Appliance Vendors Navigating Through Choppy Waters

By Alan Wolf, YSN

For major appliance manufacturers, the impact of the global pandemic can be seen in factory closures and reduced consumer demand. But vendors are coping with the economic turmoil by minding costs, building liquidity, shoring up their cash positions, and setting the stage for an eventual recovery.

Adding to the list of recent plant closures is Electrolux’s manufacturing facility in Juarez, Mexico, which produces side-by-side, French door, and top- and bottom-mount refrigerators under the Frigidaire badge, and Electrolux laundry products. Addressing members on this week’s round of Region Call-Ins, AVB Merchandising Vice President Chad Evans said the shutdown resulted from restrictions imposed by the Mexican government and that production is expected to resume within the next few weeks.

More problematic, Evans said, is the closure of Mexican factories that manufacture and assemble wire harnesses, a key appliance component, which is impacting a wide swath of the industry.

Closer to home, Rick Pyle, President and Chief Commercial Officer of Alliance Laundry Systems, makers of Speed Queen brand washers and dryers, said the company is suspending production at its Wisconsin factories through May 10 in response to “supply chain constraints and demand patterns” for its products. Customer support, the order desk, financial services, Speed Queen parts and other “business-critical functions” remain operational, he said.

Elsewhere, Whirlpool shares rose 3 percent at the close of trading yesterday after the company reported “strong liquidity” and first-quarter sales that met investors’ forecasts. The manufacturer said it was sitting on $2.8 billion in cash when the quarter ended on March 31 and could tap an additional $2 billion if needed in credit facilities.

“Our fixed cost discipline and strong liquidity position enable us to weather this crisis and emerge in a position of strength,” said Whirlpool Chairman/CEO Marc Bitzer. “Ultimately, we believe the underlying momentum we saw early in the quarter will return, and we are well prepared to win in the economic recovery.”

Companywide, net sales for the three-month period, which pre-dated the brunt of the pandemic, fell 9.1 percent from the prior year to $4.3 billion, while operating profit slipped 1.1 percent to $260 million. In North America, net sales were essentially flat at $2.5 billion and earnings before interest and taxes (EBIT) declined 3 percent to $303 million.

Looking ahead, Whirlpool said the pandemic’s full impact on business is still uncertain, but the company is nonetheless forecasting a full year net sales decline of between 13 percent and 18 percent, and is looking to shave more than $500 million in costs due to the lower price of raw materials and by adjusting its supply chain to match softer demand.

LG Electronics similarly turned in a solid first quarter led by its home appliance division. Total sales slipped 1.3 percent year over year to 14.7 trillion won while operating income soared 190 percent to 1 trillion won for the three months ended March 31.

Within its appliance and air solutions unit, sales were essentially flat at 5.4 trillion won, but rose 17.4 percent from the prior quarter. Operating income was up a healthy 26 percent from a year ago, to 754 billion won, thanks to cost savings and strong sales of its InstaView door-in-door fridge, TWINWash dual washer and steam-infused LG Styler garment refreshment system.

LG forecast “higher than ever” uncertainty for business conditions for the balance of the year due to increased competition among consumer tech companies and a COVID-19-caused decline in global demand, but said it is pursuing profitability by trimming costs and optimally balancing its resources.