By Alan Wolf, YSN
Coming off a solid third quarter that saw net earnings rise nearly 11 percent and North American margins hit a record 19.2 percent, Whirlpool chairman/CEO Marc Bitzer was nevertheless quizzed about continuing inventory tightness during an earnings call with investors last week.
Bitzer said the chief production bottlenecks continue to stem from labor constraints in factories due to COVID-related safety protocols, as well as supply and component shortages. Combined with increased retail and builder demand, Whirlpool is seven to eight weeks out on orders worldwide compared to a typical backlog of one to two weeks, although factory output is steadily improving.
“These are the fundamental constraints, which frankly are getting better every week,” he told analysts. The good news, he said, is that “we have an exceptionally strong order book. But at the same time, it’s frustrating, because we’re letting consumers down.”
“All I can do is apologize for the delay of certain customer orders,” he continued. “We are of course trying to minimize any customer frustration… [but] as long as COVID will be around us, we have to be prepared for supply chain constraints across the entire industry. This is not Whirlpool unique.”
The supply squeeze put a damper on net sales in North America, which slipped 2 percent to $3 billion for the 12 weeks ended Sept. 30. Nevertheless, Whirlpool achieved its record margins and a 47 percent spike in EBIT (earnings before interest and taxes) due to cost reductions, limited price promotions and a richer mix of higher-end goods.
“We have significantly reduced promotion expenses,” Bitzer shared. “That is a decision which we took essentially in Q2 to kind of curtail pretty much most promotions.” At the same time, while initial demand was in freezers, microwaves and other smaller-ticket items, “We see that now across the entire home, that people are starting to invest in home upgrades,” leading to “more demand [for] higher-ticket items.”
Looking ahead, Bitzer is hopeful that these consumer trends will continue.
“We all know people are spending a lot more time at home; they’re investing in nesting,” he said. “You have structurally positive demand trends, coupled with high disposable income and low mortgage rates. You put these factors together and you have a very, very healthy mix, which gives us confidence beyond this quarter.”
“There’s a reason why some people started referring to the ‘Golden Age of Housing,’ because there is a lot of positive trends coming together,” he added. “And we do not see the structural demand trends and refocus on home and nesting going away short term. COVID, hopefully, at one point will be behind us; these trends will stay.”