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Major Appliances: The Year In Review, Part II



New York If change came fast and furious to the major appliance industry during the first half of 2002 (see TWICE, June 24, p. 36), the pace would only quicken during the final six months of the year.

Among events that helped shape this once staid industry between July and December was the placement of major refrigeration programs by newcomers LG Electronics and Samsung; the U.S. introduction of Electrolux-branded majaps to compliment Frigidaire's broader line; and a planned expansion of Maytag's retail store concept.

But while the majap news flowed, sales began to stall, as monthly factory shipments took a tumble and industry leader Sears and No. 3 white goods retailer Best Buy found their appliance businesses foundering.

Whether this is merely a bump in the road, or the beginning of another retrenchment amid the ailing economy and drums of war remains to be seen. Stay tuned.

JULY

Maytag Aims High: In a sharp departure from recent white goods history, when vendors and retailers were slashing prices to grow market share and volume, Maytag set its sights on the up-market end of the business, and the strategy is apparently paying off. According to chairman/ CEO Ralph Hake, the company is focused on selling within the upper one-third of majap price points, and is "willing to walk away from low margin business." The newfound focus, combined with cost control initiatives and improved manufacturing processes, will yield projected full-year earnings of $3.10 a share, he said, compared to last year's $1.77.

Sweet Smell of Success: Leading majap makers Maytag, Whirlpool and Electrolux reported solid sales and earnings gains for the second quarter. Maytag attributed its whopping 23 percent sales hike to the addition of Amana's coffers, while Whirlpool said robust consumer spending and productivity improvements sent sales soaring 11 percent and operating profit up 20 percent. For Sweden's Electrolux, U.S. shipments grew about 9 percent for the period while operating margin nearly doubled to 8.9 percent, owing to a new mix of margin-friendly products.

AUGUST

Sizzlin' Summer Leaves AC Cupboards Bare: Thanks to a hot, sticky July, dealers, distributors and manufacturers said they would end the season with little or no room air inventory. While this season's AC sales didn't set any records, June factory shipments were already up 22.3 percent over the prior year period, while the heat and humidity of early July helped deplete stockpiles and send national chains scurrying for fill-in supplies.

Stronger Than Dirt: Technological innovation, a key driver in consumer electronics, is now playing a role in the staid floor care category. New uprights from Hoover and Bissell helped to reinvent the business by employing novel design approaches for improved deep cleaning. Hoover's updated SteamVac, for one, uses the company's new dual air path V2 technology for enhanced air flow. Bissell's ProHeat Pro-Tech and ClearView Plus units, by contrast, feature a sixth row of power brushes to lift out deeply settled dirt from carpets plus a 700-watt on-board heater to raise tap water temperature as much as 25 degrees.

SEPTEMBER

Asian Invasion: Far East majap makers made further U.S. inroads when Samsung and LG Electronics began rolling out major refrigeration programs with, respectively, Best Buy and some half-dozen dominant regional chains. Best Buy said it would sell Samsung's first-ever full-size refrigerators at all of it 500-plus stores, while LG became the first majap vendor to win widespread placement of an Internet-ready refrigerator. The latter debuted at P.C. Richard, Fry's, H.H. Gregg and others for $7,999, while Samsung's bottom mounts and side-by-sides will range from $799 to $1,699.

Buying Group Update: Three of the nation's top buying groups announced steady sales gains and new initiatives at their summer shows. Many members of the MARTA Cooperative of America are enjoying their best year ever, reported executive director Warren Mann, while the Nationwide Television and Appliance Association introduced competitively priced health, property and casualty insurance programs and a major holiday sales promotion. Meanwhile, Associated Volume Buyers/Brand Source said it will increase its media exposure in 2003, introduce a turnkey CE program with leased modular displays, offer its own low-priced insurance, and partner with the True Value hardware dealer co-op on outdoor grills and warehouse space.

OCTOBER

Anyway You Slice It: Sears and its vendor partners developed a pair of new refrigeration platforms that provide entirely new configurations for compartments. The Kenmore Elite SpaceStation, made by Whirlpool, is a 19-cubic-foot bottom mount whose freezer section comprises two-thirds of the unit, while its Amana-made sibling, the 25 cubic foot Trio, combines a bottom mount freezer section with a side-by-side fresh food section. The latter will debut in January for $1,800 while the former will hit Sears this spring at $1,200.

What's In a Name: Frigidaire began shipping the first products bearing a combined Frigidaire and Electrolux logo. The new nameplate, Frigidaire from Electrolux, represents the first U.S. phase of a global re-branding program begun four years ago by its Swedish corporate parent. The new badge appeared on 22 of vendor's high-end Professional Series refrigerators, dishwashers and cooking products in October.

Dot's All, Folks: began offering a full spate of GE major appliances. The e-commerce site of Wal-Mart's Sam's Club warehouse club division is offering over 130 GE models including washers, dryers, refrigerators, freezers, dishwashers, ranges, over-the-counter microwave ovens and trash compactors in a host of colors and configurations. GE handles fulfillment and installation, as it does for The Home Depot and select Wal-Mart stores.

NOVEMBER

Macho Majaps: Whirlpool is turning its attention to the majap industry's most neglected demographic and room of the house: men and their garages. Its new Gladiator GarageWorks line of modular appliances and storage units features rugged styling and winter-proof construction that extends to a compact and full-size refrigerator and a trash compactor. Elements of the collection are debuting this quarter at Lowe's.

South of the Border: Maytag will move much of its refrigeration production to Mexico late next year in order to cut costs and boost earnings. As a result of the relocation, the company will shut its Galesburg, Ill. facility, a former Admiral plant that employs some 1,600 workers, by late 2004. Separately, Maytag has formed a new luxury kitchen and commercial foodservice division called the Maytag Specialty Group that will be comprised of its Amana Commercial Products unit and its Jade Products subsidiary, which makes commercial kitchen products and Dynasty brand residential white goods.

DECEMBER

Dealers See Decline In Value-Priced Majaps: Retailers are reporting a slump in appliance sales that is affecting the big volume, popular price point sector, as reflected in double-digit declines in Sears' mainstay majap business and the category's sub-par performance at Best Buy. The downturn was reflected in shipment data from the Association of Home Appliance Manufacturers indicating autumn declines in the core refrigeration and home laundry categories. Still, dealers say sales of high-end to luxury-level goods remain strong.

Changing Channels: Maytag plans to nearly double the size of its 2-year-old Maytag Store appliance chain to a minimum of 49 units next year. The retail stores, which carry the corporation's full brand assortment of kitchen, laundry and floor care products, are independently owned and operated, and target markets where brand penetration is weak. Maytag Appliance president Bill Beer described the new stores as "a blip on the radar screen" compared to home improvement chain expansion, when questioned by analysts about their impact on independent dealers.


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