The second quarter is typically peak selling season for Harley-Davidson Inc. as warmer weather in North America, the motorcycle maker's No. 1 market, lures riders back into dealer showrooms.
But there is mounting evidence Harley's retail sales came in on the light side in the three months ended June 30, raising the possibility it will have disappointing news for shareholders when it reports results next week.
The issue already appears to be weighing on Harley's shares. While the S&P 500 is up nearly 7 percent year-to-date, the stock is down 4.6 percent. Much of the sell-off occurred in the past month as dealer surveys by Wall Street analysts have found that retail sales were "not quite as robust as we had initially hoped," says William Blair & Co. analyst Sharon Zackfia.
Going into the quarter, analysts like Tim Conder at Well Fargo Securities had expected that pent-up demand after the long, bitter winter would grow Harley-Davidson's retail sales by double-digits.
Also expected to rev up rider interest this season: Harley-Davidson's introduction of the Street, its first entirely new motorcycle in more than a decade and its first Harley-badged foray into the lightweight market since the 1970s.
But last week, after talking to dealers, Conder slashed his estimate for U.S. retail growth, from up 11 percent to up 6.3 percent.
Harley-Davidson was not the only motorcycle manufacturer to experience disappointing customer traffic during the quarter. Conder says rival Polaris Industries Inc. was "challenged" by the retail market in the second quarter, too.
But Harley-Davidson's woes may help explain its decision in mid-June to deliver with great fanfare, a handful of electric-powered demonstration bikes to select dealers, a move that seemed odd given its admission that it had no plan to manufacture or sell the bikes.
The PR blitz struck some as a gimmick designed to drive customers into showrooms and suggested the current lineup, Street included, was coming up short.
Robin Farley, an analyst at UBS Investment Research, says the skeptics were right. Her retail checks found few dealers received Streets to sell during the second quarter, despite a pledge they would arrive by then, because of what Harley-Davidson called unspecified "delivery issues."
"Most (Street) shipments for retail sales have been pushed back from the May timeframe dealers had originally expected," Farley said.
Harley-Davidson declined to comment on Farley's findings or talk about second-quarter sales or Street deliveries.
But spokesman Bob Klein says the electric bike tour was in the planning stages for months because the task of hand-fabricating the fleet of demo bikes was complex and time-consuming.
"Bottom line, we didn't introduce an electric Harley to drive traffic (into showrooms)," Klein says. "If there were a need to do so, there are lots of less complicated ways to achieve that."
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