NYT Butchers HOG

The NYT just did a real hack job on Harley (HOG) with a very negative article that conveniently left out some positive aspects of the story. Yes, Harley has issues, and this article didn't hesitate to roll out the same hackneyed concerns: aging boomer demographic, expensive luxury item in a bad economy, questionable relevance to younger folks, and securitization issues at HDFS - yadda yadda. Nothing new there. The stock has been crushed on all these issues. I of course think the concerns are overblown to varying degrees - I'm long, and have been from significantly higher prices unfortunately.

The Times somehow managed to ignore the fact that 32% of sales are conducted overseas, and have been growing strongly (albeit not as strongly as they were before the global slowdown).

From the Q4 earnings call (courtesy of Seekingalpha.com)

"For the full year 2008, retail sales of Harley-Davidson motorcycles in our international market were up 10.3%, the fourth straight year of double-digit international retail sales increases. For the full year, the Europe region was up 6.5%, Latin America region up 47%, Canada was up 11.7%, and the Asia-Pacific region was up 7.7%. Based on our expectation of continued economic weakness in many international markets and recent trends in our business, we expect a modest decline in overall international retail sales in 2009."

Even in the face of expected flattish overseas sales this year, those are some pretty solid results for 2008. The takeaway is that when the global economy improves, we will likely see strong demand return. It's pretty irresponsible of the NYT to ignore what is likely to be HOG's major growth engine going forward (maybe they're short). Looks like investors are ignoring the Times: the stock's up > 11%...

Comments

[nathan detroit:]

Know a lot of riders who would give up their houses before they would give up their Fat Boys or Soft Tails.

Mar 23 05:47 PM

[txrancher:]

Harley's arrogance is what will bring down the company. Sales are off, the stock is down over 75%, inventories are growing and they are still asking suggested retail.

In todays markets of layoffs, credits restrictions and varied financial difficulties, Harley should rethink its selling platform in my opinion. This an example of Harleys attitude...CAlifornia has the third largest unemployment rate and a Harley dealership wrote me an email stating that they only sold to people in CAlifornia. Another dealership in California offered me a bike for a discounted price and after I was approved by Harley credit wouldn't sell me the bike for the promised price.

I guess I will go back to the "other" bikes!

Mar 23 09:19 PM

[Deansgt:]

Harley may be a luxury item, but it still gets better gas mileage than most cars, and those boomers who are getting too old to ride, live to ride.
The younger generation will be taking up the torch before long. They will get tired of the go fast crotch rockets, and the tickets, and opt for an American tradition. Cruising down the hiway on a Harley Davidson.
Don't worry about the financial analysts! Don't worry about the stock holders! If a company makes money, the stocks will take care of themselves, and everybody will be happy. The riders, and the employees of HD, and the stock holders. The analysts are never happy. They always find something to trash somebody over. They don't know any better then the average joe. They're guessing just like everybody else what the market is going to do, and individual stocks. You can't predict what stock buyers are going to do.
All stocks are down. Buy HOG! The bike, and the stock. You won't be sorry

Mar 24 07:22 AM

[Deansgt:]

I know a lot of people the same way!
I for one will do whatever I can to keep my softail!
Harley is an attitude. It's Harley spirit!
Live to ride, ride to live!
Go HOG!


On Mar 23 05:47 PM nathan detroit wrote:

> Know a lot of riders who would give up their houses before they would
> give up their Fat Boys or Soft Tails.

Mar 24 07:33 AM

[Hanoch:]

I find it difficult to put hope in overseas markets, at least in the short term. From everything I have heard, foreign economies are in even worse shape than the US. Eventually, that has to show up in HOG's sales figures.

It is hard to imagine people are buying Harleys in the current environment. Moreover, as the economy continues to deteriorate, it seems likely that more people will be defaulting on their Harley loans, which Harley can no longer securitize. Ultimately, my concern is the company is not going to have the cash flow to meet its fixed operating expenses and increasing debt burden.

Mar 24 09:16 AM

[Car Guy:]

Perhaps the reason why the article failed to mention international sales growth is that it is non-existent -- International sales were down in the 4Q08, and the company just reported that international sales were down another 21% for the first 2 months of 2009 -- there was an 8-k release on it. Many of the European economies where HOG was expecting sales growth are in even worse shape than the US.

I agree that the article brougtht nothing new to light - all of these issues were already out there. But let's not ignore the fact that the company has some very serious issues ahead of it. One could argue that the article did not drill down deep enough on the HDFS i ssues which are very serious.

