Harley-Davidson Earnings Preview: Will The Higher Marketing Spend Attract More Customers?

-2.36%
Downside
43.74
Market
42.71
Trefis
HOG: Harley-Davidson logo
HOG
Harley-Davidson

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Harley-Davidson (NYSE:HOG) is scheduled to announce its Q2 and half-yearly results on July 28. The iconic motorcycle manufacturer has been struggling to increase its sales in its home market, which forms almost two-thirds the net shipments, as negative currency translations have given its Japanese and European competitors a pricing advantage. Moreover, as the core customer base comprising middle-aged Caucasian males continues to age, Harley has been facing an uphill battle to diversify its customer base. In a bid to boost its sales, the company is hoping to stir customer demand for its lineup by pumping more money into product development and marketing, and banking on models such as the Street 500, which are relatively cheaper, to draw-in new customers. Sales to the outreach customer base comprising young adults, women, African-Americans, and Hispanics have increased at a CAGR of 7% in the last five years, and are expected to continue growing, but their percentage composition still remains much less than that of the core customers.

In addition, international growth is crucial to Harley, especially in the absence of meaningful growth in the domestic market, where the company already commands a massive ~50% share (in 601+ cc motorcycles). Depreciation of foreign currencies against the U.S. dollar is expected to have handed a pricing advantage to its competitors. This could hinder growth for Harley in Q2.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Harley-Davidson

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