A recent survey of selected Harley-Davidson dealers across the country shows that sales and inventory positions continue to be strong, says industry analyst Tim Conder.
While the survey is not statistically valid — only 40 dealers in 20 states were contacted — it does provide some interesting insights into motorcycle trends at the Harley dealer level.
The Harley news is especially interesting because of the questions raised regarding what might be now called “normal” Harley unit sales and inventory positions following the big 100th Anniversary celebration that basically ran across portions of 2002 and 2003.
Conder is vice president and senior research leisure industry analyst at A.G. Edwards & Sons, a St. Louis, Mo., brokerage firm that operates some 700 offices in the U.S. and Europe.
Conder and his staff interviewed the 40 Harley dealers nationwide in late March and early April. Of the dealers, 68% had never been contacted by AG Edwards.
Conder found that inventory levels had “modestly” increased over the same time last year. March sales were good, dealers said, with year-to-date sales up 10% to 12%. By comparison, sales in the U.S. on-highway segment through February were off about 3%.
“Dealer optimism is high,” reports Conder, noting that he found no concerns with inventories and no promotional incentives planned on 2004 Harley models.
Based on what he heard from dealers, Conder increased his estimate of Harley’s 2004 earnings per share from $2.86 to $2.90 and his 2005 estimate from $3.33 to $3.37. “The only likely use for cash remains share repurchase and dividends,” points out Conder. Harley had $812.4 million of cash and equivalents at Dec. 31, 2003.
Here are some of the key results turned up by the A.G. Edwards survey:
- Sales Trends. Approximately 95% of the dealers surveyed were positive about sales trends in March. Dealers said good weather conditions, the large number of color options, new designs and two-year warranties were strong sales points.
- MSRP Premiums. Of the 20 dealers who said they sold at a premium to MSRP, five said that premiums were greater than at the same time last year, seven said premiums were lower, and eight said they were about the same.
Conder reports that none of the 40 dealers said they were selling below MSRP. However several did say that V-Rods (3) and Buells (1) were selling under MSRP. However, he says that some dealers offer free freight and prep, and some dealers offer prices under MSRP in advertising promotions, but “not because dealers have excess inventory.” Often, says Conder, the below MSRP selling price excludes shipping, prep and parts and accessories.
- Used Bike Prices. Dealers said the market for used bikes remains healthy: 27% increased prices, 52% kept prices stable, and 21% said prices decreased. When used prices declined, says Conder, it occurred because of the increased availability of new models. “The market for used bikes remains healthy,” he says.
- Inventory Levels. While 44% of the participating dealers said inventory increased over the same period last year, they were not concerned, saying the the March-July sales period would take care of the inventory. Thirty-nine percent of the dealers said inventories declined and many Southern dealers couldn’t keep bikes in stock. There were no reported carryover issues except for a few V-Rods and Buells.
Bottom Line: Following the extraordinary sales, production and inventory situations that came with the increased demand caused by the 100th Anniversary, Harley’s world seems to have returned to normal. psb