Harley moves to keep premium status, attract younger riders

Fri Jul 8, 2016 6:58pm EDT
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By Meredith Davis

(Reuters) - After the shares of Harley-Davidson Inc (HOG.N: Quote) took a wild ride last week on unconfirmed buyout rumors, the motorcycle maker's management is back to dealing with more basic problems, starting with pricing pressure in the U.S. market and a stagnant share price.

Getting more people to walk into one of 600 U.S. Harley dealerships and ride out on a new motorcycle remains a challenge for the Milwaukee company, and that has weighed on its share price for much of the year.

The motorcycle maker, intent on maintaining its premium status amid pricing pressures, has invested $70 million in marketing and product development for 2016 to attract new, younger riders, reverse sluggish sales and boost U.S. demand for motorcycles.

Harley extended into this month a summer sale that was supposed to end in June. Deals include a no down payment, $99 a month offer on the new $6,849 Street model, which is aimed at younger buyers.

"Typically Harley-Davidson does not have summer promotions like this," said Brian Rapier, sales manager at Fox River Harley-Davidson in St. Charles, Illinois. "It is definitely unexpected, but it is definitely welcomed. It is helping us sell more bikes."

Harley executives declined to comment, citing the "quiet period" ahead of the company's second-quarter earnings report, due to be released on July 28. Earlier this year, Harley executives said they were counting on the strength of the company's brand to avoid having to match price cuts by rivals.

"We are competing against wider price gaps and we're not going to compete by discounting," Harley's chief financial officer, John Olin, said during an April call with analysts.

The extended summer sale illustrates the competitive pressure on Harley's premium pricing strategy. Defending that strategy has other costs, including Harley's $70 million effort to reach new riders and produce new models.   Continued...

Harley Davidson's first ever electric motorcycle "Project LiveWire" is seen in Chicago, Illinois, United States, June 25, 2015. Picture taken June 25, 2015. REUTERS/Jim Young