“Inflation Challenges Are Real” – Whirlpool Cuts Guidance, Warns Shortages To Persist For Entire Year

COVID-related supply chain woes and surging commodity prices due to the Ukraine conflict sparked “inflation challenges” for appliance maker Whirlpool Corporation, forcing it to cut its earnings outlook this year. 

“Inflation challenges are real, but I think we’ve been able to demonstrate we can cope with them.

“Covid-induced inflation, I think we had a pretty good sense and we dealt with it very well. And we also thought we had a pretty good grip on inflation coming into this year,” Whirlpool CEO Marc Bitzer told CNBC’s Jim Cramer on “Mad Money.” 

The century-old manufacturer and marketer of home appliances, headquartered in Michigan, reported first-quarter sales decreased 8.2% compared with the same quarter last year. The company reported revenue over the quarter ending March 31 remained 14% higher than 1Q20, meaning customers were continuing to spend on appliances. 

Whirlpool noted demand is beginning to stall and or even reverse simultaneously as rampant inflation drives costs higher and pressures margins. It said industrywide volumes in North America fell 4% in the quarter versus a year ago but stayed 24% above 2019 levels.

Whirlpool’s growth outlook shifted to near zero after expecting up to 3% for the year. It is projected to spend up to $1.75 billion on additional materials because of the soaring commodity prices. That’s more than $600 million, the company’s previous estimate, which will translate into higher retail prices. 

“The fundamental strength of consumer demand trends remain intact and the disciplined execution of our go-to market actions position us to deliver another strong year of performance in 2022,” Whirlpool CFO Jim Peters told investors. He cited “unprecedented industry-wide inflation levels and timing of previously announced price increases” on outlook cut.” 

Bitzer told Cramer: “Shortages will be around this industry probably for the entire ’22. However, they start easing. We start seeing them easing so it’s getting better, but it’s been a painful two years, to be honest.” 

Whirlpool’s inflationary pain has been felt across all corporations.

Morgan Stanley’s Mike Wilson recently wrote that the “Q1 earnings season will be more disappointing than thought” and “inflation is no longer a net positive for earnings growth.”

US producer prices are soaring, and the Fed hiking rates to extinguish an inflationary fire may do more harm than good for corporates. Also, there’s a risk of a stagflation storm in the meantime.

Here’s Cramer’s full interview with the Whirlpool CEO.