After a century-long history together, Sears Holdings Corp. will stop sales of Whirlpool Corp. products after the companies couldn’t agree on pricing terms.
The retailer will no longer carry Whirlpool brands, including Maytag, KitchenAid and Jenn-Air effective immediately, Sears said in an employee memo last week that was provided to Bloomberg on Oct. 24.
“Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price,” Sears said in the memo. The department-store chain will continue to sell Whirlpool products only until all its current inventory is depleted.
Whirlpool informed Sears in May of its decision to stop providing products, CEO Marc Bitzer said on Oct. 24. on an earnings conference call. Sears represents about 3% of global revenue for Whirlpool, which is in the process of shipping its inventory to other vendors.
“In terms of the impact of shifting that, to be honest it’s not a whole lot,” Bitzer said. He declined to give details on why the companies couldn’t come to terms.
Whirlpool is raising its prices to cover higher costs for raw materials. The company’s shares fell as much as 11% to $163 in New York on Oct. 24, a day after cutting its earnings forecast and posting quarterly results that missed analysts’ projections. The stock move was its biggest intraday decline in a year.
Whirlpool will continue to supply about 10 branded products to the retailer, Bitzer said.
The manufacturer expects earnings of $13.60 to $13.90 a share this year, down from a previous forecast of as much as $15. Third-quarter results also fell short of Wall Street’s predictions.
The outlook renews concerns that Whirlpool can’t keep its costs in check, especially as the company struggles to integrate Italy’s Indesit SpA business. Appliance shoppers also have been gravitating toward lower-end machines, hurting Whirlpool’s price mix. In a bid to get back on track, Whirlpool is reducing expenses by $150 million -- on top of existing cost-cutting efforts.
Whirlpool, then operating as Upton Machine Company, sold its first washers to Sears in 1916, according to the manufacturer’s website. Five years later, Sears loaned Upton $87,500 to expand its washer factory, eventually converting that to a stake in Upton. To feed growing demand at the retailer, Upton merged with another washer maker in 1929.
For years, Whirlpool manufactured appliances under the Kenmore name, then sold exclusively at Sears. The retailer announced earlier this year that it would begin selling its Kenmore appliances through Amazon.com Inc.
By Lisa Wolfson and Jonathan Roeder