Harley-Davidson's High Price Tag May Be Driving Off Younger Customers

Harley-Davidson Inc HOG has lowered its sales and margin guidance for 2016.

Argus’ David Coleman maintains a Hold rating on the company.

Too Expensive For Younger Customers

“Harley continues to face pressure from aggressive discounting by competitors and soft domestic demand,” Coleman mentioned.

The analyst also questioned Harley-Davidson’s ability to attract younger customer, given the high prices of its motorcycles, including the new models that are specifically designed for younger buyers.

“Harley has also moved to less expensive parts (including some plastic parts) on certain models, which could dismay hard-core fans,” the analyst stated.

In addition, the company has continued to restructure its operations, in order to strengthen product development and marketing.

Although restructuring is a positive sign, Coleman believes that it would take time to bring about any meaningful improvement in earnings and sales.

2Q Earnings

The company reported its 2Q16 EPS on July 28 at $1.55, with growth from the previous year’s levels, beating the consensus forecasts but missing the estimate.

Related Link: RBC "Downshifts" To Underperform In Harley-Davidson

U.S. sales, which represents over 61 percent of the total sales, fell 5.2 percent during the quarter.

2016 Guidance

Management lowered the 2016 sales guidance from 269,000-274,000 motorcycles to 264,000–269,000.

The EPS estimate for 2016 has been reduced from $4.04 to $3.96, to reflect the persisting industry pricing pressure and soft U.S. sales trends.

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