Whirlpool CFO Jim Peters anticipates an uptick in appliance demand next year.
New home construction to lead the way
By Alan Wolf, YSN
Whirlpool is projecting an uptick in consumer demand for major appliances next year as inflation continues to deflate and a pickup in new home construction reenergizes sales.
That’s the word from Whirlpool executive VP and CFO Jim Peters, who spoke last month with Yahoo! Finance following the release of the company’s second quarter earnings report. Net sales slipped 6% for the period, ended June 30, and Peters acknowledged that right now U.S. demand is “probably a mixed bag.” Fortunately, he said, replacement sales, which comprise upwards of 55% of Whirlpool’s sales mix, are “relatively stable and strong.”
The challenge, however, lies in discretionary purchases, which make up about 30% of Whirlpool’s and the greater industry’s business. Peters described the consumer as “tentative” when it comes to this segment, due in part to hefty mortgage rates that have suppressed existing home sales.
“If you think about it,” he told Yahoo! Finance, “when people buy an existing home, one of the few things they change out might be the appliances.” But given today’s limited housing stock, the discretionary segment, while stable, “is below where we expected.”
The good news, he said, is that new home construction, which makes up roughly 15% of Whirlpool’s U.S. business, is beginning to pick up. That portends an uptick in sales by early next year as new homes are completed over the next six to 12 months. Likewise, as interest rates stabilize and more existing homes become available — or consumers opt to stay put and remodel — discretionary sales, particularly of kitchen appliances, should rebound as well.
Related: Whirlpool Positive on Future Demand
“But right now, I’d say new home construction will be the first thing to show signs of growth,” Peters said.
What’s more, despite the return of appliance promotions to pre-COVID levels, the more margin-rich premium and mass premium models remain popular with consumers, the CFO said.
Peters added that Whirlpool expects to shave off some $800-$900 million in costs next year due to falling prices for transportation and raw materials, new engineering and component approaches to product design, and workforce attrition that has reduced the company’s headcount by about 7%. This will help allow Whirlpool to continue its rapid pace of product introductions, which typically number over 100 launches a year, including the KitchenAid countertop line.
The full nine-minute interview is available for viewing here.