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Harley-Davidson cuts shipments forecast

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NEW YORK: Harley-Davidson Inc’s shares skidded to a more than one-year low after the motorcycle maker cut its full-year shipments forecast as demand weakens among its ageing baby-boomer customers and fewer millennials take to motorcycling.


The Milwaukee-based motorcycle maker also said it would need to cut production in second half of 2017, resulting in hourly workforce reductions at some of its US plants.


While demand for new models has waned, the company has also taken a hit from used motorcycles being sold off by ageing customers.


For the full-year, Harley said it expects to ship 241,000 to 246,000 motorcycles, compared with 262,221 a year earlier. The company had previously forecast shipments to be flat to modestly down. That’s a far cry from the nearly 350,000 it shipped a year about a decade ago.


“We are downgrading Harley-Davidson to ‘market-perform’ based on increased conviction that motorcycle demand in the United States is in the throes of secular erosion,” Bernstein analyst David Beckel said.


Beckel noted that the “Generation Y” — those born in the 1980s and early 1990s — was adopting motorcycling at a far lower rate than prior generations. Like other companies in the manufacturing industry, Harley was widely expected to benefit from President Donald Trump’s proposals to boost infrastructure spending and cut taxes.


“The hoped-for drivers of incremental Trump-related demand — infrastructure spending, middle class tax cuts, corporate tax cuts, domestic production advantages — are all on hold, perhaps indefinitely,” Bernstein analyst David Beckel said. Harley is also up against aggressive discounting by rivals such as Polaris Industries Inc, the maker of the Indian bike, and Japan’s Honda Motor Co Ltd.


The company said it expected to ship 39,000 to 44,000 motorcycles in the current quarter, suggesting a decline of up to 20 per cent. Retail motorcycle sales fell 9.3 per cent in the United States, its biggest market, and 6.7 per cent globally in the second quarter ended on June 25.


— Reuters


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