Get Ready For One Helluva Ride
This is the time of year that a (not quite so) young motorcyclists heart starts beating a little faster...his eyes gaze longer down that open road...warmer weather means riding season is upon us! And, April means its also Earnings Season. So, if you are a Harley-Davidson enthusiast and stock owner, times could not be better. Get ready for the good times, because they are about to roll along.
Now, HOG has had a decent run over the last year...but I'm predicting that Harley-Davidson is going to reveal a much-better-than-expected first quarter when they release earnings later this month. And, I expect that trend to continue for several quarters in a row. Why?
First, this has been an uncommonly mild winter, which undoubtedly provided a bump for dealers in the usually slow first quarter. I know that in my area, bikes have been out on the roads since February (easily two months ahead of schedule). Simple math...more time on the road means greater need for parts and accessories. But, warmer weather means that dealers in cold regions had greater opportunity to get people on bikes through test rides or demo events when they normally would have to wait a few months.
But, that's only a small part of the picture as I see it. Warm winters aren't a sustainable event (well, Vice-President Gore may disagree, but that's a different blog). And warm weather alone cannot account for the buzz of activity that I have been witnessing in visits to dealerships over the past three months. In my hometown area, I regularly stop in at four dealerships, either in the course of buying things, getting service done on my bike, or just to gauge sales activity and get a sense of what Harley is doing. I also make it a point to stop in at dealerships in any town that my business travels take me to. This quarter has been unique: each dealership (in my non-scientific opinion) was as busy as I have ever witnessed, or would reasonably expect for the first quarter of the year. Further, every staff person I talked to showed a higher level of enthusiasm than I have seen in years.
Again, this is all unscientific...this is not based on a formal survey or published data...this is my OPINION only.
But, what I see is demand that is higher than dealer inventory levels (good thing for HOG). I see fast turnover on models in the dealerships, but a consistent good mix of product (whereas in the past, if sales were strong dealers often had a glut of lesser desired models dominating their floors). And I see a higher number of younger riders in the dealerships than I've seen in the past.
To me, this means that HOGs direction is the right direction. The company is in its third year of rebuilding under CEO Keith Wandell. He set out to remake their manufacturing capabilities to better accommodate demand and provide quicker response to changes in market conditions (meaning they can change the plan for how many of each model they make with very little lead time, keeping that model mix on the dealer floor strong). And, the changes at their York facility are complete, their changes at the Milwaukee and Kansas City plants will be complete within a year (if I understand it correctly), which is all intended to provide hundreds of millions of dollars in on-going savings on manufacturing costs.
And, lastly...the company is heading into an anniversary year (110th). For most companies, that might not be a big deal, but HOGs core customer base LOVES the anniversaries, and will absolutely use it as an excuse to upgrade their bike. Any long-time rider that had been putting off a purchase because of economic uncertainty WILL be plunking down cash for a new bagger with a 110th anniversary badge on the tank (its expected that Harley will launch the anniversary models in mid-to-late summer...historically new models are released at the end of July).
Demand = up.
Costs = down.
Dealers = happy & busy.
Economic woes be damned...this HOG is about to fly.
(DISCLOSURE: I own shares of HOG, as well as many products put out by the company...and, again, ain't one bit of this blog that can be called scientific or valid in any other way. It's my opinion, and worth whatcha paid...go do some due dilligence).