Majap Execs Think Worst Over, Optimistic About Retail Demand

ORLANDO, FLA. — Despite dismal sales and earnings by the nation's major majap makers, and double-digit declines in monthly factory shipments, dealers and manufacturers attending last month's Kitchen/Bath Industry Show here were downright chipper in their outlook and depicted the downturn as a mere hiccup following years of record revenue.

"Business is pretty good at the moment," observed Tina Settecase, VP/general manager of home appliances for No. 1 majap merchant Sears. "We're right on inventory plan and had a nice April after being up mid-single digits in the first quarter. We can't quite figure out what's happening — the housing industry is robust, but industry shipments are down. We're optimistic going forward and are hoping the worst is over."

The story is similar for No. 2 appliance retailer Lowe's. "Business is real good and our consumers are buying," said appliance merchandise manager Michael Goodwin. What's more, warm weather is adding even greater spring to his stores' sales step by adding volume business in room air conditioners. Overall, he added, the chain is still on track to overtake Sears as the top appliance dog by 2005.

Revenues are also rosy for NECO, the Northeast wing of the Nationwide buying group. "Business is up and we're very pleased," reported executive director Mel Hunger. "We're a little soft in brown goods, but in white goods our high-end stuff and energy-efficient stuff is moving very well."

Also boosting the category, he said, is the new range of refrigeration from the majors, and a different approach to promotions by NECO member dealers. "The new refrigerator lines are just coming in and they're moving nicely," he noted. "We've also been doing our own thing, working on our own promotions, and even though the industry is down, we're up and looking forward to a good year."

But if the retail scene is so solid, how do manufacturers account for their slumping year-over-year sales? Observed Maytag appliance division president Bill Beer, "If you take out the business that was lost to Circuit City, Heilig-Meyers and Montgomery Ward, that explains the disconnect. But I feel like we've bottomed out as an industry — April business was better than last April's —and business will continue to improve. It's only anecdotal, but the mood has changed, and I believe the worm has turned. By the end of the year the industry will probably be off by four or five points, which is not so bad coming off such a high level last year."

Electrolux's VP/marketing Mark Chambers concurred. "You have to remember that during the last three years the industry had record back-to-back-to-back shipments. Also, all retailers exited 2000 with inventories. Still, the retailers we talk to don't see the same phenomenon in retail that we see in the AHAM shipments. The numbers may be down, but it's not an accurate depiction of consumer demand. Retail demand for new products is still there. This is a replacement industry, and the industry's going to be fine."

Chambers conceded, however, that while factory sales will rebound, pricing pressures will remain.

Beer agreed: "Pricing pressures will never cease. You will see a bisected industry, with tremendous growth at the high and super-high end, but price pressure at the low and mid range thanks to some of the Asian imports."

The remedy? "Our innovation will offset the pricing problem," Beer said.