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Sears Splits With Whirlpool in Latest Blow to Struggling Chain

Updated on
  • Price increases would have been prohibitive, Sears says
  • Move ends century-old partnership between the two companies

Sears Holdings Corp. is breaking ties with Whirlpool Corp., a move that winds down a century-old partnership and deals another blow to the struggling retailer’s product lineup.

The department-store chain will stop selling most Whirlpool brands, including Maytag, KitchenAid and Jenn-Air, after the two sides failed to agree on pricing terms. The news sent Sears down almost 9 percent on Monday, punishing a stock that’s lost more than a third of its value this year.

The loss of Whirlpool brands hits Sears in an area that’s been seen as one of its few remaining strengths: appliances. After years of slumping sales -- and mounting red ink -- the chain has already lost prowess in apparel and other goods. A split with Whirlpool raises fresh questions about Sears’s ability to work with vendors, said Susquehanna International Group analyst Bill Dreher.

“It’s a very strange maneuver,” he said. “If it’s a top-selling brand, why not have the product?”

Sears complained that Whirlpool tried to bully the company into boosting prices, forcing the retailer to walk away from the relationship.

“Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price,” Sears said in a memo that was provided to Bloomberg on Tuesday. The department-store chain will continue to sell Whirlpool products until its current inventory is depleted.

Whirlpool, meanwhile, is now diverting inventory to other customers. Sears represents about 3 percent of global revenue for Whirlpool, which told the retailer in May that it would stop delivering goods.

“In terms of the impact of shifting that, to be honest it’s not a whole lot,” Whirlpool Chief Executive Officer Marc Bitzer said Tuesday on an earnings conference call.

Whirlpool will continue to supply about 10 branded products to the retailer, Bitzer said. He declined to give details on why the companies couldn’t come to terms.

Price Push

Whirlpool has been making a broader push to raise its prices, part of an effort to cover the higher cost of raw materials. It has been suffering its own woes. The company’s shares fell 11 percent on Tuesday after Whirlpool cut its earnings forecast and posted quarterly results that missed analysts’ projections.

Sears fell to $5.99, marking its biggest decline in more than a week.

Whirlpool, then operating as Upton Machine Co., sold its first washers to Sears in 1916, according to the manufacturer’s website. Five years later, Sears loaned Upton $87,500 to expand its washer factory, eventually converting that to a stake in Upton. To feed growing demand at the retailer, Upton merged with another washer maker in 1929.

For years, Whirlpool manufactured appliances under the Kenmore name, then sold exclusively at Sears. The retailer announced earlier this year that it would begin selling its Kenmore appliances through Amazon.com Inc.

Craftsman Deal

In January, Sears agreed to sell its Craftsman tool brand to Stanley Black & Decker Inc. for about $900 million. Though the retailer will still benefit from customers buying the tools, the deal meant ceding control over one of its most iconic product lines.

Sears, run by hedge fund manager Eddie Lampert, also has shed the Lands’ End clothing division and much of its real estate. And it’s been closing scores of poor-performing stores.

Losing its position in appliances is especially risky for Sears because those products draw more affluent shoppers, Susquehanna’s Dreher said. Those customers may not put up with a poor selection of brands, he said.

“Wealthy customers are going to be less tolerant of the horrible shopping conditions,” he said.

— With assistance by Jonathan Roeder, Lisa Wolfson, and Alexandra Stratton

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