In a research note titled "Robust Demand and Lean Inventory Support Favorable View" provided to Powersports Business following the Harley-Davidson first-quarter earnings call on Wednesday, Baird analyst Craig Kennison writes of H-D, "big picture, retail is strong, dealer inventory is low, and the cost structure is lean -- supporting our outlook for robust profit growth."
Kennison reports that Harley-Davidson's "retail demand soared 25 percent in the U.S., a remarkable surge fueled by: 1) an early spring, 2) a successful outreach strategy to tap non-traditional riders, 3) new products like the Seventy-Two and Softail Slim, 4) a brighter economic outlook, and 5) better used bike prices stimulating stronger interest in new bikes."
Kennison adds that "relative to other brands still plagued by stale/excess inventory, sales of new Harley-Davidson motorcycles likely are benefitting from the small differential between new and used bike prices after Harley reduced supply in recent years."
Among new heavyweight motorcycle buyers in the U.S. in Q1, Harley commanded the following market share percentages:
Under-35: nearly 50 percent share
Women: nearly 66 percent share
African-Americans: more than 50 percent share
Hispanics: nearly 60 percent share
Kennison's report also notes, "Harley decided to delay the implementation of the York EPR system until Q3 after tests revealed opportunities to simplify the system. The ERP system is an important step in the restructuring process that will lead to additional efficiencies down the road."
Further, Baird estimates that "U.S. dealers have 54 bikes/dealer, below the 60 bikes/dealer we projected -- driven by the surge in retail."