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Maytag’s Q2 Profits Tumble

7/26/2004 08:47:00 AM Eastern

Newton, Iowa — Higher steel costs, labor and litigation woes, restructuring charges and skidding vacuum cleaner sales pushed Maytag into the red last quarter.

The company reported a net loss of $41.1 million for the three months ended July 3 — compared to a year-ago profit of $25.2 million — against total sales of $1.2 billion, which slipped 1 percent year-over-year.

Chairman/CEO Ralph Hake said earnings were impacted by a number of factors, including high steel prices, a three-week strike by laundry product workers that cost the company $5.5 million, and more than $50 million in restructuring and other charges. The latter included litigation with LG Electronics over front-load washer patents, a goodwill impairment charge within the commercial products segment, and an adverse judgment over the termination of a commercial Amana distributor prior to Maytag’s acquisition of that company.

Performance was also impacted by an ongoing slump within the housewares segment, where sales of Hoover vacuums fell 13.5 percent to $144 million for the period as the brand continued to lose market share at both the value and high-end price points. “Our strategy is to introduce innovative products and reduce cost structure. Hoover has launched nine of the 15 new products expected this year. We should be better positioned at the high end of the floor-care pricing spectrum with new products scheduled for early 2005,” Hake said.

Maytag fared better in major appliances, where segment sales rose 2.4 percent for the quarter to $906.1 million, although the company gave back its majap market share gains from the first quarter and trailed industry unit growth of 9.7 percent.

“We expect sales to improve in the last half of the year as we introduce new products, which customers are anticipating,” Hake said. “In refrigeration, there is strong demand for the new Jenn-Air French door bottom-freezer model, and new Amana and Maytag French door bottom-freezer models are being launched in the second half. In laundry, Neptune top-load laundry is selling well. The NeptuneDryingCenter is seeing a sales lift with our recent incentives, and we expect the new Maytag under-counter laundry products, sourced from Samsung, to be well-received when they are launched this fall. In cooking, new Jenn-Air and Maytag double-oven ranges and other refreshed models are planned to be in the marketplace in the third quarter,” he noted.

Two bright spots within the Maytag portfolio are its brand-agnostic parts and service business and its international operations, both of which continue to grow, Hake said. The manufacturer will also enjoy lower costs going forward as a result of its sweeping “One Company” restructuring, announced last month, and the relocation of some refrigeration production to its new plant in Reynosa, Mexico, in September.

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