According to Harley Davidson Chief Executive Officer Jim Ziemer, U.S. dealer retail sales dropped sharply in August. Recent economic difficulties are blamed for the fall off, from falling home values, higher fuel costs, rising food prices and even difficulty finding jobs. Harley stock slipped on the news.
Harley Davidson press release:
Harley-Davidson, Inc. (NYSE: HOG) announced today that it expects to ship between 86,000 and 88,000 Harley-Davidson(R) motorcycles in the third quarter of 2007. Shipments of between 91,000 units and 95,000 units were originally planned for the quarter. Shipments for the full year are expected to be in the range of 328,000 to 332,000 Harley-Davidson motorcycles.
“Initial reports about our 2008 model year motorcycles from our dealers and the media have been excellent, but this is a difficult time for the U.S. consumer,” said Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc. “Coming off a negative U.S. retail sales trend in the first six months of the year, we ran an effective promotion in July that increased retail sales and reduced inventories of 2007 model motorcycles. However, our U.S. dealers’ retail sales have fallen sharply during August. Against the current economic background, we no longer expect worldwide dealer retail sales to increase during the second half of 2007. As a result, the Company has decided to reduce its planned shipments of motorcycles to its dealers for the remainder of 2007. The Company expects its actions will result in fewer wholesale motorcycle shipments than dealer retail sales during 2007,” said Ziemer.
“Although this is a challenging time, Harley-Davidson is the worldwide heavyweight motorcycle market leader,” said Ziemer. “We enjoy an enviable position of financial strength, with a solid balance sheet, strong cash flow and a history of returning value to shareholders. While a decision to reduce shipments and expectations is never easy, it is clearly the right thing to do for the long-term health of the brand and the business,” said Ziemer.
I doubt this is a Harley Davidson only phenomenon. Other companies are most likely feeling the same pressures.
Willie Schmitz says
Took a bath in HOG today. Trying to get a trade in pre market was impossible. It fell like an anvil. They couldn’t have picked a worst day to announce downward guidance. Geeze guys, if you’ve got bad news do it after the market closes on an up day. Don’t do on a day when the jobs report is ugly.
RH says
I bought my first H-D back in ’83. They were making around 30,000 bikes A YEAR back then, if I remember right.
I wonder how sales of Ducati, Triumph, and BMW (not to mention Honda, etc..) are doing – and if said economic conditions applied to them as well.
Does anybody remember when BSA went from market leader to moribund – and how few years that took?
Do trends last forever?
Do markets get saturated?
Does the economy really have anything to do with any of the above?
KEITH says
Yes the market is flooded and there is a lot more used bikes on the market to buy . You can also blame the Japanese Harley lookalike imports to .
OTTOMAN says
IT,S JUST SIMPLE ECONOMICS. AND EVERY COMPANY AT ONE TIME OR ANOTHER FILL,S THE PINCH.
GAMBLER says
short sharp pain then prolonged 70’s stagflation, anyone want to pull J Carter out of retirement for Guns/Butter clean up?
RH says
Something else I’m wondering about – they say retail sales are down. Is that just motorcycles? What about parts & accessories? Clothing? Booooo-tiki/none-of-the-above stuff?
And what about Buell – where are they in the big picture?
Richard says
Following the depressing 1st quarter results, which Chief Executive Officer of Harley-Davidson, Inc., Jim Ziemer, blamed on the strike (didn’t somebody here say the strike was going to be good for Harley?), Ziemer made these predictions:
“In 2007 Harley-Davidson expects EPS growth in the range of 4 – 6 percent compared to 2006 based on moderate revenue growth, lower operating margin, and the benefits of our strong free cash flow. Looking ahead to 2008 and 2009, we expect solid revenue growth, operating margin improvement and the continued benefits of our strong free cash flow to drive EPS growth in the range of 11 – 17 percent.” – PR Newswire, April 19, 2007
At the time, I didn’t think that would happen.
… and it hasn’t.
… and it won’t.
Here’s the latest HD prediction:
“The Company now expects a modest decline in revenue for 2007. Diluted earnings per share (EPS) for the full year 2007 are expected to be down 4 to 6 percent, in the range of $3.69 – $3.77, compared to 2006 EPS of $3.93.”
“Looking ahead to 2008, the Company anticipates the U.S. retail motorcycle environment will continue to be challenging. It expects moderate revenue growth, lower operating margins and EPS growth of between 4 and 7 percent.” – PR Newswire, Sept. 7, 2007
I wouldn’t hold my breath, Jim!
PigIron says
A Harley is not exactly a necessity. Along with other info such as todays poor employment report it mat be a sign of a recession.
I’ve got to think that the aging of the boomers is another factor in flatter H-D sales. Most of them who are ever going to buy a Harley have probably already done so.
davidabl says
In todays uncertain economy, fewer are willing to take out an equity loan to buy one.
John T says
some of the responders can only see a few inchs in front of them.Harley reports a drop in sales and that is the end as far as some see it.PigIron saying that all the Harleys sold up till now is it.I remember hearing that 30 years ago.Like a flock of little birds moving this way and that with the slightest change in the breese.Harley will do just fine and Ill’ not sell any of the stock I’ve owned for 20 years that has split 3 times and gone up in worth times 10.
