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Facing weaker than expected consumer demand in Europe and North America, Swedish home appliance company Electrolux is cutting costs in both regions and launching a turnaround program in North America.
“Market demand for core appliances in Europe and the [U.S.] so far in the third quarter is estimated to have decreased at a significantly accelerated pace compared with the second quarter, driven by the impact of high inflation on consumer durables purchases and low consumer confidence,” the company said Monday (Sept. 12) in a press release.
High inventory levels at retailers and production inefficiencies and high costs caused by continuing supply chain problems are adding to these challenges, according to the release.
Competitor Whirlpool has also reported a “challenging environment.” In its most recent quarterly earnings release, which was issued July 25, Whirlpool reported a net sales decline of 4.3% and said this was caused by disruptions in the supply chain and a slowdown in demand.
PYMNTS research has found that as inflation continues to rise, it’s taking a toll on U.S. consumers’ discretionary spending and savings.
Read more: Inflation Bites as 13% of US Consumers Spent More Than They Earned in Last Six Months
In June, 61% of U.S. consumers were living paycheck to paycheck — a share that’s 5.5 percentage points higher than that a year earlier, according to “The New Reality Check: The Paycheck-to-Paycheck Report: The Consumer Savings Edition,” a PYMNTS and LendingClub collaboration.
In response to the drop in demand for appliances, Electrolux is immediately reducing costs with a focus on operations, research and development (R&D), administration, sales and marketing.
In North America, the company is also continuing its previous plan to broaden its product offering but has appointed a new head of business area North America — Ricardo Cons, formerly leader of Electrolux Latin America — to lead a turnaround program.
“The Group cost reduction program and the North American turnaround program are expected to result in a material positive earnings contribution from both Cost efficiency and Investments in innovation and marketing in 2023,” Electrolux said in the press release.
Looking ahead, Electrolux expects demand in both Europe and the U.S. to be weak in 2023 as well.
“I think people will hold on to their wallets quite hard,” Electrolux CEO Jonas Samuelson said, the Financial Times reported Monday.
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