Originally created 12/15/00

Appliance earnings fall short



DES MOINES, Iowa - Maytag Corp., the nation's No. 3 appliance maker, said slower than expected sales of major appliances would drag fourth-quarter sales and earnings below expectations.

Shares of Maytag fell 9 percent on the news. Steven Wood, Maytag's chief financial officer, said the company expects earnings per share to be about 50 percent lower than last year's 82 cents for the quarter. Analysts surveyed by First Call/Thomson Financial had pegged earnings for the current quarter at 78 cents a share.

The losses came on top of a 3.6 percent decline in Maytag shares Wednesday after rival Whirlpool warned of sharply lower profits and said it would cut up to 6,000 jobs. Whirlpool is the nation's top appliance manufacturer, followed by General Electric.

Augusta-based Electrolux Home Products, the North American subsidiary of Electrolux AB of Sweden, last week announced it would lay off more than 100 employees in response to slowing sales and increased efficiency in its supply chain management.

The company, which manufactures Frigidaire brand products, cut mostly sales and customer service positions created during the past 18 months.

Job cuts at Electrolux Home Products and Maytag, which owns Williston, S.C.-based Dixie-Narco Inc., are a possibility considering the economic slowdown, said analyst Efraim Levy of the S&P Equity Group in New York.

He said housing sales early this year should have created a demand for appliances.

"Normally there's a lag effect on housing, and housing demand was strong until the beginning of the year, so that demand should still be there," Mr. Levy said, adding, "There was some dislocation because of Circuit City."

Maytag and other appliance companies were hit hard by Circuit City's departure from the appliance sales business.

Maytag spokesman Jim Powell said he will not comment on whether the company will lay off any workers and said no decisions have been made regarding production cuts. Vending machine maker Dixie-Narco employs nearly 1,800 people.

The slowdown is not limited to the appliance industry, said Nicholas Heymann, an analyst with Prudential Securities in New York.

"We believe we're in a recession currently. You've probably seen the economy in the last seven, eight weeks come to the quickest, sharpest halt since '81, '82," he said. "We don't know the depth and the duration, but we do know that deceleration has been extreme."

Maytag will get through the economic slowdown in solid form as long as it continues to target the middle to upper end of the market, Mr. Heymann said.

The North American appliance industry is expected to be down 7 percent to 8 percent in the fourth quarter vs. the same period in 1999, Whirlpool officials said Wednesday. Earlier company estimates forecast a decline of 2-3 percent.

"In spite of the weakness in the major appliance industry in the fourth quarter, which is likely to continue into the first quarter of next year, I have a great deal of confidence in this company and in the actions we are taking to refocus on our core business and strengths," Whirlpool Chief Executive Leonard Hadley said.