Richard says
John T, it’s your money, so you can throw it away however you like. However, you should know that this news from HD is not just the “slightest change in the breese”. Harley has:
1. announced that August sales have tumbled,
2. cut bike shipments for 2007,
3. significantly lowered earnings estimates for FY 2007,
4. dramatically lowered 2008 estimates,
5. and totally cancelled their guidance for 2009.
When a company that gave guidence suddenly stops giving guidence, it is usually a sign that something REALLY BAD is happening.
Here’s one possibility: HD offers it’s own financing. It has been stuffing the market with product it can’t sell. The housing crash and credit crunch have caused an increase in the number of loan defaults. This is a double-whammy for HD.
You’ve probably heard about unscrupulous housing lenders giving money to people who can’t really afford to buy the house, and how the huge number of people defaulting on those loans has caused a big problem in the housing market. HD appears to be doing the same thing to bikers. Here’s what their finance web page says:
“Shouldn’t you have it all? The motorcycle, the clothes, the accessories and the security? We think you should. Below is a list of items you may finance in your motorcycle loan:”
“MotorClothes® apparel”
“Parts and accessories ”
“Harley-Davidson® Extended Service Plan”
“Harley-Davidson Cycle Insurance”
“Payment Protection Plan”
“Finance Protection Plan”
“By financing these items in your loan, you save yourself from the expense of additional purchases down the road.”
When the average person who works at 7-11, or Menards, etc., gets a Harley, it’s not enough for them to borrow 17 to 35,000 dollars for the bike, they have to get a few thousand dollars worth of HD clothes, too, so their friends will all know what an “individual” they are. To really be an “individual”, they also have to get several thousand dollars worth of “custom” chrome add-ons. They even get to finance the Finance Protection Plan! Who could pass that up?
With lots of these worthless loans defaulting, and a huge pile up of repossesed Harleys sitting on showroom floors, HD is really going to be in big trouble.
Prester John says
I’ve been told that everyone who wanted a Harley had already bought one every quarter since, oh, 1988!
Tom
Bill Pritchett says
Historically, Harley has done a good job for their shareholders and they build a fine product. Fortunately or unfortunately, depending on your perspective, they have flooded their own market. This became painfully clear when I went to attempt to trade my nicely customized V-Rod on a CVO Roadking. The depreciation on my ’04 model was staggering and I was politely told at two different dealerships to try to sell my bike on my own. Take a look at e-bay and the local papers. The market is flooded with Harley’s. See what you can get for a late model TC88 Soft Tail. Everyone wants the new 96″ with the wider rear tire. Needless to say, I’m keeping my V-Rod. It’s a great bike and I, like many of my fellow Harley owners, am not about to take a bath on a trade in or outright sale. I wound up buying a restored vintage bike. Harley’s trade up market is dead in the water and that’s not about to change, and it’s not about the national economy, I’m afraid.—Bill P.
PigIron says
I don’t know what sort of Kool-aid some of you have been drinking but Harley’s stock price is down over 35% from it’s high last year and is in fact at the same level it was six years ago.
Bob says
It’s not just Harley.
It is the overall economy…we are in a ‘Depression’ really, but nobody’s talking about depressions anymore…not politically correct.
Many of my old ‘hippie’ friends have bought and sold Harleys in the last 10 years. Some traded up. Many quit riding after seeing one of their friends get killed by a car.
Of the few old guys I know who still own Harleys it seems they bought the one they
always wanted and will keep them. No more trading they say.
Anybody who is in the stock market should realize their risk now, I mean the ‘boom real estate
market’ and the ‘use your house equity as an ATM market’, is over so the old Yuppie
cash-to-burn segment is drying up.
Let’s face it, back in the day, Harley’s market was mainly ‘the Joe 12 pack, double-wide crowd’ and they are all hurtin’ now. Food, rent or new motorcycle??
Earl says
Every body that’s gonna get a HD has already done so. Very few people under 40 will lay out $15-20K on a monument to an era past they neither know nor care for. These days, V-twin means Ducati, cruiser means as much metric as 96 and HD better realise that selling factory customs with a cheap veneer of custom gloss will only go so far.
Whilst I don’t blame HD for not wanting to be associated with the likes of the odious Sonny Barger, Hell’s Angels have been the most effective promotion for HD, has given HD a cachet they really don’t deserve. Every other major motorcycle manufaturer in the world pace themselves with cutting edge products. HD rely on a retro appeal which is gonna bite ’em on the arse one day.
Mark says
I worked at Harley 2 years ago, and I can say that Harley is probably tripping over itself “over-reacting” to this. They were having quarter after quarter of record profits, when i was there, but they were still a heartbeat away from worring to death about breaking that trend.
I work for another motorcycle company (Wichita) now and we have been keenly looking for when this mortgage thing to stop. Our custom bikes and choppers are mostly financed by “mortgage lines of credit” and this has really restricted our cusomers. However, unlike Harley, we don’t have a finance wing.
Waiting says
With sales falling and the dealers STILL selling (or trying to) over msrp it ins’t too hard to see why new Harleys are piling up on the sales floor.
When Harley gets a grip on todays economy changes and starts offering realistic deals like msrp prices and 0% financing just like the auto makers do to sell cars I WILL BE ON THEIR DOORSTEP BUYING MY NEW BIKE!!!
Until then I don’t need one that bad….