NEW-BIKE SALES LAG

Harley-Davidson’s share price is skidding off the road

It looks like the “live to ride, ride to live” lifestyle just crashed.

Harley-Davidson’s shares fell past its one-year low today (July 18) after the company announced second-quarter earnings. The staggering drop reflects low demand for motorcycles, especially in its largest market, the US. Harley’s US retail sales fell 9.3% compared to last year.

Harley is internalizing this falling demand. The company plans on shipping no more than 44,000 bikes in the coming quarter, representing at least a 10% decline in shipments from the previous year. This has alarmed shareholders—annual shipments have been falling steadily since 2012 and remain below their pre-crisis high (close to 350,000).

Analysts are quick to blame millennials, whose embrace of the Harley “hog” culture doesn’t quite live up to that of the baby boomers’ generation. While it’s likely that young people aren’t big fans of gas-guzzling Harleys, it’s more likely that the bike’s price point is just too high. Demand for used Harleys has eclipsed demand for new bikes, according to John Olin, Harley-Davidson CFO. “When you combine [both used and new motorcycle sales], our retail sales are up… and the highest in the history of the company,” he told analysts on a conference call. Used bikes can be an easier entry point for price-sensitive millennials. But those sales still aren’t the best for company revenue.

CEO Matt Levatich says the company is banking on the timelessness of Harley’s brand: “We’ve been inspiring riders across every American generation since 1903. Through all of their life stages and each of those generations have seemed different in what they do, what they like, how they express themselves, what personal freedom means to them, and millennials seem different too. But we know that among them, they’re plenty of freedom-loving adventure seekers.”

Still, Harley-Davidson’s vision—2 million new riders by 2027—seems quite ambitious. The company says there are 5.5 million Harley riders in the US, so that means it is attempting to increase riders by close to 40%.

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