Harley-Davidson said Friday quarterly earnings fell 26 percent as sales of its iconic motorcycles tumbled in the United States, its biggest and most important market, sending shares down 5 percent.
Turmoil in the housing market and a related tightening in credit markets have forced U.S. consumers to rein in their spending. And Chief Executive Jim Ziemer said the company was not counting on a rebound.
"Consumer confidence is low and housing and credit issues persist," he said during a conference call with analysts. "All this adds up to a weak retail sales environment for major discretionary purchases, including our motorcycles."
The market was initially encouraged by Harley's sales outside the U.S. and the absence of any announcement of production cuts, leading to a 6 percent rally shortly after the opening bell. But those gains were erased within an hour.
The Milwaukee-based company reported a fourth-quarter net profit of $186.1 million, or 78 cents a share, compared with $252.4 million, or 97 cents a share, last year.
Sales fell 7.7 percent to $1.39 billion, the company said, pulled down by a 14.2 percent decline in U.S. bike sales.
Analysts, on average, expected the Milwaukee-based company to report a profit of 81 cents a share on sales of $1.34 billion.
Craig Kennison, an analyst at Robert W. Baird, called the quarter "mixed" and said it had "something to offer bulls and bears."
Sales outside the United States rose during the quarter, led by a 45.9 percent jump in Canadian sales. Exports account for 27 percent of overall shipments.
Results were also pulled down by its financial services unit, where operating income fell 19 percent as a result of a $6.4 million write-down on customer loans -- a sign of the growing stress on U.S. consumers. Delinquency rates also increased during the quarter.
Even so, Harley-Davidson maintained its guidance for 2008 of earnings-per-share growth of 4 to 7 percent.
UBS analyst Robin Farley said Harley faced "an uphill battle" in 2008 that would probably require additional production cutbacks. Farley also predicted that all of the 2008 earnings growth Harley is promising will come from share repurchases rather than organic growth.
Last year the company bought back more than $1 billion of its stock.
Harley shares were down $2.12 to $38.00 on the New York Stock Exchange.