Citi’s motorcycle aficionados have deciced that Harley-Davidson’s (HOG) new 2009 models are less innovative. Worse, low pricing may hurt the company’s margins:
We believe the model year 2009 (“MY09”) motorcycles should be less innovative than last year’s introduction. There were 31 family models in MY08 vs. 28 in MY09.
Also, lower pricing on several models may indicate a competitive environment and that the innovations were not significant enough to be able to raise pricing.
Lower pricing is also a negative for HOG margins, dealer profitability, and used bike prices, which are an important driver of trade-ins. Innovations include new chassis for the touring line and new styling for the V-Rod, Street Bob, and Heritage Softail Classic.
Citi also is worried about the tough consumer environment, despite easy comparisons from the year before, the bank estimates US June sales declined 20%, a terrible signal for the months ahead. The bank also expects the lack of innovation to slow international sales.
Citi reiterates SELL on Harley-Davidson (HOG), target $31.
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