Whirlpool

Whirlpool announced price hikes days after authorizing $2 billion in stock buybacks 

In April 2021, Whirlpool announced it had authorized $2 billion in additional share repurchases as well as an increase in dividends. “Today the board of directors of Whirlpool Corporation has authorized an additional $2 billion share repurchase program. The new authorization is in addition to the $531 million unused portion of the previous program as of December 31, 2020.The Company’s board of directors also approved a $0.15 increase in the quarterly dividend on the Company’s common stock to $1.40 per share from $1.25 per share. The dividend is payable June 15, 2021, to stockholders of record at the close of business on May 21, 2021. ‘I am pleased to announce that we are increasing our dividend for the ninth consecutive year and have approved a significant expansion of our share repurchase program,’ said Marc Bitzer, chairman and chief executive officer of Whirlpool Corporation. ‘These actions highlight the confidence we have in our business to continue generating strong levels of cash and reflect our continued commitment to creating strong shareholder value.’” (Whirlpool, 4/19/2021)

Two days later, Whirlpool’s CFO said it would raise prices worldwide in response to commodity price increases. “Doing business amidst a global recovery from a pandemic that is sending all sorts of commodities prices higher — and triggering an inflationary semiconductor shortage — is getting costlier for appliance giant Whirlpool (WHR).  And now it’s going to ask consumers to pay more. “We took price increases in every region of the world, and range from 5% to 12%,’ Whirlpool CFO Jim Peters told Yahoo Finance Live. ‘Those are driven by commodity cost increases, and it’s something we have done historically.’” (Yahoo News, 4/22/2021)

Whirlpool repeatedly connected price hikes to strong demand and used it to justify increased earnings guidance 

Whirlpool connected the price increases to commodity inflation, but also strong consumer demand for its appliances. “Key commodities for Whirlpool have surged since March 2020 — steel and oil prices alone are up about 75% and 90%, respectively, over that time period. Hence, it’s not a shock to see an industry such as Whirlpool raise prices to try to protect its bottom line. Peters said the price increases and strong demand for appliances as people continue to upgrade their homes during the pandemic are two of the main reasons Whirlpool lifted its full-year guidance on Wednesday after the close of trading.” (Yahoo News, 4/22/2021)

Thanks to price increases, Whirlpool reported a 134% increase in operating profits in the first quarter of 2021 over the previous year.  “Home appliances company Whirlpool Corp announced on Wednesday that its operating profit jumped 134.9 percent in the first quarter, led by a price hike and strong sales of home appliances during the pandemic. The Q1 2021 results smashed the estimates and raised the forecast for profits for the entire year, as the company has benefitted from the spike in demand for home goods and appliances. The operating profit of the appliance maker in Q12021 climbed to $618 million from $263 million in the same period last year. Whirlpool’s net sales have increased 23.9 percent to $5,358 million from $4325 million.” (The Electronics, 4/22/2021)

In July 2021, Whirlpool’s CFO said the company was considering additional price increases, calling it “one of the tools we haven’t hesitated to use in the past.” “Whirlpool Corp. , which manufactures washing machines, KitchenAid mixers and other home appliances, is considering additional price increases should inflation outpace its forecasts. The Benton Harbor, Mich.-based company earlier this year raised sale prices for its products by 5% to 12%, depending on the market, to compensate for increased raw material costs, including for steel and plastics, and it could lift prices again if necessary, Chief Financial Officer Jim Peters said Wednesday. Pricing is ‘one of the tools we haven’t hesitated to use in the past,’ he said, adding that additional price increases could apply to certain categories, rather than the company’s entire product range. Whirlpool expects $1 billion in additional raw material costs this year.” (Wall Street Journal, 7/22/2021)

Whirlpool emphasized that it didn’t expect higher prices to reduce demand. “Whirlpool, which reported a 31.7% increase in net sales to $5.32 billion for the second quarter from a year earlier, doesn’t expect higher sale prices to dent demand for its products, Mr. Peters said. “The only thing they are comparing is the competitive set,” he said, referring to consumers.” (Wall Street Journal, 7/22/2021)

In an interview with Bloomberg, Whirlpool’s CFO said while the company faced higher costs “pricing actions offset everything we see in front of us.” “Whirlpool Corporation has announced Q2 sales up by 32% thanks to ‘sustained customer demand and cost-based pricing initiatives’. In an interview with Bloomberg, chief financial office Jim Peters, said Whirlpool had been able to offset higher costs for everything from steel to shipping and labor by raising prices by as much as 12% earlier this year. He said he expected cost pressures to continue, saying: “We do feel that there will be some carry over from this year to next year, but pricing actions offset everything we see in front of us.” (KBB Review, 7/22/2021)

