Declining discretionary demand prompts sales promotions
By Alan Wolf, YSN
In a third-quarter earnings call with analysts last week, Whirlpool Chairman/CEO Marc Bitzer described a “challenging” appliance environment marked by greater distress purchases, slower discretionary sales and a backdrop of intensive promotions.
On one hand, he said, demand in the U.S. market is being driven almost entirely by a very strong replacement cycle due to increased appliance usage at home, a trend that Whirlpool anticipates will continue. Third-quarter sales were also boosted by the builder channel as housing availability remains constrained.
Conversely, discretionary sales, which tend to be higher-margin purchases, have been softer than the company anticipated, Bitzer noted, owing to rising mortgage rates and low consumer confidence.
The diminished discretionary demand has sparked what he described as a “more intensive promotional environment,” particularly in North America, which was not expected for another one or two quarters. “Essentially, we’re back to a pre-COVID promotional environment,” Bitzer noted, which will remain unchanged through the fourth quarter.
Whirlpool’s analysis serves as a proxy for the overall appliance industry, given the company’s top-five market share and manufacturing might.
Bitzer said the company managed to chart the choppy waters thanks to improved supply chain execution, accelerated cost reductions and the launch of several innovative products across multiple categories, such as the Maytag Pet Pro laundry pair and flush microwave hood combo. As a result, the manufacturer grew market share in almost all its key businesses, with sales rising 3% worldwide to $4.9 billion, and growing 3.8% in North America for the three months ended Sept. 30. The top line was also helped in part by last year’s acquisition of InSinkErator.
Net earnings, however, fell 42% percent during the third quarter, to $83 million, due to a higher mix of lower-margin products, while North American EBIT (earnings before interest and taxes) rose 5.7% to $298 million amid the lower cost of raw materials and transportation and improved industry demand.
Elsewhere, EU regulators approved a proposed pact between Whirlpool and Beko parent Arçelik that would spin off Whirlpool’s European operation into a joint business in which Whirlpool would hold a 25% stake.
