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Harley-Davidson Inc HOG

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Recreational Retail Demand to Rise at a Measured Pace, Scarce Dealer Inventory Support Shipments

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

Although unit demand in 2020 was favorable for many of the companies in the traditional recreational vehicle space, we surmise the original equipment manufacturers with meaningful market shares still have room to see further retail sales gains ahead. These market leaders have carved out new verticals for growth, which are the linchpin in our outlook for positive recreational product demand over the next five years. With the addition of boats, electric alternatives, and access to a broader demographic target market, we expect the recreational products category could grow at 3% between 2021-25, growth that we have directionally incorporated into our outlook for wide-moats Polaris and Harley-Davidson as well as narrow-moats Malibu Boats and BRP. This would represent a slowdown from retail unit growth of 3% in ATVs, 10% in side-by-sides, and 8% in personal watercraft experienced in the five years ending 2020, which closed with robust pandemic-driven takeaway (in the five years ending 2019 retail unit sales averaged negative 2%, 6%, and 8%, respectively).

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Company Profile

Business Description

Harley-Davidson is a global leading manufacturer of heavyweight motorcycles, merchandise, parts, and accessories. It sells custom, cruiser, and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear, and apparel, as well as merchandise. Harley-Davidson Financial Services provides wholesale financing to dealers and retail financing and insurance brokerage services to customers. Harley has historically captured about half of all heavyweight domestic retail motorcycle registrations, a metric it has ceded in 2020 as it has repositioned the business. The firm recently expanded into the middleweight market with the launch of the Pan America model.

3700 West Juneau Avenue
Milwaukee, WI, 53208
T +1 414 342-4680
Sector Consumer Cyclical
Industry Recreational Vehicles
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 4,600