Harley-Davidson is all revved up with nowhere to go until it can lure more riders — especially younger ones — on new motorcycles and clear out excess inventory.
The famous Milwaukee-based motorcycle maker said Tuesday that dealers are stuck with too many 2016 models that need to sell before new, improved 2017 models can take over dealers’ showroom floors. The surplus reflects a sales slowing trend that started last May.
A sales droop is one of the reasons that Harley failed to live up to analysts’ expectations for the fourth quarter, even though profit rose. Net income came in at $47.2 million, up 12% from $42.2 million in the same quarter last year. The tally was well shy of the $54.1 million that analysts had anticipated, according to S&P Global Market Intelligence. Earnings per share were 27 cents, also below the 30 cents that analysts expected.
Revenue fell to $1.11 billion, down slightly from last year’s $1.18 billion
For 2017, the company says it anticipates full-year motorcycle shipments to be flat-to-down modestly compared with 2016 as the new model-year bikes are held back some until last year’s inventory is sold. In the first quarter, Harley warned it will ship 15% to 20% fewer motorcycles than the same quarter last year.
Harley-Davidson’s guidance for the first quarter is “worrisome,” said Trevor Young, analyst at Jeffries Equity Research, in a note to investors Tuesday. “We worry that this may reflect a worsening outlook for the motorcycle category” including challenges selling current inventory, he said.
Harley and other makers of cruiser and touring motorcycles saw U.S. sales slip last year as the economy faltered in some states and consumer confidence was unsteady.
The heavyweight motorcycle market started to decline last May, resulting in a surplus of bikes from manufacturers and discount pricing.
Harley executives said they remain concerned about economic and political uncertainty around the world, as the volatility puts a damper on spending for discretionary products such as motorcycles. Another issue is the fear that Harley’s hardcore fans are aging and not enough young riders are coming up to take their place.
Still, Harley was pleased to see slight sales growth in the U.S. in the recent quarter and – aside from too many leftover 2016 model-year bikes – the company has made progress on other fronts.
“Our long-term strategy is all about growing ridership in the U.S., growing reach and impact internationally,” CEO Matt Levatich said in a statement.
Harley shipped 262,221 motorcycles in 2016, below its forecast of 264,000. Sales in the United States, which is the company’s largest market, were flat compared with 2015. Shares of Harley (HOG) closed down 1.5%, or 88 cents, to $57.04.
Source: USA Today