Harley-Davidson Inc. trimmed its full-year forecast for motorcycle shipments, citing problems with supply of an electronic component after the earthquake and tsunami in Japan, sending its shares down in trading Tuesday.
The company declined to name the manufacturer but said it was looking at other options for obtaining the microchip that helps run radio displays on its motorcycles.
"These are sub-tier suppliers. In other words, we buy our radios from a U.S. supplier. But they then source chips and other components from sub-tier suppliers, who in turn might source something from yet another sub-tier supplier," chief executive officer Keith Wandell said.
"We felt that we have great mitigation plans in place," Mr. Wandell said. "Again, there could be a timing issue. And that's why we were just a little bit conservative."
Harley lowered the bottom end of its full-year motorcycle shipment forecast to accommodate a slight supply chain interruption. The new forecast is for the company to ship 215,000 to 228,000 Harley-Davidson motorcycles to dealers and distributors in 2011. That outlook is adjusted from 221,000 to 228,000 motorcycles.
Harley-Davidson's shares were down 4.8 per cent at $37.82 (U.S.) at midday, off an earlier low at $37.57.
"It's had a good run, and any kind of downward guidance is going to put pressure on the stock," said R.J. Hottovy, director of consumer research at Morningstar. "No need to overthink this one."
The company said it expects to ship 62,000 to 67,000 bikes in the second quarter.
"We think Harley will ultimately get a pass on the Japan issue, so the stock should recover," RBC Dominion Securities analyst Edward Aaron said in a research note.
Harley-Davidson is seeing renewed demand for its motorcycles as the economy recovers from a downturn. The motorcycle maker reported a 3.5-per-cent increase in quarterly sales of new motorcycles.
"We are pleased by the growth of our dealers' new motorcycle sales on a worldwide basis, led by strength in Europe, even as we continue to encounter some headwinds in the U.S. related to the challenging macroeconomic conditions," Mr. Wandell said.
In particular, he pointed to stubbornly high unemployment - 8.8 per cent in the U.S. - and the diminished value of home equity that customers often use to buy motorcycles.
Mr. Hottovy agreed that economic weakness remains a challenge for companies like Harley-Davidson.
"It's a discretionary category it's in," he said. "While we've seen some confidence at the higher end, it's still a difficult situation."
Harley-Davidson said first-quarter income rose to $119.3-million, or 51 cents per share, compared with $68.7-million, or 29 cents, in the year-ago period.
Analysts on average had expected the Milwaukee-based company to report a profit of 53 cents a share, according to Thomson Reuters I/B/E/S.
Harley-Davidson said first-quarter earnings improvements were driven largely by income from financial services, which soared 154.6-per-cent compared with the first quarter of 2010.
Harley-Davidson said its financial services segment earned $67.9-million in the quarter, up from $26.7-million in the year-ago quarter. The increase was due to continued improvement in credit performance, the company said.