Are Harley-Davidson Profits About to Take a Hit? — The Motley Fool

Harley-Davidson (NYSE:HOG) has been austere a motorcycles are value a high cost they charge, and it won’t taint a code by discounting them like a rivals do. When we possess half a marketplace and your nearest aspirant usually usually pennyless into a double-digit share range, we can means to do that.

Yet maybe a dramatic 12% decline in first-quarter motorcycle sales has finally gotten to a Milwaukee-based company. Very quietly, Harley-Davidson is charity buyers adult to $1,500 off if they squeeze a bike by a finish of a month, that also happens to be a finish of their quarter.

Trying to pierce some-more bikes with this bureau inducement might prove that sales are most weaker than expected.

Harley-Davidson trademark on gas tank

Image source: Harley-Davidson.

Clearing a decks

Harley put adult a dauntless front when it confirmed that notwithstanding a gloomy sales report, it still approaching to boat between 67,500 and 72,500 motorcycles in a second quarter, and between 231,000 and 236,000 motorcycles for a year.

Although a approaching quarterly numbers were as most as 17% next final year’s shipments, a full-year figure would usually be off by as small as 2% from 2017. Shipments aren’t sales, of course, yet we can’t sell new bikes if we still have your aged models on a floor, and that’s what Harley-Davidson is perplexing to do, here. It needs to transparent out a aged register to make space for a new bikes entrance in.

According to a promotional offer, a bonus is usually good on 2017 and 2018 denote year Softail and furloughed bikes; higher-end CVO models are excluded.

That’s a large problem, since it means dealers still have bikes that will be deliberate dual years aged when a new 2019 models are denounced in a integrate of months. If they still have them on their salon floors collecting dust, dealers will need to heavily bonus them to pierce them, pinching profits. It looks like Harley throwing out a bureau promo is an try to assistance on that front, yet it doesn’t obviate buyers from negotiating a good understanding on a leftovers and afterwards throwing a bureau bonus on top.

It should be remarkable this is not a broad-based graduation open to everyone, yet rather something of a curated list for those Harley-Davidson wants to incentivize to come in, either you’ve taken a roving academy class, participated in their museum, or had some other communication with a association over a past few years.

That does extent how many bikes will get discounted, yet it also sets adult a probability that it will spin off some-more than a few would-be business who are in a market, yet aren’t arcane to a discount. A demeanour during contention play for Harley enthusiasts shows this is already occurring.

Harley can means it, though, even yet sales are in a tailspin. Because of a hostility in enchanting in discounting, a bike maker’s distinction margins haven’t unequivocally depressed much. 

Data source: Harley-Davidson Q1 2018 SEC filing.

As a biggest motorcycle builder in a U.S. with a 50% share of a complicated bike marketplace (Polaris Industries as a No. 2 aspirant has usually recently damaged into a double-digit share range), Harley can means to bide a time. But it can usually do this for so prolonged before it needs to respond, and that time might have come. Investors might wish to ready for a large rider downward as a year progresses.

HOG Total Return Price Chart

HOG Total Return Price information by YCharts.

Investors have been a large losers, though, as Harley-Davidson’s sum lapse over a final 6 years is radically zero compared to a doubling in value of a SP 500. There’s also no denote that will improve. Sales are down, that is causing Harley to finally get promotional, that might means a distinction margins to slight further. With a batch down 25% from a 52-week high, it might go reduce still.

Although it is not an across-the-board deal, a fact that Harley feels it needs to rivet in discounting after carrying hold out for so prolonged indicates there are deeper problems with a bikes. It also means that when it does finally news a quarterly numbers, sales might be even worse than we suspicion they’d be.

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