Motorcycle manufacturer Harley-Davidson Inc said on Friday that 2007 earnings would come in 4 percent to 6 percent lower than last year because of tough times for U.S. consumers, sending its shares down 7 percent.

The company said it expected 2008 earnings to rise by 4 percent to 7 percent and withdrew its 2009 outlook. In July, it had forecast growth of 11 percent to 17 percent for the two-year period.

Our U.S. dealers' retail sales have fallen sharply during August, said Chief Executive Jim Ziemer. Against the current economic background, we no longer expect worldwide dealer retail sales to increase during the second half of 2007.

Harley and other leisure product companies, including recreational vehicle and pleasure boat manufacturers, have dealt with such headwinds as higher interest rates and gasoline prices, as well as the downturn in the U.S. housing market. All those factors have weighed on consumer confidence and put a crimp on discretionary spending.

The Milwaukee-based company company said it expected to ship 86,000 to 88,000 Harley-Davidson motorcycles in the third quarter, after originally planning for 91,000 to 95,000.

Harley-Davidson forecast 2007 earnings of $3.69 to $3.77 per share, compared with $3.93 in 2006, and said revenue would decline modestly. As recently as July, the company had said it expected earnings per share to rise by 4 percent to 6 percent this year.

Ziemer said initial reports about the 2008 model year motorcycles from its dealers have been excellent, but this is a difficult time for the U.S. consumer.

For 2008, Harley said it expected moderate revenue growth and lower operating margins as it sees continued challenges in the U.S. retail motorcycle market.

In trading before the market opened, Harley shares had fallen to $50.15 -- their lowest level in more than a year -- from their New York Stock Exchange close of $54.09.

At Thursday's close, the stock was already down about 25 percent for the year, while the broad Standard & Poor's 500 index had gained 4 percent.

(Reporting by Scott Malone in Boston, Ben Klayman in Chicago and Lewis Krauskopf in New York)

Retail sales