US Leading Home Appliance Company Losing to LG... Reduces Refrigerators and Sells Coffee Machines

US Housing Market Deterioration and Post-Pandemic Demand Decline

In the global home appliance market, American appliance maker Whirlpool, which has been trailing LG Electronics for two consecutive years, is focusing on sales of small kitchen appliances such as coffee machines and blenders. As demand for large appliances like refrigerators and washing machines has sharply declined due to the downturn in the U.S. housing market, Whirlpool's strategy is to overcome this difficult period by concentrating on the sale of highly profitable small appliances.

[Image source=Reuters Yonhap News]

According to the Wall Street Journal (WSJ) and others on the 5th (local time), Whirlpool recently announced during its earnings report that it plans to strengthen its small appliances division. Whirlpool intends to expand sales of small appliances globally, not just in the U.S., by leveraging its kitchen appliance brand 'KitchenAid,' which includes coffee machines, blenders, toasters, and more.

Whirlpool has already been preparing to strengthen its small appliances division since last year. It began financially separating this division last year and plans to disclose detailed sales figures starting with the first-quarter earnings to be released next month. Jim Peter, Chief Financial Officer (CFO), explained, "We are in the process of transforming the company," adding, "Focusing on high-growth, high-profit businesses is key."

The main reason Whirlpool is focusing on small appliance sales is the significant impact of the U.S. housing market slump. The U.S. accounts for 60% of Whirlpool's sales. With the U.S. business being core, demand for large appliances such as washing machines and refrigerators, which had surged during the COVID-19 pandemic, has sharply declined due to the housing market downturn, inevitably impacting profits.

Whirlpool's sales last year were $19.46 billion (approximately 26 trillion KRW), down 1.4% from the previous year. During the height of the pandemic in 2021, sales were $21.99 billion, a 13% increase from the previous year, but have declined for two consecutive years since then. To reduce costs, Whirlpool has already announced plans to sell its home appliance business in Europe, the Middle East, and North Africa. It has also recently implemented partial workforce reductions.

Whirlpool expects to achieve an 11-12% profit margin in small appliances by around 2026. The company forecasts the small appliance market size to grow from $1 billion last year to $1.3 billion by 2026. However, considering the overall sales scale, the proportion of small appliances is not expected to be very large. When expanded to include both small and large appliances as 'kitchen appliances,' the share of sales last year was about 22%.

Meanwhile, LG Electronics' home appliance business recorded its highest-ever sales last year, surpassing Whirlpool for the second consecutive year to become the global number one in home appliances. LG Electronics' H&A Business Division, responsible for home appliances, posted sales of 30.1395 trillion KRW and an operating profit of 2.0078 trillion KRW last year.