Harley-Davidson Inc. stock took its biggest hit ever today as investors reacted to the news that the company was reducing its projected 2005 earnings growth by almost half, and cutting projected 2005 shipments back to 329,000 instead of the previously projected 339,000 bikes.
Is this the beginning of a slide for Harley? According to this poll on the MSNBC news web site, 52% of respondents (as of this writing) feel that Harley is running out of “baby boomers” to sell their bikes to.
The increasing mainstream popularity of “choppers” and cruiser culture over the last few years would normally be assumed to have helped Harley-Davidson, but in fact it may be just the opposite. These days, everyone with a little wrenching ability and a few catalogs is suddenly a “custom builder”, and many potential buyers may be lured away from the popular Harleys when they find they can buy a “custom” personalized to their taste for nearly the same price. This problem is only exacerbated by Harley-Davidson’s insistence on holding back shipments of bikes to ensure that demand exceeds supply, creating a frustrating, waiting list-style buying experience.
Other media outlets have also pointed to “over-saturation” of the market as a possible cause of flattening H-D sales – that is, there are only a certain number of people in the world who ultimately want a Harley and can afford one, and at some point every one of these people will have one! The fact that many Harley models retain essentially the same design and technology for long periods of time may give current owners little reason to upgrade to a newer model. Harley has created this problem for itself through a lack of diversification and (V-Rod excepted) a failure to develop new technologies for its lineup.
So is the Harley-Davidson phenomenon over? Well, it is unlikely to burn itself out overnight, but this reduction in projected sales and profits may signal the beginning of a slow fall back from the incredible sales growth Harley has demonstrated over the past decade, or so. Or, as Harley claims, it may simply reflect a slow couple of months caused by generally poor weather in the U.S. Time will tell.
