Is Harley-Davidson Losing Its Diehards?
Harley-Davidson rolled out a dismal earnings report on Tuesday morning. Pretty much every performance gauge offered a bad reading: A strong dollar weighed on international sales, poor weather kept away winter buyers, and aggressive pricing from competitors lured away would-be buyers. The company now expects to ship a maximum of 281,000 motorcycles for the year, down from earlier projections of 287,000.
Perhaps the most troubling sign for the Wall Street darling was the product mix. Harley experienced an increase in demand for its touring bikes—the massive cruisers that typically have big windscreens and hard panniers—as well as for the smaller street bikes aimed at younger, urban riders. Those models are doing well at home and winning buyers in Southeast Asia and South America.
The big crash, however, came from Harley’s custom-bike business, which markets the burly, chrome-clad cruisers that have become the calling card of the brand. Buyers of these bikes are either diehard Hog fans or very affluent—or both. And they don't stop spending when they buy new motorcycles: Custom bike shoppers usually kit out their rides with tailor-fit seats, suspensions, and handlebars. Sometimes the spending doesn't stop until one of those little teddy bears in a bandana and black leather jacket has been purchased. These are far and away Harley's best customers.
Customized Harleys aren't just a smaller share of the bikes sold in the recent quarter. Sales are declining outright.
Meanwhile, Harley’s market share in the U.S. slipped from 56 percent to 51.3 percent. The company chalked that up to aggressive price cuts from competitors. There is, no doubt, some truth to that. A stronger dollar makes it easier for international brands to lower prices in the U.S. and keep the profit margin unchanged.
But the custom customers Harley is missing aren’t from the price-shopping demographic. The Hog die-hards just want a bike that’s notably different from everything else on the strip in Sturgis, S.D. The worry for Harley is that loyalists might ditch custom foot pedals and trimmings in favor of trying out a whole new brand, such as Polaris’s Indian, BMW’s customization-friendly RNineT, or any of a host of other hot, new cruisers.