Ending a business relationship that dates back more than 100 years, Sears announced this morning it would no longer sell Whirlpool appliances. As first reported by the WSJ, in a note sent to its stores last week, Sears said that Whirlpool was making demands that would have made it difficult to sell its appliances at a competitive price, although some have speculated that the true reason for the end in the century-old colaboration is Whirlpool’s concern about Sears viability.
“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 wrote to its employees. The department store chain added that it will provide “tools and instructions” to its employees regarding how to deal with “excess inventory,” and how to move into its Kenmore or other appliance brands.
Earlier this year, Sears CEO Eddie Lampert took aim at the retailer’s vendors, saying: “We will not simply roll over and be taken advantage of — we will do what’s right to protect the interests of our company and the millions of stakeholders we serve.” Sears went on to sue two of its Craftsman vendors in contract disputes. The lawsuits have been resolved.
The end to the partnership is effective immediately and includes the larger appliances and small kitchen appliances of Whirlpool subsidiaries Maytag, KitchenAid and Jenn-Air.
In recent years, Sears has been ravaged by new competition for years from stores such as Home Depot and also from Amazon.com and other online retailers, and has seen its business obliterated even as vendors have tightened receivables pressuring Sears’ liquidity and sending its default probability surging.
Sears said it would sell off the remainder of its Whirlpool inventory. Its stores will now only sell its Kenmore products and other brands including LG, Samsung, GE, Frigidaire, Electrolux and Bosch. The department store chain added that it will provide “tools and instructions” to its employees regarding how to deal with “excess inventory,” and how to move into its Kenmore or other appliance brands. Moving forward, Sears said it will push its other top brands for appliances, which include LG, Samsung, GE, Frigidaire, Electrolux and Bosch.
The Upton Machine Company, which eventually became Whirlpool, sold its first washing machines to Sears in 1916. Sears later took a stake in the appliance company in 1921 according to CNBC.
On its earnings call on Tuesday morning, Whirlpool said that it informed Sears in May that it would no longer supply Sears with Whirlpool brand products as companies couldn’t reach terms that were acceptable to both parties. However, Whirlpool would continue to supply Kenmore branded appliances.
To comfort concerned investors, WHR said Sears represents only 3% of total sales with branded portion only a small fraction of total sales. The Company plans to fully recover raw material cost increases over 2 years with price increase that were announced.
Still, WHR was down 10% premarket after the Michigan-based appliance manufacturer on Monday reported worse-than-expected third-quarter earnings, and trimmed its financial outlook. Whirlpool said it expected to earn $11.10 to $11.40 per share for 2017, down from a prior forecast of $12.40 to $12.90 a share. Whirlpool Chief Executive Marc Bitzer has cited rising raw material costs and “unfavorable price/mix” as weighing on the company’s margins. Whirlpool will hold its quarterly earnings conference call Tuesday morning.
As for sears, its shares have tumbled nearly 30% in 2017 with more to come.
