Q3 sales and earnings reflect inflationary environment

By Alan Wolf, YSN

Higher costs and lower demand were a double-whammy for Whirlpool last quarter.

Excluding the negative impact of currency fluctuations, the appliance giant reported a 9.7% decline in net sales to just under $5 billion, and a 70% decline in net earnings to $143 million year-over-year for the three months ending Sept. 20, 2022.

In North America, sales slipped 7.4%, to $2.9 billion, and earnings before interest and taxes (EBIT) fell 49% to $282 million.

“We are operating in unprecedented times,” Chairman/CEO Marc Bitzer said last week on a Q3 earnings call. “Short-term consumer sentiment and consumer demand are clearly reflective of a recessionary environment, while at the same time input costs, which you would expect to come down in a recessionary environment, are still elevated. Needless to say, this combination impacted our Q3 negatively.”

Related: Whirlpool Acquiring InSinkErator

Whirlpool said most key global markets experienced double-digit industry declines last quarter including the U.S., which dipped 10%, while the cost of freight, logistics, raw materials and energy continued to rise. To address the downturn and work down inventories, the manufacturer cut North American production back to pandemic-period levels, a reduction of about 35% or $300 million. The company also trimmed fixed costs by about 3% over the past five years, plans to cut an additional $500 million in overhead, and continued a sequential series of quarterly price increases that ranged from 5.5% to 6.75%. That, along with a more profitable product mix, helped it realize 10% margins within the North American market during the quarter.

Looking ahead, Whirlpool is “very optimistic about the mid- and long-term demand trends,” particularly in North America, Bitzer said. Among them: The advent of a sizeable remote workforce in the wake of the pandemic, which has increased appliance usage and is driving greater replacement demand. What’s more, Whirlpool believes existing home sales and new home construction will resurge over the next two years as mortgage rates decline, price appreciation slows and millennials reach their prime homebuying years, fueling discretionary sales of white goods.

Nevertheless, the industry’s current challenges are expected to persist into the first half of 2023, Bitzer said.

See also: Whirlpool Leaving Russia