The latest quarterly AMD/Baird authorized Harley-Davidson dealer survey (April and May 2014) reported “weaker than expected retail, largely as a result of depressed traffic trend.”
Citing weather as a factor that continued to play a role especially in the early part of the survey period, Baird are now projecting in the region of 6 - 7 percent US retail growth for the year, but that by excluding the impact of Street bikes shipped into the Rider Academy training program, Baird is modelling 3 – 4 percent retail growth.
66 percent of dealers surveyed said that customer traffic in April and May was worse than expected, with 36 percent saying that new bike retail sales failed to meet expectations.
However, Baird are reporting that used bike sales in April and early May were running at some 7 percent up year on year.
Internationally, Baird’s research suggests that new unit retail sales were down in Canada, but strongly up in Europe and other international markets.
Dealer sentiment was mixed with one telling us that the “Rushmore bikes [are] having little spill-over to other models,” and another saying that they were “down this year about 25% in new bike sales.”
One dealer stated that “floor traffic is down 5%,” and another that they were “down 20% in floor traffic”; however, another dealer reported “April traffic was up 23%” and that by mid-May their MTD (Month to Date) was running at +5%.
The one thing that all dealers are agreed upon is the impact of the weather, and by way of a wider perspective one dealer told us that he had just attended a MotorCo Town Hall and that “most sentiments are the same – current conditions and outlook ratings are up across the board after being down since the economy took that hit.”
Dealers indicated that new bike inventory remains generally lean, with 83 percent indicating that it is “too low” or “about right” for this time of year.
However, dealer responses suggest that the delayed start to the spring selling season has resulted in pockets of excess inventory in some models, but that Rushmore inventory remains “tight.”
Used bike inventory appears appropriate for this time of the year, with 69 percent of dealers reporting that used inventory is “too low” or “about right.”
Baird say that overall lean channel inventory levels are leaving dealers willing to stock more units, which they believe makes full year shipment forecasts robust.
Dealers remain broadly unimpressed where promotions are concerned with one dealer saying that they would “like to see more co-op dollars” and another saying that “Harley has not been proactive enough to help dealers sacrifice margin to help sell bikes.”
One dealer commented that “inventory levels of Rushmore bikes are a bit low. We can’t get enough of the hot selling bikes i.e. FLHTK and FLHXS. Used bikes are down due to lack of trade-ins and lack of new bike sales.” However, another dealer said that “I wouldn’t want any more bikes as I have lived through high demand and low inventory, and also low demand and high inventory. High demand and low inventory is definitely more profitable and fun.”
In terms of new bike pricing, 57 percent are saying that they are selling bikes below MSRP – a smaller proportion of dealers relative to last year, suggesting that dealers remain confident that retail will improve, despite a condensed selling season.
One dealer told us that there is “a lot of competitive dealing going on” and that it “seems like the number one focus is on volume.” Another said that “dealers are still giving significant discounting” despite market growth. Yet another dealer told us that “dealers are taking the hit on pricing. For the first time I’m cancelling orders,” with another telling us that “dealers from outside territory are coming into other territories and discounting hugely to gain a sale. It is not about the customer experience to them, it’s all about stealing the sale at any cost.”
Finance availability continues to ease according to survey respondents, with the overall consumer financing environment remaining stable – 89 percent of dealers report credit availability as being less difficult or unchanged compared to the year ago period.
However, one dealer believes that “HDFS is difficult to deal with. Something [has to] change. From underwriting to funding, they are way behind other lenders in all categories. H-D needs to look into a better dealer operation system than Talon and Connect”.
Baird recently established a Harley-Davidson Dealer Sentiment Index, capturing both current and longer term (3-5 year) dealer sentiment. They asked dealers about their current outlook as well as their outlook at this time last year.
Harley dealers hold an optimistic outlook based on current conditions, as dealers reported sentiment levels of 82 versus 70 last year. The 3-5 year outlook remains remarkably positive as well, as dealer sentiment is 82 versus 70 last year.
For context, sentiment readings can range from 0-100 with 50 providing a “neutral” outlook. Overall, Baird’s Harley-Davidson Dealer Sentiment Index is indicating a high level of dealer confidence.
On average, dealers are expecting retail sales to improve approximately 5 percent in 2014, but when asked to rate the retail impact of the 2014 models while results for the Rushmores were overwhelmingly positive (13:1 love/hate ratio), retail impact for the Street and Low Rider/SuperLow models was more mixed.
It would appear that whilst many dealers are excited about the Street models, lack of availability at retail has triggered negativity, and while the off-cycle release of the Low Rider/SuperLow reflect improved R&D processes at Harley, dealers are reporting less of an impact from these models as a result of the launch timing.
One dealer told us that “Rushmore has been huge. The Street is a bust until we get one. We’re going to miss all the beginning spring bike sales. Poor planning on Harley;” another one told us that “we haven’t been able to order a Street 750 or 500 for several months – very frustrating. SuperLow is way overpriced. No significant demand for Low Rider.”
Robert W. Baird & Co Inc is an employee owned wealth management, capital markets, asset management and private equity firm that was founded in 1919 and is headquartered in Milwaukee, Wisconsin. The company says that it currently has $105 billion in client assets.
Any AMD readers who would like to see this or future AMD/Baird quarterly Harley-Davidson dealer surveys in full, or wish to nominate who should receive the survey forms at their store, can contact AMD’s Information Editor Sara Viney by email (sara@dealer-world.com).