Shares of venerable appliance maker Maytag (NYSE:MYG) were under pressure today after the company turned in disappointing third-quarter earnings. It said Q3 net income fell year over year and lowered its full-year guidance for 2003.
Among the culprits cited was the Hoover floor-care division, where business fell "dramatically" from last year's third quarter. (Unit sales and earnings did improve from Q2.) Maytag is continually looking to improve Hoover's offerings and cost structure -- in fact, this effort is going on companywide -- and has two low-end vacuums set to debut in the fourth quarter.
Unfortunately for Maytag, Hoover has been a problem for some time. Business was bad in the first half of 2003 amid pricing and market share declines, results were mixed in 2002 as the division saw mixed success from its products, and sales fell in 2001.
Interestingly, floor-care sales in 2000 improved largely because of product introductions. That's something Maytag hopes will help rejuvenate the division this time around, though with the two new vacuums set to debut on the low end, their impact on profit may be relatively small -- and with their introduction not coming until Q4, their impact on this year's results will likely be minimal.
Maytag has a history of growing sales through innovation and quality, though it would rather market more high-end products. Its new Neptune Drying Center, for example, is seen by the company as a stand-alone product rather than just part of a washer-dryer combo and fits neatly with Maytag's other premium offerings.
Despite a difficult competitive position in the appliance business that includes General Electric (NYSE:GE), Whirlpool (NYSE:WHR), and vacuum giant Electrolux (NASDAQ:ELUX), Maytag is a company with a strong product history and good free cash flow. It isn't going away.
But the importance of improvement at Hoover can't be overstated. It's a glaring weakness, with the rest of the business showing improved results and market share.
Dave Marino-Nachison doesn't own shares of Maytag, though he does own shares of GE. He can be reached at [email protected].
