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Harley-Davidson sales may fall

Difficult time for the U.S. consumer made Harley-Davidson send shares downward.

Dealer sales fell sharply in August and the classic motorcycle maker said it would cut shipments to those dealers for the remainder of the year.

"Against the current economic background, we no longer expect worldwide dealer retail sales to increase during the second half of 2007," Ziemer said in a news release.

Company shares fell nearly 8.6 percent, or $4.64, to $49.45 in midday trading Friday.

Harley-Davidson said it anticipates 2007 net income to drop 4 percent to 6 percent to a range of $3.69 (2.69 EUR) to $3.77 (2.75 EUR) per share. The company reported a 2006 profit of $3.93 (2.87 EUR) per share.

Analysts polled by Thomson Financial have predicted earnings of $4.12 (3.01 EUR) per share.

Harley-Davidson said it is lowering its planned third-quarter shipments to between 86,000 and 88,000 units from its prior estimate for shipments in a range of 91,000 to 95,000 units. Full-year shipments are expected to be between 328,000 and 332,000 units, down from 349,196 units last year.

The company now expects 2008 earnings growth between 4 percent and 7 percent on moderate revenue growth and lower operating margins. It previously forecast earnings growth between 11 percent and 17 percent for 2008 as well as 2009.

The company said it was not providing a 2009 guidance at this time.

Harley-Davidson hinted at a possible cut in July, when it revealed in its second-quarter earnings release that U.S. retail sales in the first half of the year fell short of expectations. During the quarter, worldwide retail sales of the company's motorcycles fell 1.2 percent from the previous year, with U.S. sales down 5.5 percent.

The U.S. motorcycle market has been experiencing a decline for the last four quarters, UBS analyst Robin M. Farley wrote in a research note Friday. Harley said in July that the overall U.S. market was down 6.2 percent for the quarter.

Harley-Davidson held a sales promotion in July that helped clear some of the 2007 stock, Ziemer said, but sales in August fell sharply. Conditions do not look like they will improve worldwide for the rest of the year, he said, and expectations are that 2008 will be "challenging" as well.

A growing share of Harley-Davidson sales are made overseas, but most of its motorcycles are still bought in the United States.

The company sent 28 percent of its stock overseas in 2006. In the first half of this year, that number was up to nearly 40 percent of all shipments.

"While a decision to reduce shipments and expectations is never easy, it is clearly the right thing to do for the long-term health of the brand and the business," Ziemer said.

Even before Harley-Davidson's second-quarter results were reported, Farley said in the note, UBS warned that domestic sales had fallen in consecutive quarters, the first time that had happened in more than 15 years.

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