Mar 24 09:42 AM

[high yield ...:]

I think as a long you are doing virtually the same thing that you are accusing the Times of doing. Focusing on your perceived positives vs. the reality of the negatives. Hopes and wishes are not very prudent strategies for investing in stocks. Look at the facts, starting in Q4 not all of 2008. That is your reality today. Past performance is not guarantee of future results!

Mar 24 10:03 AM

[tallguy:]

Honey, I know our stock portfolio has lost 60% this last two years, and I didn't expect to get laid off either, but I think now would be a great time to buy a new Harley, especially since I am only 10-15 years from retirement, and we aren't that far behind on our mortgate yet........

Disclosure Short and own a BMW, you know, the ones you see people actually riding.

Mar 24 12:35 PM

[FUJIMO:]

Tell it like it is . Did i see you in tampa LOL. A real motorcyclist . True form and fashion.


On Mar 24 12:35 PM tallguy wrote:

> Honey, I know our stock portfolio has lost 60% this last two years,
> and I didn't expect to get laid off either, but I think now would
> be a great time to buy a new Harley, especially since I am only 10-15
> years from retirement, and we aren't that far behind on our mortgate
> yet........
>
> Disclosure Short and own a BMW, you know, the ones you see people
> actually riding.

Mar 24 04:18 PM

[FUJIMO:]

So well put . Thank you for expressing my sentiment.
Buying at the improper time is like twisting the throttle for some , they do it with their ego. "or with out thought "
Remember the Old Wall street saying " Bulls make money, Bears make money but PIGS never do.
The shorters that stayed to long got burned on the pit during the rally but the bull may be roast beef again. to many extremes makes me nervous.


On Mar 24 10:03 AM high yield bonds wrote:

> I think as a long you are doing virtually the same thing that you
> are accusing the Times of doing. Focusing on your perceived positives
> vs. the reality of the negatives. Hopes and wishes are not very prudent
> strategies for investing in stocks. Look at the facts, starting in
> Q4 not all of 2008. That is your reality today. Past performance
> is not guarantee of future results!

Mar 24 04:46 PM

[HarleyBadBoy:]

Say what you will, riding/owning a Harley is different from any other brand. As they say, how many people do you see walking around with Honda tattoos? People who own Harleys will keep them if humanly possible. And once the economy turns around, they'll continue to buy new ones. HD has made some significant improvements in their line over the past few years - 6-speed trans, bigger engine, ABS option, bigger fuel tank. Not that it's on the forefront, as other brands had these options before HD. But the loyalty of Harley riders is impressive, and the company does an excellent job of making money in new ways - sponsored rides and rallies, clothing, factory "customized" models. Their marketing people are among the best. I expect a short term stagnation due to no one having much disposable cash, but a long tern growth due to customer loyalty and an aggressive and effective marketing division.

Mar 26 03:51 PM

[FUJIMO:]

Now we understand how Harley does it.


On Mar 26 03:51 PM HarleyBadBoy wrote:

> Say what you will, riding/owning a Harley is different from any other
> brand. As they say, how many people do you see walking around with
> Honda tattoos? People who own Harleys will keep them if humanly possible.
> And once the economy turns around, they'll continue to buy new ones.
> HD has made some significant improvements in their line over the
> past few years - 6-speed trans, bigger engine, ABS option, bigger
> fuel tank. Not that it's on the forefront, as other brands had these
> options before HD. But the loyalty of Harley riders is impressive,
> and the company does an excellent job of making money in new ways
> - sponsored rides and rallies, clothing, factory "customized" models.
> Their marketing people are among the best. I expect a short term
> stagnation due to no one having much disposable cash, but a long
> tern growth due to customer loyalty and an aggressive and effective
> marketing division.

Mar 27 12:31 PM

[Jav:]

More, more, that's it talk the stock down. Bad company Harley.
I need the stock cheaper so i can buy it at the price I want. Why
buy Harley stock? Because they have great product, they have been
around longer than any who comment here, and I dare say will be
here long after we are gone.

Harley just need to market their product effectively to the younger
generation, to ensure their future. I will buy a new Harley this year
and I know many others that will also. Who wants a bike that is
only fun at 160mph and will see you in a coffin more likely that to
age sixty.

Jav

Mar 29 09:49 AM

[Jav:]

Sorry, than to age sixty ( "that" was a typo )

Mar 29 09:51 AM