Whirlpool, Maker of Big Home Appliances, Focuses On Its Small Ones

Mixers by KitchenAid, a Whirlpool brand. The company will be separating out results for its small appliance business when it next reports earnings.
Mixers by KitchenAid, a Whirlpool brand. The company will be separating out results for its small appliance business when it next reports earnings.

Summary

The company is pinning its hopes on espresso machines, stand mixers and other high-margin small appliances as it slashes costs and transforms itself, CFO says.

Whirlpool, a name often associated with home-appliance bruisers like washing machines and refrigerators, is looking to cut costs and focus on selling blenders and coffee makers, its latest effort to overhaul its more than century-old business as consumers pull back on large purchases.

The company behind its namesake brand as well as KitchenAid and Maytag products is going small, pinning its hopes on its popular stand mixers, espresso machines and other high-margin small kitchen appliances, after recently navigating dramatic swings in demand for high-ticket refrigerators and other home appliances as inflation weighs on shoppers’ willingness to spend on those larger items.

“We’re in the middle of transforming the company," Chief Financial Officer Jim Peters said. “A big part of that is focusing it more on our higher-growth and higher-margin businesses."

In 2023, net earnings available to Whirlpool rose to $481 million, a turnaround from a $1.5 billion loss the previous year as the company dealt with softening demand and a significant supply-chain problem. Sales for 2023 slipped 1.4% to $19.5 billion.

Sales of food processors, blenders and other small appliances were fairly steady at Whirlpool in 2023 after significant growth during the pandemic as people spent more time cooking at home. Whirlpool aims to lure more shoppers with new offerings such as fully automatic espresso makers and two or three new cordless kitchen gadgets, the company told investors on Tuesday.

Whirlpool projects that small appliances will be a roughly $1.3 billion business in 2026, up from around $1 billion last year. The Benton Harbor, Mich.-based company expects double-digit margins for its small appliance business in 2026, with growth in the range of 10% for some of the new products, executives said this week.

Whirlpool executives spent the better part of last year separating out small appliances in the company’s financials, which analysts and investors will first see when the company releases first-quarter results in April. At the same time, the appliance maker is aiming to cut hundreds of millions of dollars in costs this year, in part with head count reductions, while also divesting its appliance business in the Europe, Middle East and North Africa (EMEA) region, which accounts for about 20% of revenue.

Like others in the industry, Whirlpool, which gets more than half its revenue from North America, has been stymied by a depressed U.S. housing market. Americans have been skipping appliance purchases as existing-home sales plummeted to a nearly three-decade low last year as homeowners grew reluctant to give up their low mortgage rates.

Whirlpool’s shift also comes as consumer confidence unexpectedly slipped in February, with the Conference Board index dropping for the first time since November.

Peters is optimistic that existing-homes sales, the primary driver of about a quarter of Whirlpool’s sales, will pick up later this year or next. “Like many folks in our space, we’re waiting for [it,]" he said.

The company isn’t waiting to put its plan in motion.

Along with its emphasis on small appliances, Whirlpool’s refresh includes divestment of its European major appliances business, likely in April, to focus on businesses with higher growth and margins. Exiting the EMEA region, where Whirlpool does business in more than 30 countries, will tighten Whirlpool’s structure and may unlock up to $300 million annually that would have been invested to grow that business, Peters said.

All told, Whirlpool this year aims to cut between $300 million and $400 million in costs. That comes after roughly $800 million clipped in 2023, partly achieved by bringing down head count through attrition and not backfilling roles.

Roughly a quarter of the cuts this year will carry over from cost-reduction efforts set in motion in 2023, with another 50% coming from annual assessments of things like suppliers and how products are made.

The rest of the reductions this year will come from a simpler company structure once the European business is divested, Peters said, which will mean more cuts to staff. “Obviously as we go through and simplify, that will affect over time the number of heads and jobs that you need," he said.

Moreover, Whirlpool is carving out its small appliance business as a stand-alone global segment.

Investors and analysts previously would see reporting by four regions—North America; Latin America; EMEA; and Asia—which included both small and major appliances for each.

Beginning with the current quarter, Whirlpool will report on small appliances separately on a global basis, while keeping region-specific reporting for major appliances. This will include the EMEA region for a temporary period, but only until Whirlpool unloads that part of the business.

The rationale behind the reporting change is to provide more insight into how the small appliances business is doing, which Peters said investors and analysts have wanted for years.

“This is helping them to better understand the size of this business, the scale," he said. It is also, according to the CFO, a logical step to report on small appliances separately and on a global basis because those products, unlike the large appliances, are largely common in terms of what they offer and where they are manufactured.

Whirlpool will continue reporting the same metrics, such as sales growth, asset bases and earnings before interest and taxes, for the new business segments.

Analysts seem to welcome the changes, including the reporting one. “If we’re talking about it as an important growth driver, people want to be able to connect the dots from quarter to quarter to quarter and gauge the progress," said David MacGregor, an analyst at Longbow Research who expects the shifts may help turn around sales.

Besides the drop in Whirlpool’s 2023 net sales, its shares, at around $107, are off around 21% from a year ago. For now, Whirlpool is somewhat capital-constrained: free cash flow is down and the company will pay down at least $500 million in debt this year, MacGregor said.

“It makes a lot of sense," he said of the plan. “But it’s going to take some time to unfold."

Write to Jennifer Williams at jennifer.williams@wsj.com

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