Diving summary:
- Whirlpool’s margins took a hit in the most recent quarter as rivals imported from Asia ahead of the tariffs and a “flood”.[ed] “A market with lower-priced inventory,” Whirlpool CEO Mark Bitzer said during the company’s third-quarter earnings call on Tuesday.
- In the third quarter, the manufacturer incurred $100 million in charges due to tariffs, mostly on imported parts rather than finished goods. Whirlpool expects tariff costs to be $225 million this year, assuming tariffs remain at current levels. “That’s a big assumption, of course, because as we’ve all experienced, there are a lot of moving parts,” Bitzer said.
- Despite the impact of the tariffs, Whirlpool managed to grow its net sales by 1% to about $4 billion in the quarter. Executives attributed this to double-digit sales growth in KitchenAid’s small appliances business and increased market share in major appliances amid new product launches.
Diving Insights:
Tariffs have been a headwind for Whirlpool, despite the manufacturer’s sizeable domestic footprint. But executives expect the tide to turn as competitors reduce inventory and face more tariffs. Ultimately, Bitzer predicted, Whirlpool would emerge as a “net winner” of the new tariff and trade policies.
Bitzer said he wasn’t surprised to see Whirlpool’s competitors build inventory ahead of the tariffs, but it “lasted longer than we anticipated.” In fact, domestic appliance imports from Asia were near record highs in the first half of the year, according to Bitzer.
It forced Whirlpool to do more advertising to stay competitive, which negatively affected pricing and mix, according to Jim Peters, the rivals’ chief financial and administrative officer. During the third quarter, the tariffs hurt Whirlpool’s margins 250 base points and Gross margin decreased 49 million dollars year after year
“There is little inventory,” Bitzer said. “This excess inventory will flow through the system at some point.”
Whirlpool is starting to see signs of slowing imports in the home appliance segment. According to Bitzer, ocean freight rates are declining rapidly, indicating a decrease in demand for ocean containers. The chief executive added that imports have also decreased after peaking in July. At the Port of Los Angeles, for one, volumes dropped 7.5% annually in September after a 0.2 percent decline in August.
As competitors work through their inventory, they will face higher costs to import finished goods into the United States because of the tariffs. Starting Oct. 5, imported home appliances are subject to countervailing tariffs as well as Section 232 tariffs, which include duties on steel and aluminum, Bitzer said.
Whirlpool, on the other hand, makes eight out of every 10 devices it sells in the U.S. using parts sourced both domestically and internationally. Additionally, 96 percent of the steel it uses in its portfolio of brands, which also includes KitchenAid and Maytag, is sourced in the United States.
The manufacturer has doubled down on its commitment to US manufacturing. Announcement of programs this month to invest $300 million in its two laundry production facilities in Ohio. Bitzer said the company sees “very attractive returns” from investing in American manufacturing and domestic products, mostly supported by tariffs on foreign imports.
“As a domestic manufacturer with more than 80 percent domestic production, we will have a clear comparative advantage over our competitors,” Bitzer said.
Bitzer said Whirlpool is projecting annual cost increases of 3 percent, while its competitors are expected to see cost increases of 5 to 15 percent, depending on their footprint. Over the next year, Whirlpool’s tariff costs will “probably be between $300 million and $350 million,” the company’s CEO said.
In addition to outperforming competitors on the tariff front, Whirlpool also expects to benefit from record new product launches in North America along with a lagged recovery in the housing market, likely in 2026 or 2027.
More than 30 percent of the company’s North American product portfolio is transitioning with new products this year — the most number of new product launches in more than a decade. Peters noted that discretionary and premium products have been hit hardest by changes in consumer spending and the sluggish housing market. As mortgage interest rates drop and the housing market improves, products in this category, such as KitchenAid mixers and accessories, will benefit.
“We’re in a great position to win the ultimate housing recovery,” Bitzer said.
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