Harley Davidson: "Below MSRP"

We took a quick vacation this past weekend and brought the kids to Storyland in Glenn, NH. If you've never done it and have pre-teen kids, do it, it is a wonderful place.

Anyway, on the way back home we stopped in Meredith, NH to have lunch at Hart's Turkey Farm (another great place). Now, for those of you not familiar with the NH geography, Meredith is right next to Laconia, which is essentially the center of the Harley universe in New England. Laconia is famous for two things, "Bike Week" and well, "Bike Week". My sons and I sauntered over to the massive Harley Davidson (HOG) dealership for a stroll and to look at all the bikes. One thing immediately struck me. Evey single bike in the store, almost 100 had the same tag on it "Priced Below MSRP".

I casually asked a salesperson, "What is going on, why is everything on sale"? He replied "can't move 'em and the new models are coming out". HMMMM

When I asked why he though they were not selling he replied that most people had been upgrading the last few years with two things, house money (home equity) or Harley financing which is now getting harder to get and much more expensive. He said that because of this people are either sticking with the bikes they have much longer and those who are buying, are buying cheaper, lower margin bikes. For instance, a bike that was selling for $10,000 last year was being offered below $8,000 yesterday. Both of these are very bad for Harley.

When I asked what would happen if he can't move the old models when the new ones come out, he said that they will just cut back the new model orders. Even worse for Harley.

Earlier this year when shares were at $70 I recommended waiting until they reached the mid $50's to buy. Based on my weekend visit, they may go lower still. This is a great company that makes a one of a kind product, but, people are not buying it now and that will hurt. I think we may see share prices in the $40's before the year is out.

Be patient and you may get a fantastic buy, later...