BENTON HARBOR, MICH. -As with most durable-goods categories, deep dips in consumer confidence and spending hit the major appliance business hard this past holiday season.
The first formal pronouncements came last month, with No. 1 appliance maker Whirlpool and third-ranked majaps manufacturer Maytag announcing dramatic restructuring amid a worsening business climate.
Underscoring their concerns are the latest wholesale sales figures from the Association of Home Appliance Manufacturers (AHAM), which showed steep declines in November's factory shipments.
Indeed, while all of the major appliance sectors taken together managed to eke out a modest 1.4 percent gain in unit sales over November 1999, it was only the stellar performance of microwave ovens that kept shipment levels in the plus column. Examined individually, however, each of the white-goods' core categories registered sharp downdrafts.
Showing the sharpest drop was the home comfort area, where shipments of dehumidifiers fell a staggering 4,115.5 percent, and room air conditioners showed a vexing 107.7 percent decline year over year.
Of greater concern are sales of the big non-seasonal white boxes. Most beaten up here is the food preservation arena, down 14.6 percent to 694,000 units shipped in November, compared with the 812,000 pieces that flowed out of factories during the year-prior period.
The biggest drag here was the freestanding freezer category, down 25.4 percent, although refrigerator shipments, off by 12 percent, didn't fare much better.
Also registering double-digit declines were factory sales of compactors, down 28.9 percent, and dishwashers, which were off 14.2 percent for the month. The precipitous drop-offs were offset by a more modest 2.8 percent fall in disposer sales, which kept losses within the overall kitchen cleanup category to 9.4 percent.
Automatic washers also took a hit, down 9.3 percent for the period, although dryers came through relatively unscathed with a flattish 1.2 percent decline, leaving the total home laundry category off by 5.5 percent for the month.
Buoyed by microwave ovens' 48.4 percent gains in November, the overall cooking category actually grew 23 percent to 1,897,000 units shipped. But that figure belies weakness in electric ranges, down 6.8 percent, and gas ranges, off 4.8 percent.
A more succinct snapshot is provided by the bellwether AHAM 6, whose component washer, dryer, dishwasher, refrigerator, freezer and range categories together fell 9.7 percent during the period.
The weakness in November was a continuation of a trend that took hold the month prior. According to the latest data from NPD Intelect Market Research, unit sales of the top-five best-selling top-load washers fell 16.4 percent in October over the year-ago period, while the top-five side-by-side refrigerators dropped 11.8 percent and the best-selling top-freezer units fell 8.6 percent. (See chart, p. 126).
Clearly, manufacturers are feeling the pain. In response to what Whirlpool chairman/CEO David Whitwam described as "intensified price competition, rising material costs, and slowing or declining demand," the company last month announced a 10 percent cut in its worldwide work force, representing some 6,000 jobs, and said it would slash an additional $100 million in costs over the next two years.
The company added that industry shipments for fourth-quarter 2000 likely fell
7 percent to 8 percent below the year-prior period, compared with previous forecasts of a 2 percent to 3 percent drop, and that competitive pricing pressures would continue through first-half 2001. All told, Whirlpool said, full-year industry shipments would likely be flat vs. 2000.
A day later, Maytag weighed in with a similar story. Acting president/CEO Leonard Hadley pronounced that "the industry is down more severely" than previous expectations for a flat or slightly down quarter, resulting in "lower volume in our major appliance division."
Hadley, who retook Maytag's reigns on an interim basis after its board ousted Lloyd Ward in November, acknowledged in a conference call that the company had lost market share in the cooking and refrigeration categories, although its core laundry and floor care businesses remain strong.
As part of his turnaround strategy, he intimated that wider distribution and advertising support of Maytag's flagship brands might be in the offing, based on its earlier success at bringing the once channel-restricted Hoover line to discount chains.
Hadley also acted quickly to dismantle such Ward-led initiatives as the group president structure, a planned relocation of headquarters from Newton, Iowa to Chicago, and investments in Web-based businesses and "experimental e-commerce initiatives" that were outside the core majap disciplines. Similarly, research and development expenditures, which increased substantially during Ward's watch, would be more narrowly focused on white goods and floor care products.
What does all this mean? According to analyst Aram Rubinson, a managing director at UBS Warburg, Whirlpool's and Maytag's woes are attributable to a combination of declining end-user demand, the concomitant promotional environment, and share shifts resulting from Circuit City's exit from appliances and GE's renewed push into the mass channel.
Other analysts have suggested that comparable corporate retrenchments are also taking place at GE, although they are cloaked by that company's multidivisional structure.
The biggest beneficiaries of the current environment, added Rubinson, are the No. 1 and No. 2 appliance retailers-Sears and Lowe's-which continue to consolidate their market share leads.
"As a result of the Circuit City shakeout, it appears that Lowe's and Sears are gaining the most share," he observed, citing appliance comps of as much as 20 percent and 11 percent, respectively. "That is not surprising since they are the two companies that have invested the most in an efficient distribution network."
Industry Shipments Of Major Appliances* - In 1,000s Of Units
|<p> <span class="small" id="id2702433-27-small">Product</span> </p>||<p> <span class="small" id="id2702441-30-small">2000 NOVEMBER**</span> </p>||<p> <span class="small" id="id2702448-33-small">1999 NOVEMBER</span> </p>||<p> <span class="small" id="id2702456-36-small">% Chg.</span> </p>||<p> <span class="small" id="id2702463-39-small">2000 11 mos.</span> </p>||<p> <span class="small" id="id2702471-42-small">1999 11 mos.</span> </p>||<p> <span class="small" id="id2702478-45-small">% Chg.</span> </p>|
*Domestic shipments only. Includes U.S. produced and imported products.
** For period of four weeks ended Nov. 25, 2000