As Maytag Corp. cuts costs to boost profits, analysts also say the appliance maker needs to develop innovative products that stand out to capitalize on a consumer shift to washers and refrigerators with extra features.
Maytag, whose earnings have been pinched by high steel costs and a slump at its Hoover vacuum unit, built its reputation on the dependability of its appliances. But now, consumers want much more than that.
“Quality and dependability are almost givens now, and the consumer is looking for something with a little more contemporary styling,” said David MacGregor, an analyst with Longbow Research who conducts monthly surveys of appliance retailers.
These days, companies like LG Electronics of South Korea make refrigerators equipped with television and Internet screens. Appliances are also looking more stylish as companies offer various color finishes, such as Pacific blue, smooth black and stainless steel.
“The key for Maytag longer-term is to make significant progress in improving its cost structure as well as introducing more successful and effective new products,” FTN Midwest Research analyst Eric Bosshard said in a recent research note.
Retailer Best Buy Co. cited customer demand for LG and other new brands in deciding to drop Maytag appliances later this year.
Maytag, the No. 3 U.S. appliance maker, earned high marks on innovation in the 1990s when it unveiled front-loading washers and dryers that saved water and energy.
“Years ago, Maytag was pretty much on the cutting edge,” said Geoff Wissman, a vice president at consultants Retail Forward. “It hasn’t been on that tip as much recently.”
As a result, “I think (Maytag) is potentially not perceived by the retailers as being as good of a strategic partner as some of the other options out there,” Wissman added.
Recently, Maytag has offered consumers something different, including a wide-by-side refrigerator, a side-by-side configured to give more refrigerator space at the top and more freezer space at the bottom. It also introduced the Neptune Drying Center, a tall product that combines a bottom tumble dryer with a top rack where clothes can hang to dry.
“While they’ve put out a lot of new ideas into the market, none have really resonated with the consumer,” MacGregor said.
Still, Wissman does not expect Maytag to get dropped by other retailers. “The Maytag brand is still very well respected among consumers” and distributed widely, he said.
During a recent conference call, Maytag cited stiff competition in laundry products but was upbeat, noting that a redesign of its front-loading Neptune washer and dryer will be unveiled this year.
“We do have lots of new laundry products which will certainly help our product position,” Chairman Ralph Hake said.
Products are also a key part of Maytag’s effort to revive Hoover, which represents about 15 percent of Maytag sales but has lost market share as consumers defected to rival vacuums. Analysts have said Maytag may sell Hoover if it keeps underperforming.
While some question whether Maytag will survive, others expect the company’s cost cuts will help its competitive position over time.
“I hardly think Maytag is down for the count,” said Alan Wolf, a senior editor at TWICE magazine, which tracks the appliance industry. “It’s a viable player and an important part of the mix for many retailers.”
From Reuters