On Tuesday, Whirlpool (WHR 0.76%) informed investors that it was pulling its 2020 guidance in light of the COVID-19 pandemic, which is disrupting its supply chains and reducing demand for its products. The uncertainty also prompted the company to withdraw $2.2 billion from its $3.5 billion credit facility.
A portion of those funds went to pay off some of Whirlpool's short-term debt. It's holding the remainder in cash as a cushion against whatever may come in the year ahead.
Image source: Whirlpool Corporation.
While consumers' compulsion to purchases stockpiles of toilet paper, packaged foods, and cleaning supplies are dominating conversations, there are also reports that appliance retailers are selling out of deep freezers across the U.S. as people gear up for a potentially long quarantine period. That led some stock traders to anticipate Whirlpool would actually get a coronavirus-related revenue boost. For them, it's probably surprising that the impact on Whirlpool's first-quarter earnings will be even worse than its initial downside estimate of $25 million to $40 million.
It shouldn't be. Whirlpool is a global operation, and its manufacturing facilities in Italy and India are now closed as those countries are completely locked down in an aggressive effort to stem the spread of the novel coronavirus. Its production has also slowed in the U.S. and Brazil as factories comply with state and local orders to shut down nonessential businesses. Only in China is production returning to normal.
Notably, Whirlpool (so far) has not said it will cut or suspend its dividend payouts. Considering its payout ratio was a low 26% before this crisis, it's possible the dividend is safe for now. If world economies recover relatively quickly, one would expect consumer-discretionary spending to return, to the benefit of companies like Whirlpool.
With its current liquidity, Whirlpool believes it can continue operating its business worldwide throughout the pandemic. Further guidance will be given in the company's upcoming first quarter 2020 earnings release in May.
