NEWTON, IOWA -- Citing critical disruptions of major appliances in the retail marketplace, Maytag Corp. said it expects second-half financial results to be lower than anticipated.
In July, Maytag said it expected full-year earnings per share of about $3.80. Then the company said this figure was becoming an increasingly challenging target. Now, it expects second-half earnings per share to be off about 8-10 percent from last year's second-half results of $1.74 per share.
Specifically, Maytag pegged its troubles on the temporary loss of sales volume resulting from Circuit City's exit from majaps and the loss of business at furniture-majap chain Heilig-Meyers, which filed for Chapter 11 reorganization and is closing more than 300 of its 800 stores.
Maytag said Heilig-Meyers carried Maytag majaps exclusively in almost half its stores, and that both Heilig-Meyers and Circuit City are among Maytag's top 10 majap accounts.
Maytag added other problems it expected would reflect on the state of its second-half business. These include increased price competition, much of which was triggered by Circuit City's decision; an overall softening in appliance industry sales, reflecting general economic conditions; and a Chinese vendor-Maytag venture that will not perform at break-even for the second half, as expected, due to difficult economic conditions in China.
Maytag also said the earnings-per-share performance in the second half would not be evenly split between the quarters, with the third-quarter performance expected to hit the mid-70-cent range and the fourth to come in at the low-to-mid-80-cent range.
"Our view of second-half operating performance has changed substantially based on the disruption of two major customers, the fierce competition and pricing that has resulted, and an overall softening in the industry," said Lloyd D. Ward, Maytag chairman/CEO. "Together, this creates a short-term impact we are not likely to overcome this half."
Looking at the longer term, Ward said, "Circuit City going out of the appliance business and Heilig-Meyers reducing the number of stores will not change consumer demand or the number of major appliances the industry sells.
"It does create marketplace disruption in the short term and will have an impact on our second-half business, especially in the third quarter. We expect the impact of retail dislocation to abate in 2001. Further, the loss of sales volume this half has a multiplier effect on production levels and manufacturing costs, and that also is part of what we are experiencing."
Ward said Maytag is counting on expanding and strengthening its retail reach with the decision to sell majaps through emerging channels such as Home Depot and Sam's Club. The manufacturer said it expects to be represented in all Home Depot stores by the end of this year and in all Sam's Club locations by first-quarter 2001.
"Expanded distribution is one of the fundamental strategies we are pursuing to grow our business," said Ward. "By the end of this year, we will have replaced the Circuit City and Heilig-Meyers volume."