Nobody likes to lose a customer, and that's precisely why shares of appliance company Maytag (NYSE:MYG) fell more than 10% in yesterday's trading: The company announced that it will stop selling Maytag-branded major appliances at Best Buy (NYSE:BBY) stores beginning this quarter. (Hoover floor care products will still be sold at Best Buys.)
But why exactly did Maytag have to lose so much market value on the news? Best Buy is hardly a key customer: The company said major appliance sales at the retailer amounted to approximately 1% of total 2004 revenue and have been declining for years. (If Maytag announced it was losing Sears (NYSE:S) as a customer, then you'd have a darn good reason for panic.)
It's worth pointing out that heavy appliances are hardly Best Buy's bread and butter -- the retailer would much rather be known as a place where you can walk in wantin' and walk out smilin'. (It's hard to do that with a washer/dryer combo on your back, even if it's the one you've always wanted.) To wit, appliances, and not just heavy ones, are Best Buy's smallest product category by far. And they've become an even smaller part in recent years.
The larger picture for Maytag, however, isn't any prettier because of the news. The company is already pressured on the cost side, as Rich Smith's November article on the impacts rising steel prices have made on Maytag, Whirlpool (NYSE:WHR), and other firms notes. Increased competition -- Korean concern LG is moving in, selling to Home Depot (NYSE:HD) and Best Buy stores -- may pressure margins, though news that Sears has been raising prices has cheered some investors.
And now here's news that points to further reduced revenues on top of downbeat -- albeit encouraging, in places -- Q3 income statement numbers and the departure of two high-ranking, long-standing executives. While a 10% drop in market value seems harsh, in broader context it becomes easier to understand why Maytag investors, who'd love to see their shares move upward, have been hesitant over the last 12 months.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this article.
