Harley-Davidson Dealers Under Pressure In Tough Econ
22 Januar 2009 - 10:28PM
Dow Jones News
Harley-Davidson Inc. (HOG) dealerships that serve as retailers,
repair shops and de facto clubhouses to legions of loyal owners are
falling victim to the company's mounting financial pressures.
At least a half-dozen have closed in recent months, hit by
sinking sales as cash-strapped Americans forgo luxury
purchases.
Dealers worry the shutdowns will begin to chip away at one of
Harley's most prized assets: its loyal customer base.
"Harley depends on a distribution network of its dealers to make
sure consumers have place to call home, a place to get bike
serviced," said Mike James, whose Santa Cruz, Calif., Harley shop
went out of business late last year.
"For Harley, losing dealers will be devastating."
Milwaukee-based Harley has been hit hard by the economic slump
that's cooled demand for motorcycles and other luxury goods. The
extent of Harley's sales slide and financial challenges will become
clearer Friday when the company releases its fourth-quarter
financial results.
Demand for the company's iconic bikes, popular among aging baby
boomers with money to spare, is quickly falling victim to
Americans' slashing of unnecessary expenses. The company's share
price has lost nearly 70% of its value in the last year. Earlier
this month, the head of its Harley-Davidson Financial Services
lending arm abruptly left the company, creating more uncertainty in
tough times.
One industry analyst is predicting 2009 will deliver Harley a
30% decline in sales, its largest drop since the 1970s.
"The reversal of the equity and real estate markets, coupled
with tougher credit access, has hampered consumers' ability to
spend beyond their means," Goldman Sachs analyst Patrick
Archambault wrote. "We think the wealth-induced days of 'trading
up' are largely behind us."
Meantime, Harley dealers are anxiously trying to ride out the
rough economy.
Dealer James is frustrated Harley hasn't done more to spur sales
through incentives from the company. And, like many other dealers,
he invested big to upgrade to an elaborate, capital-intensive
dealership, encouraged to do so by the company. "When the market
contracts and you contract your business, you still have overhead,
too much debt and not enough working capital," James said.
He attempted to sell his store to two other owners, but the
deals ultimately fell through.
Other stores have closed in cities such as Caldwell, Idaho;
Roseburg, Ore.; and Kansas City, Mo.
"We feel the economy now," said Marilyn Fox, owner of a
dealership just outside of Kansas City that closed earlier this
month. Fox and her family opted to combine that store, which wasn't
a full-line retailer, with a larger store nearby.
The closings, though still isolated, are being felt through the
Harley community.
"It's not something that Harley-Davidson dealers have
experienced since the 1980s, but it's starting to happen across the
U.S. - foreclosure and going out of business sales," one motorcycle
enthusiast wrote on the Northwest Harley Blog site.
Another Harley blog asked riders to post information about which
stores have closed. Harley owners often tour stores around the
country and were arriving to find some locations closed. Readers
quickly responded with a handful of new closings.
"We may be one of the first," James said recently. "We certainly
won't be the last."
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com
(Steve Wisnefski contributed to this article.)
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