Analysts who track Harley-Davidson Inc. mostly agree with company officials who said a sluggish economy is to blame for the company's falling motorcycle sales.

But the analysts said an aging customer base and other concerns could contribute to weak sales, which were behind the job layoffs the company announced Thursday.

Robin Diedric, an analyst for the Edward Jones brokerage firm, said sales have been weakening for a few quarters and could be plateauing because of demographic challenges. There is little chance for growth in the company's prime riding range, males 40 to 50, she said.

Diedric said higher production costs and competition from Japanese manufacturers could also pose challenges.

Overall, Diedric said things have changed since a few years ago, when Harley-Davidsons were scarce. Those bikes are available on demand now, she said.

"Going forward, I think it's definitely a case where the company is going to have to manage its inventory to maintain pricing and to try to maintain the brand kind of where
they have it," Diedric said. "It's definitely a different company than it was a decade ago."

Tempered warnings: Craig Kennison, analyst for financial services firm Robert W. Baird & Co., also called the aging customer base a risk, but said in a research note that the risk could be overstated.


Advertisement

Though the median age of Harley-Davidson buyers is 47 and aging baby boomers will soon be out of Harley's prime riding range, Kennison noted Harley-Davidson had recently seen growth by penetrating new markets.

A number of analysts noted Harley's efforts to court new riders, especially women and minorities. In a research note, Diedric mentioned the Riders Edge learn-to-ride program offered by many Harley dealers, a new rental program, advertising changes and the introductory Buell brand meant to get inexperienced riders and women interested in the Harley brand over time.

Despite the challenges, Kennison, Diedric and other analysts said the Harley brand is retaining its powerful recognition among motorcycle riders. Kennison said the production cut resulting from the layoffs will help protect the brand because dealers will not be flooded with bikes.

"It represents an effort to protect the scarcity value of the Harley-Davidson brand, which was diminished, in our view," he wrote, saying that more bikes were selling below suggested retail prices.

The company is still the U.S. and worldwide leader in the heavyweight motorcycle market, Diedric said.

Sales figures down: Harley-Davidson Inc. announced its work-force cuts after reporting a decline in first-quarter profits Thursday, with domestic sales falling nearly 13 percent.

Overseas, the company's sales were up 16.8 percent in the first quarter. Shipments overseas represented about one-third of the company's total shipments in the most recent quarter.

The motorcycle maker cropped its guidance for 2008, saying it expects earnings to fall between 15 percent and 20 percent. Earnings per share are expected to be between $3 and $3.18.

Previously, the company had said it expected moderate revenue and earnings per share growth of between 4 percent and 7 percent.

The earnings beat the expectations of analysts, who were looking for a profit of 77 cents per share, according to a poll by Thomson Financial.

Chief Executive Officer Jim Ziemer said in a conference call Thursday that the company outperformed the U.S. heavyweight motorcycle market, which saw sales drop 14 percent in the quarter.

U.S. sales were down in the high teens in the past six weeks, Citigroup analyst Greg Badishkanian wrote in a research note. Given those trends, he said the drop in Harley's guidance may not be low enough.

Following Harley's announcement, shares quickly dipped to a 52-week low of $34.10, rebounded to $36.09 by Thursday's closing, down $0.70 from Wednesday. Shares have traded as high as $66 in the past 52 weeks.

--Reach Daina Klimanis at 505-5439 or dklimanis@yorkdispatch.com. The Associated Press contributed to this report.