Harley-Davidson stock falls on weak 3Q earnings
Harley-Davidson stock took a hit off weaker-than-expected third quarter earnings, falling as much as 16% in midday market action.
HOG shares were trading at just above $47, down from a Monday close of $56. Midday prices were the company’s lowest since November, 2012.
The Milwaukee-based motorcycle company’s officers reported lower than expected retail sales of its big bore street bikes, domestically and abroad. Harley also reduced projections for full year shipments.
New motorcycle sales were down 2.5% domestically, the company said, but up 0.9% in international markets. Third-quarter income was $140.3 million, compared to $150.1 million a year ago.
Analysts said the lower sales were due in part to increased competition, currency fluctuations and consumer concerns about recalls.
In July, the company issued a record 312,000 recalls for its Road King, Street Glide, Electra Glide and Ultra lines -- among its most popular models -- over concerns including leaky fuel pumps, dysfunctional clutches and saddlebags that could suddenly detach.
Management has been aggressive about alerting owners to the problems and correcting them, but confidence in the brand might be affected.
“The currency issues are exacerbating the competitive threats to the company, and the recalls are hurting enthusiasm and demand,” said Robin Diedrich, analyst with Edward Jones.
Harley President and Chief Executive Matt Levatich promised new investment to counter aggressive pricing from its competitors -- which isn’t going to end any time soon.
“We expect a heightened competitive environment to continue,” Levatich said. “Now is the time for us to dial things up with significant additional investments in marketing and product development.”
Harley-Davidson, the nation’s most successful motorcycle company, traditionally accounts for about 50% of all motorcycles 600cc and larger sold in the U.S.
But holding onto that share has been harder in recent years, as the company’s core buyer base of middle- and working-class white males ages and purchases fewer motorcycles.
The competitive pricing has come largely from Japan, where Yamaha, Suzuki, Kawasaki and Honda, the world’s largest motorcycle company, have increased their interest in the big bike market.
Competition at home has come from Polaris-owned Indian Motorcycle, which builds large road bikes aimed directly at Harley’s traditional dominance.
Diedrich, while mindful of Harley’s difficulties, applauded one item to emerge from the third quarter earnings report. The company has said it has hired outside experts to investigate the recall issues, and will more than double its consumer-facing marketing expenditures, and would increase investment in new product.
“I agree with their long-term strategy,” Diedrich said. “Their core customer is in that 50-60+ age range, so they have to focus on a younger market. It’s good they’re putting more investment in that.”
Twitter: @misterfleming
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