'LG Electronics Soars in Q3'... Can It Surpass Whirlpool and Maintain Global No.1 in Strong Second Half?

[Asia Economy Reporter Ki-min Lee] Due to the surge in home appliance demand that was suppressed in the first half of the year amid the impact of the novel coronavirus infection (COVID-19), LG Electronics' home appliance business division, led by its premium product lineup and new home appliances, is expected to record strong performance in the third quarter of this year. Accordingly, attention is focused on whether LG Electronics can maintain its global sales No. 1 position in the third quarter, surpassing the U.S. home appliance company Whirlpool.

According to FnGuide on the 26th, the consensus (average earnings estimate) of securities firms for LG Electronics' third quarter sales this year is 16.1683 trillion KRW. This is a 20% increase compared to the sales of 13.425 trillion KRW in the same period last year. It also represents a 41% increase compared to the previous quarter's sales of 11.442 trillion KRW.

In particular, securities firms expect LG Electronics' home appliance business division, the H&A Business Division, to achieve third quarter sales this year in the mid-50 trillion KRW range, which is about 10% to 15% higher than last year's third quarter sales (5.331 trillion KRW) before COVID-19 and this year's second quarter sales (5.155 trillion KRW). Typically, LG Electronics' H&A Business Division has shown a sales pattern of higher sales in the first half and lower in the second half, but this year, due to the impact of COVID-19, home appliance demand that decreased in the first half surged in the second half.

Go Eui-young, a researcher at Hi Investment & Securities, stated in a report on the 25th, "Due to this situation (COVID-19), consumers' awareness of hygiene has strengthened, leading to increased sales of expensive steam home appliances," and added, "If the COVID-19 environment continues at least until next year, we can expect sustained improvement in the product mix." Kim Un-ho, a researcher at IBK Investment & Securities, also explained in a recent report, "Demand improvement is expected to continue after the lifting of lockdown measures, and the proportion of online purchases is expected to be higher compared to the second quarter," adding, "The effect of disaster relief funds in various countries is also an anticipated factor."

Accordingly, the industry expects LG Electronics to firmly maintain its No. 1 position, surpassing the U.S. home appliance company Whirlpool, in the third quarter as well. LG Electronics' H&A Business Division has maintained the world's No. 1 operating profit position, surpassing Whirlpool since 2017, but it was only last year that it topped in terms of sales. LG Electronics' H&A Business Division's sales in the first and second quarters of this year also surpassed Whirlpool's. However, sales in the third and fourth quarters of last year, when home appliance demand surged due to events like Black Friday in the U.S., lagged behind Whirlpool.

However, while LG Electronics has not suffered significant damage amid the COVID-19 situation due to diversification of sales channels and production lines, Whirlpool, which has its main production lines and sales channels concentrated in the U.S., struggled from the first half of this year. Moreover, LG Electronics has enhanced its brand image through its premium product lineup and new home appliances such as dryers, stylers, and dishwashers, making it promising for the second half. In fact, LG Electronics was selected as No. 1 for two consecutive years in the annual consumer satisfaction survey for home appliances conducted by the American Customer Satisfaction Index (ACSI). An industry insider said, "Due to various factors, home appliance demand for LG Electronics exploded in the third quarter, and there is also an expectation that the LG Electronics H&A Division can achieve an earnings surprise exceeding this quarter's consensus," adding, "It is expected that LG Electronics will be able to beat Whirlpool and maintain the global No. 1 position in the third quarter as well."