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Turfscape (42.51)

Harleys are for old guys, right?

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July 20, 2010 – Comments (1) | RELATED TICKERS: HOG

The 2nd quarter earnings are out for Harley-Davidson, Inc. (HOG), and the news is good. Earnings are up year over year. Gross margin is up. Overall sales are down, but the rate of decline is slowing. EPS estimates were exceeded. The headlines are all screaming: "Harley-Davidson Profit Soars", "Harley Net Income More Than Triples", "Insert clever 'HOG' reference for amusing title here (HOG wild, High on the HOG)"...and shares are up over 5% this morning on the news.

The numbers are nice, and it's what I was hoping for...but they are not so overwhelming that headlines should scream. There is a lot of work to do before HOG reclaims its Wall Street glory.

What really surprises me, though, is that all the news articles have missed what I think is the single most important bit of news from HOG today. And this one small piece of their release this morning is the single biggest reason I remain bullish on HOG. From the release statement:

"Despite the decline in second-quarter retail motorcycle sales, we believe interest in the Harley-Davidson brand remains strong among riders of all generations. In fact, Harley-Davidson is the U.S. market share leader of on-road motorcycles among young adults."

Read that again...Harley-Davidson has RECLAIMED the top market share among young adults in the U.S. for on-road motorcycles! I've watched the company's efforts for three years with new campaigns (Dark Custom and Screw It, Let's Ride), new products (Nightster, Iron 883, XR1200, V-Rod Muscle) and new partnerships with people, events and publications (Maxim, various alternative music festivals, Marissa Miller, Dave Grohl). There has been a laser-like focus on gaining that young adult market share, and it is paying off big-time.

The relentless knock on HOG stock and product has been the "customer base is dying...only old white guys buy Harleys" mantra. With the news today, we can officially put that to rest. The numbers are in and Harley-Davidson appeals to young adults! If that isn't reason to be bullish long-term, I don't know what is...

1 Comments – Post Your Own

#1) On July 20, 2010 at 2:44 PM, Turfscape (42.51) wrote:

One other item of note...the first dealership in India is finally open. Four more will be opening soon. Bikes will be expensive there, but a lot of opportunity exists.

There is strong upside potential for HOG over a three to five year time frame.

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