Whirlpool, Electrolux report Q2 slowdown but a bullish long-term outlook
By Alan Wolf, YSN
Whirlpool and Electrolux have confirmed what many appliance dealers already know: the unprecedented sales pace of the past two years has finally slowed.
In their second-quarter earnings reports, both appliance giants acknowledged the impact of high inflation, continuing supply-chain disruptions and softened consumer demand on their sales and earnings, both in the U.S. and abroad.
For Whirlpool, the three months ending June 30 brought a 4.3% decline in net sales year over year, to $5.1 billion, and a net loss of $371 million. Earnings were also impacted by a loss from the pending sale of the company’s Russia business, the vendor said.
In North America, Whirlpool’s sales slipped 2.6%, to $3 billion, and earnings before interest and taxes (EBIT) fell 25.1%. The results came amid the backdrop of a 6% decline in total industry unit volume, the company said, and chairman/CEO Marc Bitzer noted that prior price increases, cost reductions including hiring freezes, and Whirlpool’s “more profitable and agile business model” helped it eke out EBIT margin of 14.1% despite higher costs.
In an earnings call, Bitzer told analysts that a combination of inflation, the pandemic and the war in Europe led to “a significant drop [in] consumer sentiment, impacting demand” in North America during the second quarter’s promotional holiday period, prompting adjustments in production and inventory. Market conditions are unlikely to improve until after the mid-term elections, he said.
Conversely, Electrolux president/CEO Jonas Samuelson said visibility into future performance is clouded by historically high inflation, increased interest rates, global supply constraints and uncertainty around the pandemic and war in Ukraine. For the second quarter ended June 30, net sales were essentially flat and operating income fell 72% year over year due to substantially higher costs for spot buys of components and increased use of airfreight.
In North America, sales rose 0.7% amid a loss of 270 million SEK in operating income, as consumer demand declined and retail inventories rose. Electrolux was also impacted by labor shortages and “a critical faulty component,” later fixed, that nonetheless limited its production of specific high-end products.
“It is truly disappointing that our North American business area reported a loss in the quarter,” Samuelson said. As with Whirlpool, price hikes helped offset higher logistical and raw material costs, and the CEO left the door open for additional price increases in the back half of the year. “In an inflationary environment, price increases are more accepted in the market,” he said.
Looking ahead, both companies lowered their full-year financial projections in North America, with Whirlpool now anticipating a sales decline of 5% to 7%. But the longer-term outlook remains bright, with Electrolux’s Samuelson pointing to consumer demand that still exceeds pre-pandemic levels, a record wave of innovative product launches and a new after-sale focus on the consumer.
For his part, Whirlpool’s Bitzer assured analysts that “The long-term fundamental strength in consumer demand remains unchanged. Consumers continue to use their appliances at an elevated rate, alongside strong replacement demand and an undersupplied housing market.
“Our brands are strong,” he continued, “and consumers use them daily and will use them even more in the future.”