Citing higher energy and steel costs along with litigation expenses concerning certain early-generation front-load washing machines, major appliance maker Maytag posted lower fourth quarter sales and earnings.
Sales in Maytag's majap segment slid 8.4 percent in the fourth quarter to $1.1 billion from $1.2 billion in the year-ago period. Operating income for majaps dipped into negative numbers during the quarter ended Jan. 1, coming in at a loss of $4.8 million, compared with operating income of $50.7 million in the same three months in 2003. The fourth quarter included restructuring and related charges of nearly $30 million.
“Higher raw material and energy costs significantly impacted our operating results for the quarter and the year,” said Ralph Hake, chairman/CEO. “We have addressed our challenge head on, and have taken decisive steps to improve Maytag's performance going forward. This includes completing our 'One Company' restructuring, which is expected to realize $150 million in annual savings.”
For the 12 months, majap sales were off less than 1 percent, coming in flat at about $4.5 billion for both 2004 and 2003. Majap operating income for the 12 months dropped to $47.5 million from a year-ago $212.3 million.
Consolidated Maytag sales for the fourth quarter slipped 8.4 percent to $1.2 billion from a year-earlier $1.3 billion. Net loss for the fourth quarter was $14.1 million, compared with income of $23.9 million in the same three months the previous year.
Consolidated 12-month sales edged downward 1.5 percent to $4.7 billion from $4.8 billion in 2003. Net loss for the year plunged to $9 million, down 107.5 percent from net income of $120.1 million the previous 12 months.
Separately, Maytag's senior VP/sales Chris Wignall has been succeeded by Paul Bognar, previously VP/general manager, Canada. Wignall has been reassigned to a special projects role, focusing on Maytag's growth initiatives. Both execs continue to report to Hake. The reassignments follow this month's departures of former majap and floor-care presidents Bill Beer and Tom Briatico.
In a conference call, Hake acknowledged that much of Maytag's earnings woes are tied to shrinking majap market share, which it is losing to “aggressive competitors” who are offering dealers better margins and more back-end money. “We don't have to offer better margins, but we have to at least be within range, and we have not been close enough,” he said.
In particular, Maytag's core laundry business, which Hake described as the company's greatest strength in white goods, has been under “pretty severe attack, which hurts us across the board with our dealer structure,” he observed.
Also crimping volume is LG's entry into The Home Depot and Maytag's exit from Best Buy, Hake noted, as well as the company's higher positioning and price points. “We play in the top two-thirds [of the market's price spectrum], but most of the industry's growth is in the bottom third,” he said.
Maytag is addressing those challenges by introducing a revamped laundry platform that will include a new 27-inch Neptune front-load washer and dryer that ships in March, and by continuing to lower the company's cost structure through such measures as sourcing finished goods and migrating production to Maytag's most efficient factories.
Hake added that Home Depot remains “a good and very big customer,” and that their business there will continue to grow, albeit at a slower rate with LG in the assortment. He also reminded analysts that Best Buy continues to carry Maytag's Hoover floor-care line, and that the company enjoys additional distribution through its chain of franchised Maytag stores.
Hake added that price hikes, which Maytag put into effect Jan. 3 to pass along higher energy and raw materials costs, appear to be sticking at retail, as reflected by dealer advertising.