Whirlpool raised its earnings guidance following the “successful implementation of our previously announced cost-based pricing initiatives.” “Commenting on the Q2 results, chairman and chief executive Mark Bitzer said: ‘We are significantly raising guidance to reflect the strength of our business driven by sustained consumer demand and the successful implementation of our previously announced cost-based pricing initiatives. Our Q2 results together with our record performance over the past three years impressively demonstrate our ability to perform in a volatile environment.’” (KBB Review, 7/22/2021)

Whirlpool spent hundreds of millions on stock buybacks and dividends during the pandemic

Whirlpool spent $121 million on stock buybacks and $300 million on dividends in 2020. “While the environment around us was constantly changing, our commitment to delivering strong returns for our shareholders did not. We raised our dividend for the eighth consecutive year and repurchased $121 million of common stock, returning over $425 million to shareholders in 2020. These actions reflect the confidence we have in our business in both the short- and long-term.” (Whirlpool, 2020 Annual Report) 

For the first six months of 2021, Whirlpool reported paying out $167 million in dividends. (Whirlpool, Second Quarter 10-Q, 6/30/2021)

Whirlpool reported spending $200 million on stock buybacks in the first six months of 2021. “On July 25, 2017, our Board of Directors authorized a share repurchase program of up to $2 billion. On April 19, 2021, our Board of Directors authorized an additional share repurchase program of up to $2 billion, which has no expiration date. During the six months ended June 30, 2021, we repurchased 981,676 shares under these share repurchase programs at an aggregate price of approximately $200 million. As of June 30, 2021, there were approximately $2.3 billion in remaining funds authorized under this program.” (Whirlpool, Second Quarter 10-Q, 6/30/2021)

During the pandemic, Whirlpool’s executive pay rose significantly along with the pay ratio between its CEO and median employee

For 2020 Whirlpool reported it’s CEO compensation had increased to $17 million while the median employee was $22,113, a ratio of 772 to 1.“ For 2020, The median of the annual total compensation of all of our employees, other than Mr. Bitzer, was $22,113.  Mr. Bitzer’s annual total compensation was $17,064,835. This amount is the same amount as reported in the Total column of the 2020 Summary Compensation Table, except that this amount includes the company-paid portion of health insurance premiums, which are normally excluded for Summary Compensation Table purposes.  Based on this information, the ratio of the annual total compensation of Mr. Bitzer to the median of the annual total compensation of all employees is estimated to be 772 to 1.” (Whirlpool 2021 Proxy Statement, 3/5/2021)

In 2020 the average compensation of Whirlpool’s top five executives increased 19% while its CEO’s compensation specifically increased 22%. “In 2020, five Whirlpool executives received on average a compensation package of $7.2M, a 19% increase compared to previous year. Marc R. Bitzer, Chief Executive Officer, received $17M in total, which increased by 22% compared to 2019. 38% of Bitzer’s compensation, or $6.4M, was in stock awards. Bitzer also received $2M of change in pension value and nonqualified deferred compensation earnings, $4.2M in non-equity incentive plan, $3M in option awards, $1.3M in salary, as well as $173K in other compensation.” (ExecPay, 3/5/2021)

For 2019 Whirlpool reported the total compensation of its CEO was $14 million compared to a median employee of $20,765, a ratio of 675 to 1. ”We are disclosing the relationship of the annual total compensation of our employees to the annual total compensation of Marc Bitzer, our Chairman and CEO. For 2019, The median of the annual total compensation of all of our employees, other than Mr. Bitzer, was $20,765; Mr. Bitzer’s annual total compensation was $14,011,663. This amount is the same amount as reported in the Total column of the 2019 Summary Compensation Table, except that this amount includes the company-paid portion of health insurance premiums, which are normally excluded for Summary Compensation Table purposes; Based on this information, the ratio of the annual total compensation of Mr. Bitzer to the median of the annual total compensation of all employees is estimated to be 675 to 1.” (Whirlpool 2020 Proxy Statement, 3/6/2020)

In 2019, the average compensation of Whirlpool’s top five executives increased 7% while its CEO’s compensation increased 18%.  “In 2019, five Whirlpool executives received on average a compensation package of $6.1M, a 7% increase compared to previous year. Marc R. Bitzer, Chief Executive Officer, received $14M in total, which increased by 18% compared to 2018. 45% of Bitzer’s compensation, or $6.3M, was in stock awards. Bitzer also received $1.2M of change in pension value and nonqualified deferred compensation earnings, $2.3M in non-equity incentive plan, $2.7M in option awards, $1.3M in salary, as well as $187K in other compensation.” (ExecPay, 3/6/2020)