Coach (COH) and Harley Davidson (HOG), two heavily branded products that fared well in the last three years, are continuing that momentum. This has created a boon for fashion and recreational products that have built solid customer bases, and a powerful bandwagon effect for the prestige of their offerings.
Both firms cater to mutually exclusive consumer segments but both have released strong earnings this quarter and are trading heavily this week.
The international presence of this brand continues to generate returns. Sales in China were particularly strong, up almost 40%. With enormous gross margin at 72.8%, North American sales have a good cushion as growth matures in this segment.
Nevertheless, domestic sales increased 8%, primarily through direct-to-consumer channels (all those long lines at the mall!) The company is vertically integrating abroad as well to capture more high margins. The company is adept at changing to fit consumer tastes. It’s new lines offer more classic styles with fewer logos.
Forecasts for 2012 see increased motorcycle shipments of 5-7%. A lot of this volume is coming from dealers and distributors in other countries. Retail sales were strongest in the Latin America region. And while the company sold fewer units in the US, margins were strong and sales were up 6.2% in the
U.S. fans of the brand are loyal and with a 110th anniversary coming up, new customers might soon be riding Harleys. It doesn’t hurt that buying a motorcycle is still one of the most popular ways to celebrate a mid-life crisis.
Mapping out stock price to quarterly sales; the correlation is loose:
Written by Freda Ding