Key Takeaways
- Whirlpool delivered a Q1 loss of 56 cents per share versus expectations for a 38-cent profit
- The appliance giant halted its dividend after maintaining quarterly payouts for seven decades
- Annual EPS outlook was dramatically reduced from $7.00 to between $3.00 and $3.50
- Shares of WHR dropped 11.9% to close at $48.21 on Thursday
- Management blamed tariff uncertainty and demand conditions comparable to a recession
Shares of Whirlpool tumbled to $48.21 on Thursday, sliding 11.9% after the appliance manufacturer disclosed an unexpected first-quarter loss and announced the elimination of its dividend.
The home appliance producer revealed a Q1 loss of 56 cents per share with revenue totaling $3.3 billion. Analysts surveyed by Wall Street had anticipated earnings of 38 cents per share on revenue of $3.4 billion. In the same period last year, the company generated earnings of $1.70 per share with sales reaching $3.6 billion.
Management also dramatically lowered its annual earnings forecast. The company now projects earnings between $3.00 and $3.50 per share, a steep decline from its previous outlook of $7.00. Free cash flow expectations were also reduced from $450 million down to $300 million.
The dividend elimination represented the biggest shock to shareholders. The company had maintained its quarterly dividend of 90 cents through ten U.S. recessions and every significant global economic crisis since the 1950s. Just last year, the dividend was reduced by nearly 50% for the first time in generations. Now the payment has been completely suspended, at least temporarily.
CEO Marc Bitzer discussed the decision during the company’s earnings conference call. “We would like to resume the dividend as quickly as possible, but clearly, it’s a board decision,” he said. “We need to have a better ongoing operating margin, and we want to continue to pay down our debt.”
The stock had been struggling before Thursday’s announcement. Prior to this session, WHR had declined 24% since the start of the year and 28% over the past twelve months. Looking at a five-year timeframe, shares have plummeted more than 80%.
Tariff Policy Changes Create Additional Headwinds
Trade policy has created significant complications for the business. Whirlpool produces approximately 80% of its goods in the United States, which theoretically provides an advantage when import duties are elevated. However, in February, the Supreme Court struck down the Liberation Day tariffs that had been protecting the company from foreign competition. Once those protections disappeared, overseas manufacturers flooded back into the market with aggressive pricing.
Simultaneously, separate Section 232 tariffs on steel and aluminum increased Whirlpool’s raw material expenses. This dual tariff impact — losing competitive protection while facing higher production costs — severely compressed profit margins.
In April, Section 232 tariffs were reconfigured to impose a blanket 25% duty on the complete value of imported appliances, rather than only on the steel component. Bitzer stated the revised framework provides Whirlpool with a more transparent competitive advantage versus importers. Yet investors remain skeptical about whether this will translate to improved performance.
Citi analyst Kyle Menges observed that “industry demand reached recession-level lows” in North America throughout the quarter, with aggressive competitive pricing intensifying the challenges. He noted that Whirlpool’s double-digit price increases “should be relatively defensible.”
Price Increases and Manufacturing Expansion
The company has implemented price increases across its product portfolio of washing machines, dryers, refrigerators, and cooking appliances throughout this year, with additional price hikes scheduled for summer. Bitzer recognized the increases will probably exceed those of competitors, but defended the strategy by highlighting new product innovations.
Earlier in the year, the company secured $1.1 billion through a fresh equity offering. The move attracted criticism from investor David Tepper of Appaloosa Management, who characterized it as excessive shareholder dilution and recommended Whirlpool consider strategic partnerships or acquisition opportunities.
Last month, the company unveiled a $60 million capital investment in a new manufacturing facility in Perrysburg, Ohio, dedicated to producing washer and dryer components.
Management also pointed to deteriorating U.S. consumer sentiment — which they partially attribute to escalating oil prices driven by the Iran conflict — as a factor suppressing appliance purchases during the quarter. Organic net sales declined 6% year-over-year in the first quarter.
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