Harley-Davidson Channel Checks Show US Retail Sales Down Up To 3% In Q2

After performing end-of-quarter dealer checks, Longbow Research analyst David MacGregor is expecting another weak quarter from Harley-Davidson Inc (NYSE: HOG). After talking to dealers,

MacGregor said on Thursday he expects a 1 to 3 percent decline in U.S. retail sales in the second quarter. The sales weakness is particularly disappointing considering the relatively easy comparison from Q2 2016, when sales were down 5.2 percent.

In light of the negative feedback from retailers, Longbow now estimates Q2 shipments were down between 5 and 7 percent and expects Harley-Davidson to miss consensus earnings estimates when it reports for the quarter. Longbow now expects Q2 EPS of $1.35.

One retailer reported lower-than-normal store traffic due to unfavorable weather to start the summer driving season. MacGregor also mentioned that strength in used bike sales may have weighed on new bike sales. Longbow estimates used bike sales were up as much as 2 percent in Q2.

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Retailers reported no change in the percent of sales financed, which remained at about 80 percent.

Despite the potential for a disappointing quarter, Longbow maintains its Neutral rating for the stock, and MacGregor said there isn’t too much downside for the stock at its current price.

“We are NEUTRAL on HOG shares due to concerns regarding an ongoing pattern of weak U.S. retail sales resulting from increased competition on pricing/financing promotions, new models from competitors and stronger reception for used bikes vs. new,” MacGregor wrote.

Retailer commentary suggests rival Polaris Industries Inc. (NYSE: PII) likely gained market share from Harley with its Indian brand during Q2 as well.