Survey: 3Q U.S. Harley Retail Sales Up 3.5%

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Here is some good news for followers of Harley-Davidson: Retail sales in the third quarter were up 3.5%, compared to the 3Q last year when sales slumped 9.4%, according to a recently-completed survey of dealers by Wells Fargo Securities.

There’s more good news as well: Inventories remain at five year lows and all of the dealers described inventories as comfortable/light with a need to improve the mix such as adding more touring bikes. Inventory levels are at about 40-45 days, according to the survey.

However, dealers voiced concerns about the inventory mix and said there probably were lost sales due to lack of product availability on models such as the model year 2012 (MY12) touring, sportsters and softails. “We believe Harley underestimated U.S. summer demand, especially in touring (models),” says Tim Conder, Wells Fargo Securities senior analyst and author of the report. “It likely will be late fall before Harley has U.S. inventories normalized,” he added.

Here’s an interesting comment from Conder: “We continue to believe Harley is making specific efforts to limit some availability of Touring models, in part to encourage the dealer network to grow sales (i.e. Sportster, Dyna, Softtail) into targeted, less penetrated customer demographic segments (i.e., under 35, women, African-American, Hispanics). However, this effort may have been too aggressive when combined with York restructuring transitions.”

The survey included 40 dealers located in 24 states across the U.S., approximately, 6% of Harley’s U.S. dealers and was skewed toward larger dealers in major metropolitan areas. The survey included 10 dealers in the East,  10 in the South, 10 in the Midwest and 10 in the West.

The dealers surveyed were very aggressive in their marketing. In addition to selling new and used motorcycles, clothes, merchandise, parts, accessories and service, 98% of the participating dealers had Harley Owners Group (HOG) chapters, 55% offered rentals, 45% sponsored a Rider’s Edge training program and 33% had an on-line sales program.

The dealers also were very aggressive on their pricing. Seventy percent of the dealers sold at MSRP, 20% sold at MSRP with what Wells Fargo calls “minimal discounts,” and 10% sold at a premium to MSRP. Twenty percent of the dealers said they were selling at least some new models below MSRP, compared to 13% in the Q211 survey by Wells Fargo, and 18% in Q310.

Here are other findings from the survey:

  • The ratio of used to new bikes has improved from 2:1 to 1.75:1.
  • The price gap between used bikes and new bikes has continued to narrow. Used bike prices were stable through the 3Q after rising for much of the last 24 months, according to Conder.
  • Price discounting does not appear very likely in the near term, says Conder, “given clean dealer inventories, increased demand and management’s aggressively managing supply in line with demand.”
  • Used Harley bike prices stabilized in Q209 and have increased since then to the point where new bike demand “is positively impacted,” notes Conder. Since Q209, he says, dealers reporting flat or increasing used bike prices jumped from 25% to 88% in Q311.”
  • Prices of used Harley’s are likely to continue to increase, year over year, over the next year, Conder predicts.
  • Credit standards of Harley-Davidson Financial Services (HDFS) have remained basically stable between the second and third quarters this year, according to the dealers.

Harley common stock has traded in a range of $28-$47 over the last 52 weeks. It closed at $34.33 on Friday, Sept. 30, 2011. JD

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