Posted Apr 16th 2009 2:00PM by Tom Barlow
The venerable Harley-Davidson (NYSE:HOG) sputtered through another dismal quarter as reported today. Even Warren Buffett's recent vote of confidence in the form of purchasing $300 million of HOG debt wasn't enough to pretty up a year/year decline in worldwide sales of 12%, and sales this quarter last year were well below the previous year. The company did ship 3.9% more bikes to dealers than in 2008, when dealers were sitting on large stocks of unsold units, but it anticipates shipping 10-13% fewer bikes overall in 2009 than 2008.
Domestic sales dropped 9.7%. Diluted earning reported were $.50, below analyst expectations and down from $.79 Q1 of 2008. Revenue for the quarter was $1.01 billion, down only $2.7 million from same quarter 2008. General merchandise, usually a steady cash-generator for the company, also fell by 10.5% from a year ago.
Showing up this quarter were early costs associated with the $120-150 million major retooling of the company as it consolidates manufacturing, and an unexpected state tax bill for $22.5 million. The HDFS bad-credit problem has not been solved, but successfully delayed by extensions to almost $1.5 billion of credit facilities. HD hopes to tap into TARP money to help prop up its financial services business.
The company reported that it's "Ride Free" campaign, offering those who purchased the Sportster, HOG's least expensive model, would receive new-bike value when later traded in for another model, helped build showroom traffic.
The company's stock has been on the rise recently, bolstered by the appointment of new CEO Keith Wandell and expectations from the announced streamlining. However, the troubling market trend that shows a steady decline in market share for H-D bikes (2006, 49.3%; 2007, 48.7%, 2008, 45.5%) shows that even in this slow market the company is losing sales to its competitors.
Harley-Davidson is a one-trick pony, having only motorcycles to sell, and the market does not yet seem convinced that enough new customers are ready to take a ride.
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