Electrolux Stock Price Collapses

Posted on July 20, 2011 by advisor • 3 Comments

Electrolux share price falls 12% today, for a total drop of 33% drop since January 1.  These unfortunate numbers are all the worse as Whirlpool’s share price dropped only 15%.

Analysts had predicted net income this quarter would be down 34%, but were surprised when net income was actually down 45%.

Electrolux will continue to raise prices everywhere, and shift focus to emerging markets.
Sub-Saharan Africa anyone?

Bloomberg

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3 Responses to Electrolux Stock Price Collapses

  1. Bermuda Bob says:
    July 20, 2011 at 11:20 am

    … and it is that there is less-and-less disposable income because of rising prices, which directly translates into less sales …

     

    So, go ahead … worry about that precious bottom line on your P&L and raise prices … then compound everything and raise taxes, thereby depleting disposable income even further … stock prices will continue to decline … the Recession deepens !!!

     

    Brilliant !!!

    • advisor says:
      July 20, 2011 at 7:01 pm

      A recession moves folks to fixing, instead of replacing, saving rather than spending.
      Companies to consolidating instead of growing, coasting rather than investing.

      All the companies of the appliance industry were based 3 years ago on the idea of splurging and borrowing.  They grew beyond what the economy could sustain over the long run.
      Rising prices will reduce demand.  But it is a also a way to back into a sustainable corporate size, a size and demand the economy can carry.

      So for example since the recession, demand for dishwashers dropped 25% (wild ass guess warning).  Even with rebates, even with discounts, even with 2 for 1 sales…….25% drop is where we are.  (wild ass guess warning).
      That original 25% was an unsustainable demand based on cheap money, and dumb customers, and the replacement of perfectly good dishwashers that were just out of style. 
      The 75% that’s left is whole lot more solid.
      If Electrolux can raise prices 10% while losing only an additional 2 – 3% (more wild ass guessing) of demand, the numbers might pencil out quite nicely.

      Once you admit as a company, that 25% are gone, or are too expensive to get back, that the 75% left are not at risk, then you can make pricing and discount decisions that were impossible before.  The pricing or discounts Electrolux used to get that 25%  were bleeding all over the sales to the other 75% too, hurting total profitability.  In other words, folks who were going to buy a dishwasher anyway were getting the better pricing, and product discounts. 

      DAMMIT!!  HOW DO WE STOP ALL THAT BLOODY BLEEDING?

      I think they just did.

    • Appliance Stallion says:
      July 20, 2011 at 7:18 pm
      prices continue to escalate and nearly jump off the top of the page I am anxious to see what you would do in terms of pricing. While there is a connection in stock prices to sales there are other factors that determine the value of stock from day to day. We don’t know what is happening inside so it is difficult to speculate how much those factors play into the speculative nature of Wall Street. Bob perhaps you have not had P&L responsibility but at some point that becomes an overriding factor in business regardless of how we all feel personally. I will suggest that if the people on TV would shut up you may see some organic economic growth on the horizon. As far as my organizations , we have continued to give people equitable increases this year and have tightened up all areas of waste and still required price increases to our customer base. We brought most of our costs in line however when costs increase and you have done what we have done you have no choice but to protect margins. That is how businesses run Bob. My suspicion is they are too top heavy at Electrolux and Whirlpool as larger organizations usually require more infrastructure and that has a tendency to get away from management when things are going well. I suspect with them the easiest method of regaining costs was through a price increase only and they potentially stopped some marketing efforts which ultimately affect sales performance .

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