Appliance makers LG, Whirlpool and Electrolux are raising prices to pass soaring raw material costs on to customers, but their attempts may not pass muster with bargain hungry shoppers.
Both Whirlpool and Electrolux reporting quarterly profits that fell short of estimates as they grapple with tepid demand in major markets like the United States and Europe.
Analysts have questioned the timing of the move, since consumers in the developed world continue to look for incentives to buy expensive goods like appliances.
Brian Sozzi analyst at Wall Street Strategies, citing failed attempts by Whirlpool to raise prices early last year, said that “They can call out price increases, which is what I expected to hear from them given the increase in prices of steel, but whether those price increases stick is another thing altogether.”
Some also worried that the price increases would erode Whirlpool’s market share, especially since some rivals are sticking with existing price tags.
David MacGregor, an analyst at Longbow Research, said that other manufacturers have not announced increases and appear to be planning to hold existing prices.
Whirlpool sees raw materials costs for 2011 rising by USD 250 million to USD 300 million. Its shares were down 2.3% at USD 83.46 at midday, off an earlier low at USD 79.76. Whirlpool has shut plants, cut jobs and moved some manufacturing to lower cost centers like Mexico. It has also started using common parts across its lineup of dishwashers, refrigerators and washing machines.
Keith McLaughlin CEO of Electrolux said that the rise in raw materials’ costs had been across the board. He added that “In the first quarter we are going to have raw materials hitting us immediately.”
Mr McLaughlin also said that overall markets were growing, but again most of the growth was coming in emerging markets like Eastern Europe, China and India. He added that “There is a global economic recovery happening.”