Here’s something for the Maytag repairman to fix: his company.
Maytag Corp. lost money last year, and has flat sales and declining market share. Some investors think the dividend is under threat, while the company’s shares are near a 10-year low. And, if all that wasn’t problem enough, major retailer Best Buy Co. has stopped selling Maytag appliances as Home Depot Inc. gives more space to Maytag’s Asian rival, LG Electronics Inc.
Maytag has already fired staff and cut costs, but chief executive Ralph Hake thinks more needs be done.
Revenue is a major concern. Sales for the Newton-based company slipped last year to $4.72 billion from $4.79 billion.
Its stock closed Friday at $14.76 on the New York Stock Exchange, down from a high of $74.81 in 1999. “Clearly we have a top-line problem,” Hake acknowledged on the company’s fourth-quarter conference call. “We play in the top and middle third of the appliances range. Most of the growth in unit terms is in the bottom third, where we don’t play…. The truth is we need to gain share, and we have not done it.”
The company will continue to cut its manufacturing costs this year by sending more production overseas, Hake said last week, including work now done at its washer and dryer manufacturing plants.
He provided no further details, but those plants are in Searcy and in Herrin, Ill.
The No. 3 domestic appliance maker behind Whirlpool Corp. and General Electric Co., Maytag faces increasing incursions from foreign manufacturers. Besides LG Electronics and Samsung Corp. from South Korea, there is Sweden’s Electrolux AB, which makes Frigidaire appliances in North America, and Germany’s Bosch and Siemens.
An obvious way to improve its fortunes is to make must-have products.
But that’s become an elusive goal for Maytag, once the upscale name in the category. “The premium mainstream market has been dominated by Whirlpool’s KitchenAid, GE’s Monogram and now Electrolux’s ICON, [but] Maytag has been stumbling without a single premium brand,” Longbow Research analyst David MacGregor wrote recently. “Competitors can now offer equivalent quality, and retail salespeople are advancing this argument to consumers.”
In explaining recently why it is dropping the Maytag line, Best Buy said it was partly because its customers increasingly wanted products with “innovation and style,” and they were finding those in other brands.
Moreover, competition is so fierce that any novelty is quickly cloned. Maytag touted a tall-tub dishwasher in late 2003, but rivals responded with similar products within months.
Hake vows that Maytag will be back in the market with leading-edge technology, but Wall Street worries about the trend. “The big challenge with us is the magnitude of the market share losses the company is sustaining,” FTN Midwest Securities’ Eric Bosshard said in a recent report.
Company spokesman Karen Lynn acknowledges that “Maytag today is facing many challenges in its business, including the intensifying pressures of a global competition, retail consolidation and tough cost issues…. However, we are facing our challenges head-on with aggressive and necessary actions.”
One of Maytag’s conundrums is its Hoover unit, which represents less than 20 percent of overall sales. The floor-care unit’s revenue fell 25 percent last year and it lost money.
Some analysts like the idea of selling Hoover. FTN estimates that $1.50 in per-share earnings “disappeared with the Hoover business over the past two years “” earnings we don’t believe can be recovered anytime soon.”
Maytag’s woes have stoked concerns about its ability to survive as an independent firm, 98 years after introducing its first washing machine, a hand-crank wooden-tub model called “Pastime.”
In Newton, where Maytag is the dominant employer, rumors are rife that a foreign company is eyeing a possible takeover.
Maytag said it doesn’t respond to rumors or questions associated with mergers, takeovers or acquisitions.
From NWA News