand year- to- date has been higher than we had forecasted and I think above expectation, so to speak. So that's definitely an element of the shipments. And we're also pulling forward a little bit as well from prior year launches.
Yeah, but I think, Robin, you're right. As you go through and you take a look at where we guided to, we obviously moved the midpoint of our retail guide up. So with what we've seen in terms of the way that we've run, we're pleased with what we're seeing at retail, particularly in North America, and that supports us making sure that we kind of land inventory in the right place so that dealers are set for 2027 too.
Okay. Thank you.
You're welcome.
There are no further questions at this time, and this concludes today's conference call. Thank you all for joining. You may now disconnect.