Five Quarter Earning Decline At Harley

It’s not a good day to be a Harley-Davidson (NYSE: HOG) dealer.  The company reported that Q3 profits fell sharply and they tried to reassure investors that company management is taking prudent steps to manage the brand.  They also cut earnings outlook and lowered the estimate for motorcycle shipments for the rest of the year.

Harley reported that earnings for Q3 dropped 37% to $166.5M from $265M as compared to Q3 of 2007.  This is the fifth straight decline in quarterly earnings for Harley.  Revenue fell 8% to $1.42B from 1.54B in 2007.  Shipments of motorcycles fell 14% to 75,704 although they did report that international shipments were slightly up.  Dealer retail sales fell 10% this quarter as purchases of high-end motorcycles are often tied to consumer confidence and the credit market squeeze has compounded the problems.

Speaking of credit, the Financial Services segment of the company reported higher delinquency rates this quarter, a 28% decline in operating income and having to raise interest rates for all potential customers.

In a downturn climate Harley acquired MV Augsta Group, expanded on European operations, opened the new museum, rolled out MySpace and Facebook sites and hosted the 105th celebration all during this quarter.  So, given the daily doses of financial doom and credit circumstances Harley seems to be doing “okay” in trying to weather this slowdown.

Call transcript is HERE.

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Harley-Davidson Q3 Earnings Call

Harley (NYSE: HOG) will announced tomorrow at 8:00AM central time its results for the third quarter of 2008.

Harley operates in two segments: the Motorcycles & Related Products segment and the Financial Services segment. The Motorcycles segment includes the group of companies doing business as Harley-Davidson Motor Company (Motor Company) and the group of companies doing business as Buell Motorcycle Company (Buell). The Motorcycles segment designs, manufactures and sells at wholesale primarily heavyweight (engine displacement of 651+cc) touring, custom and performance motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. The Financial Services segment includes the group of companies doing business as Harley-Davidson Financial Services (HDFS). HDFS provides wholesale and retail financing and insurance and insurance-related programs to Harley-Davidson and Buell dealers.

Analyst already weighing in expect deeper declines so, it will be interesting to hear an update on the financial news and if Harley continues to expect earnings per share (EPS) in the range of $3.00 to $3.18 as they manage through a weak U.S. economy.

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