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Factory Shipments Of Major Appliances Reflect Soft Market

By Alan Wolf -- TWICE, 12/9/2002

Washington — Factory shipments of white goods edged up a modest 2.1 percent in October, underscoring the soft market for majaps.

According to the latest wholesale sales data from the Association of Home Appliance Manufacturers (AHAM), the industry slump manifested itself in the core refrigeration and home laundry categories, which slipped 0.7 percent and 2.0 percent in unit volume, respectively.

The weak results — annualized to the month after the Sept. 11 terror attacks, when discretionary spending was largely suspended — confirm retailers' reports of an autumnal slump in appliance sales. The softness, dealers say, is affecting the big volume, popular price point sector, and is reflected in the monthly double-digit declines in Sears' mainstay majap business and the category's sub-par performance at Best Buy.

Indeed, concerns over Sears' flagging hard goods sales, compounded by its private label credit card woes, prompted a Goldman Sachs downgrade last month that sent the company's shares skidding to new 10-year lows. Meanwhile, Best Buy's growing impatience with majaps, and its take-no-prisoners promotions, have fueled increased industry chatter warning of an imminent departure from white goods, despite the company's insistence otherwise.

Why the downturn? Part of the problem lies with the general malaise that's engulfing retail in general. As Banc of America Securities analyst Aram Rubinson noted, "We feel this may be an especially brutal fourth quarter for many retailers … in no small part due to the absence of last year's tax rebate, [higher] energy prices, and the reversal of last year's stay-at-home effect."

Nevertheless, while entry-level sales have cooled, high-end to luxury level white goods remain white hot (see story, below) — a trend that has not gone unnoticed by the mass market manufacturers. Such recent upscale introductions as Whirlpool's Duet washer/dryer and Polara refrigerated range, and Maytag's creation of a luxury kitchen Specialty Group, acknowledge the need to aim higher as stock market-mauled baby boomers refinance and reinvest in their most important asset: their homes.

Those consumers, argues Standard & Poor's senior equity analyst Efraim Levy, have reached a stage in life where they're increasingly concerned with upgrading the contents of their homes, which should bode well for appliances and furniture.

Another beneficiary is the independent dealer channel. While the independents had felt snubbed by their suppliers' pursuit of the home improvement chains, they are now being re-embraced by the Big Four majap makers for their ability to explain and sell more sophisticated white goods.

Still, there's no getting away from volume vulnerability as the vast, gray mass market backs off from majaps. Taking it on the chin in October, as noted above, was home laundry. The sector's 2 percent decline in wholesale sales was lead by gas dryers, down 4.8 percent, while washers essentially held their ground with a 0.4 percent fall off.

In food preservation, the 0.7 percent slip in refrigerator shipments, to some 700,000 units, was partially offset by a 9.5 percent gain for freezers, to 213,600 units.

Cooking fared better. Led by an 8.4 percent rise in gas ranges — which was sparked, in turn, by an 11.6 percent gain in surface cooking units — the category grew 4.4 percent in October.

But the leader of the majap pack that month was kitchen clean-up, which rose 5 percent to 977,600 units on the strength of dishwashers, up 6.4 percent, and disposers, up 4 percent. By contrast, the big loser was home comfort, which fell 41.8 percent due to a 119.7 percent plunge in room air shipments, compared to the same extended summer period last year.

Providing a broad-brush view of the industry is the AHAM 6 composite index, which is comprised of the core washer, dryer, dishwasher, refrigerator, freezer and range sectors. What is its performance? Up 1.9 percent in October and ahead 6.1 percent for the year to date.

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