Whirlpool’s stock rises after the company beat Q1 estimates. Jim Peters, Whirlpool Corporation CFO & EVP, joins Yahoo Finance Live to break down the company’s latest financial results, consumer trends, and outlook post-pandemic.
MYLES UDLAND: All right, the earnings parade continues, and the beats do not stop. Whirlpool just the latest company to come out and smash expectations. The company earning an adjusted $7.20 per share in the latest quarter, about $2 clear of Wall Street expectations. Revenue in excess of $5.4 billion. The Street was looking for something just under $5 billion.
And joining us now to talk through the company's latest quarter is Jim Peters. He is the CFO and executive vice president over at Whirlpool. Jim, great to talk with you once again. So let's just start with how you guys are thinking about the current state of the business and trying to tease out the trends that you think are durable growth drivers longer term for Whirlpool and how much is being pulled forward from people rapidly trying to update their homes during COVID.
JIM PETERS: Yeah, well, thanks for having me. And again, appreciate the recognizing our earnings. It was a really, really strong quarter. And on top of the expansion in earnings, we talked about the sales growth. We saw 24% sales growth. So. You know, we feel really good about the long-term demand potentials right now. And as we look at it, there's a couple drivers to that. It's, one, we do believe that demand due to housing-- and if you look right now at the whole overall housing market, there's still a shortage of housing. And, you know, you've seen articles on it recently, estimating it could be millions of units. And so, again, that's a big part of our business. And 15% plus of our business is new home sales.
But if you also look at another big part of our business is the replacement side. And that can be 50% to 55%. And while, you know, many people may have been accelerating appliance purchases, there's also been a lot more usage of appliances during this time period. And if you think about, an appliance doesn't necessarily made to last a certain number of years. It's for a certain number of uses. And so, I think that's also going to accelerate the replacement cycle.
And probably the last piece, even when we look at that, we say, you know, the industry hit a trough right around 2011 in terms and then started to grow significantly in the US from there. So, not only do you maybe have a accelerated replacement curve, but you've also got a positive period year beginning to comp. So taking all those dynamics into play, I think we're still going to see the consumer purchasing appliances for an extended period of time. And some of the things we would have talked about on the call this morning, we still have a relatively significant amount of backorders that we're filling. So the demand is still very positive out there.
BRIAN SOZZI: Jim, I read a report this morning that Whirlpool raised prices as much as 12%, just because of the commodity price inflation. Can you confirm that number? And because you raised prices, what will be the earnings impact this year from that?
JIM PETERS: Yeah, so, you know, what we did is we talked about-- we took price increases in every region of the world, and they range from 5% to 12%. And those are driven by commodity cost increases. And it's something we've done historically. And so, when you look at what we expect for the year, we raised-- as we raised our guidance today for the full year to go from $19 to $20 per share to 22.50 to 23.50, one, that's reflecting what we see as strong demand. But, two, it's also reflecting our confidence in our ability to offset these material cost increases with pricing.
And what you would have saw is we raised, in terms of the impact of materials over the year, we think will be 500 basis points. But we believe pricing and mix will actually help us gain 600 basis points. So, it is a significant part of our earnings improvement. But it's also driven by the commodity cost increases we see.
JULIE HYMAN: Jim, between sort of maybe delays in getting product to consumers and these price increases, what are you hearing from customers, both on the sort of wholesale and retail side, in terms of frustration levels right now?
JIM PETERS: Yeah, and what I would say is that, you know, as the whole COVID environment played out-- and there were obviously constraints in the manufacturing environment last year and the number of backorders began to build up-- we did hear concerns from many of the retailers and from customers. But it's not just Whirlpool. And that's the thing I have to highlight, that this is an industry wide issue. And so, you know, consumers weren't able to find many brands that weren't even ours in the marketplace at that time.
And so, a big part of our focus throughout this has been to really try and get the supply chain back on track and deal with all the difficulties we've had. And what we would say is, we're beginning to see those number of back orders come down gradually and slowly. And we do think they'll exist throughout the year. But it's so that we can get appliances in consumers' hands. But, as I said, on the other side of it is our competitors are dealing with the same issues out there. And, you know, we understand some of the frustration. It's a continuously evolving environment that we're dealing with.
BRIAN SOZZI: And Jim, historically, when Whirlpool has seen periods of inflation, you've gone back to redesigning your appliances, maybe using a different material or taking something out or perhaps shrinking the product a little bit. Are you having to redesign your products right now, just because of the inflation we are seeing in materials, but also the chip shortage?
JIM PETERS: Well, here's what I would say is that we do that constantly and consistently. And every year, we look to take out a certain amount of cost-- material costs within our products. And we have a target and a goal. And obviously, in a period with this rapid of material inflation, you still continue to try and do that and identify new ideas. But you have to offset it with some cost-based pricing also, because this was a very rapid acceleration in terms of the cost of materials that are out there.
So, you know, we do continuously do that. And many a times when we do that, we also enhance the products. And we look at ways that can we add new features, can we add other enhancements, but make sure that it meets the needs of the consumer.
MYLES UDLAND: And Jim, finally, before we let you go, I spent about six months, nine months, asking the executives why they weren't able to issue guidance. You guys came out with a full year forecast, essentially doubling your top line expectation. I'm just curious kind of what went into that and what you're looking for over the balance of this year in terms of giving the Street something to work off of. But your company is no exception-- continue to see analysts too conservative relative to where your results end up coming in.
JIM PETERS: Yeah, and listen, this is-- as a CFO, this is an environment where giving guidance has, obviously, gotten a lot tougher than it used to be in the past. And I think, you know, what I really want to highlight here is the reason we're able to give guidance and the reason we're able to raise guidance today is because we have confidence in the actions that we've taken in terms of our ability to offset the material cost increases we've seen. You know, we have confidence in our ability to catch up and meet the demand levels that are out there. And we feel good about the longer term demand levels.
And so, that's why I think as you look at the things we did, whether it's giving guidance, raising our dividend, increasing our share buyback authorization, all those are just a reflection of the confidence we have not only in our business and our industry, but in our company and the actions that we've taken. And I think it would-- you know, one thing I need to say in there, too, is we have a lot of confidence in our people, all the way from our factory workers through our salespeople, through folks in logistics and supply chain, that they can deliver on what they need to. And they will continue to deliver.
MYLES UDLAND: All right, Jim Peters, CFO at Whirlpool. Jim always great to get your thoughts. Thanks for jumping on. I know we'll talk next quarter.
