NEW YORK - Harley-Davidson shares tumbled 17 per cent yesterday after it cut its 2005 production and earnings targets and blamed bad spring weather for a 1 per cent dip in first-quarter United States retail sales of its motorcycles.
The warning overshadowed news of an 11 per cent rise in
quarterly earnings, and raised questions among analysts about the long-term growth outlook and strategy for Harley-Davidson.
"Management attributed the cuts to slow first-quarter sales, but we think the issue may run deeper than that," said RBC Capital analyst Ed Aaron.
"We think Harley's underlying [production] growth rate is lower than either management or investors perceive."
Harley-Davidson said it would cut 2005 production by 10,000 shipments from its original forecast, and now targets shipment growth of 3.7 per cent from a year ago.
The stock was down US$9.99 ($13.8) at US$48.78 on the New York Stock Exchange after forging the biggest fall in its history and hitting its lowest level in 15 months.
Chief financial officer and CEO- elect Jim Ziemer attributed the shortfall in US retail motorcycle sales to delayed warm spring temperatures and called the cuts a "precautionary measure".
"This action we are taking now to take out 10,000 units ... is a small adjustment to make sure we don't run into having too much carry-over product," Ziemer said.
"It's not a reaction to bikes selling for less than [sticker price] or an economic concern."
Harley-Davidson has traditionally had a greater gap between supply and demand, but it has recently moved to narrow that and change the situation of the past when dealers charged more than sticker price and there were long waits for bikes.
When demand far outstripped supply in the past, small changes in the market did not cause Harley-Davidson to adjust production.
But the company is more sensitive now, especially as the model year ends in 2 1/2 months, Ziemer said.
Analysts continued to seek other reasons for the production cuts, raising questions about dealers' inventory levels and higher credit losses.
US Bancorp Piper Jaffray analyst Tony Gikas said his checks with dealers suggested trends had been weakening for eight months.
- REUTERS
Harley runs into heavy weather
NEW YORK - Harley-Davidson shares tumbled 17 per cent yesterday after it cut its 2005 production and earnings targets and blamed bad spring weather for a 1 per cent dip in first-quarter United States retail sales of its motorcycles.
The warning overshadowed news of an 11 per cent rise in
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