Southfield, Michigan - Harley-Davidson, the biggest US motorcycle maker, fell the most in more than six years after trimming its annual shipment outlook because the company doesn’t plan to match competitors’ steep discounts.
The forecast for motorcycle shipments worldwide is 276 000 to 281 000, down from its earlier projection of 282 000 to 287 000, the Milwaukee-based company said in a statement on Tuesday. Harley’s retail sales in this year’s initial three months fell 1.3 percent from a year earlier.
“Given the first-quarter retail results and ongoing, increased levels of aggressive competitive discounting in the US which we expect will continue, we are taking the precautionary step of lowering our estimated growth rate for full-year motorcycle shipments in order to manage supply in line with demand and protect the premium nature of our brand,” Chief Executive Officer Keith Wandell said in the statement.
The shares slid 9.8 percent on Tuesday to close at $55.72, recording the steepest one-day decline since March 2009. The stock has fallen 15 percent this year.
Rivals from outside the US cut into Harley’s sales in its home market, capitalising on a strong dollar to slash prices without hurting margins. The company’s first-quarter US market share fell to 51.3 percent from 56 percent a year earlier, Chief Financial Officer John Olin said on a conference call.
‘Undercut pricing’
“Foreign competitors were coming in and using exchange rates to price their bikes more competitively,” said Jaime Katz, an analyst at Morningstar. “It sounds like this is the lion’s share of the problem, that until the exchange rate differential reverses, you’re going to have peers willing to undercut pricing to just sell more volume.”
The Chicago-based analyst rates Harley shares hold.
Sharon Zackfia, an analyst at William Blair & Company, said the discounting is mostly by Japanese companies. The yen remained weak against the dollar in the first quarter. Zackfia, also based in Chicago, rates the stock outperform.
Harley said retail sales volume in the quarter was down 0.7 percent in the US, 1.1 percent in the Asia-Pacific region and 5.6 percent in Europe and the Middle East. Those sales rose 0.3 percent in Latin America and 5.7 percent in Canada.
First-quarter net income rose 1.5 percent to $269.9 million, or $1.27 a share, from $265.9 million, or $1.21, the company said. That beat the $1.23 average of 12 analyst estimates compiled by Bloomberg. Revenue from motorcycles and related products declined 3.9 percent to $1.51 billion, trailing the $1.58 billion average estimate.
Bloomberg