A Whirlpool production line in Amana, Iowa
By Alan Wolf, YSN
Following months of catch-up in the wake of the pandemic, Whirlpool said its appliance production is now on par with current demand, although it still faces a 7- to 8-week backlog of orders.
Speaking with industry analysts on a fourth-quarter earnings call last week, chairman/CEO Marc Bitzer said the world’s largest appliance manufacturer is making steady, month-by-month progress toward working down its backorders, and expects inventory availability to normalize by the end of June.
“Our production yield has increased a lot,” he told analysts. “We’re also adding capacity, so every month you will see improvement … but it will still take us time to work through it.” Bitzer said Whirlpool’s production constraints were fundamentally pandemic driven, and cited transportation bottlenecks, labor shortages and factory absenteeism, and “significant” component shortages.
Given the sizeable backlog, he said sales promotions are off the table for the time being. “I don’t need to promote backorders,” he noted. “I just deliver them.” He also suggested that discounting could remain on hold for the foreseeable future given the rising costs of raw materials and transportation, but remained mum on any plans for price hikes.
Bitzer touted a solid ending to a challenging 2020, with fourth-quarter net sales up 4.4 percent to $3.2 billion in North America, and earnings before interest and taxes (EBIT) up 42 percent year over year, to $581 million for the region.
Adding to the inventory squeeze was robust consumer demand, which he expects will continue even after the pandemic recedes. Early on, “You saw a lot of COVID-related stress purchases — the freezers, the microwaves — but that has gradually shifted into a higher mix of remodeled kitchen upgrades or rebuilding or entire home construction,” Bitzer said. “We do believe increased disposable income, investments in the home and a favorable housing shift are here to stay and will drive strong demand.”
Bitzer added that consumers won’t revert to pre-pandemic patterns any time soon, and that the structural changes that the health crisis wrought will favor the home appliance industry.
“The one thing I really want to emphasize, which sometimes outside observers get wrong, is that everybody thinks everything will go back to where it used to be post-COVID,” he said. “It won’t.”
“First of all, COVID will be around us longer than we want it to be. Second, a consumer who has been essentially at home for more than a year will not change their behavior overnight. A consumer’s mind is not a flash memory you just erase.”
“That behavioral trend is not going to go away,” he continued. “And also, in the context of work, you should assume that the average consumer will spend more time at home than before. It’s just going to be that way.”
“What it leads to,” he concluded, “is a fundamental reorientation of a consumer toward the house — the purpose of the house, how I live in the house and how much I invest in the house. If you improve your home, it will benefit us. If you upgrade the kitchen, it will benefit us. If you build a new house, it benefits us. So there are multiple trends, which are all ultimately coming from a consumer reorientation to the home, which will really play in our favor.”