Whirlpool Corp. 2026 Q3 Earnings Call

Good morning, and welcome to Whirlpool Corporation's third quarter 2026 earnings call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, Roxanne Warner, our Chief Financial Officer, Juan Carlos Puente, our Executive President of North America and Global Strategic Sourcing, and Ludovic Beaufils, our Executive President of KitchenAid Small Appliances and Latin America. Our remarks today track with the presentation available on the Investor section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements to assist you in better understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from the statements due to many factors discussed in our latest 10-K, 10-Q, and other periodic reports.

We also want to remind you that today's presentation includes non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in listen-only mode. Following our prepared remarks, the call will be opened for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc.

Thanks, Viv, and good morning, everyone. During the quarter, our execution focused on two core imperatives, protecting and expanding our margins in a tough macro environment and disciplined cash management. These imperatives not only shaped our third quarter results, but are also driving our actions as we move towards the end of 2026 and into 2027. What you will hear today are essentially four key messages. First, we delivered another quarter of sequential margin improvement against macroeconomic challenges that undoubtedly intensified over the last three months. Second, we made good progress on our pricing actions, in particular in North America. This progress was partially offset by incremental inflationary costs, and as a result, we did not deliver the margin step-up we had expected. In line with a slower pace of margin recovery in the third quarter, we are updating our full-year margin guidance.

Third, we have implemented further pricing actions of 7%-10% in North America and in Latin America. We expect the impact of these new actions to be somewhat limited in Q4 and fully ramping up in January. Our structural cost initiatives around strategic sourcing, manufacturing optimization, and warehouse footprint consolidation are on track. But as mentioned in prior calls, the majority of the cost benefits will impact 2027. These structural cost initiatives, together with the additional pricing actions, set up a strong foundation for margin expansion in 2027. Fourth, we are prioritizing highly disciplined working capital management that positions us to deliver on our full-year free cash flow goal. Turning to slide seven, let me cover our third quarter results. We delivered net sales of $3.7 billion, which was impacted by softer industry demand in North America.

We saw a sequential margin improvement of 80 basis points to 2.6%, resulting in ongoing earnings per share of negative $0.21. While we made progress on our pricing and cost take-out actions, this progress was partially offset by higher raw material, fuel, and logistic costs. During the quarter, we maintained strict working capital discipline to prioritize balance sheet strength. Our free cash flow was a consumption of approximately $1.1 billion, which was negatively impacted by the timing of our recovery of insurance claims related to Grupo Casas Bahia. This is a major retailer in Brazil, which filed for bankruptcy reorganization, the equivalent of Chapter 11 in the U.S., in August. We expect to receive a majority of insurance claim payments related to this event in the fourth quarter. Turning to slide 8, I will walk through our sequential ongoing EBIT margin drivers.

We delivered sequential margin improvement of approximately 80 basis points. Our pricing actions in North America and Latin America fully offset the mix headwinds across the business and result in 250 basis points of improvement. Net cost was a tailwind of 100 basis points as we continue to make progress on structural cost take-out and ongoing cost productivity, with the benefits being partially offset by the impact of fuel and logistic costs. Raw material inflation unfavorably impacted margin by 75 basis points, primarily driven by higher steel, resin, and base metal costs. Net tariff impact was an unfavorable 225 basis points, driven by incremental Section 232 tariffs in the U.S. Marketing and technology investments increased by 25 basis points, offset by a favorable currency impact of 25 basis points, primarily from a Mexican peso and Brazilian real, and favorable transaction impacts of approximately 25 basis points.

Now I will turn the call over to Juan Carlos to review our MDA North America results.

Thanks, Marc. Turning to slide 10, I will provide an overview of our MDA North America segment. In the third quarter, net sales were $2.5 billion, negatively impacted by the persistence of industry demand. In Q3, the industry was down 3.3%, which is in line with our full-year guidance of down approximately 5%. The solid execution of our price increase implemented in April and July, combined with our new product launches, drove approximately 230 basis points of sequential margin expansion. This improvement was masked by the inflationary headwinds, resulting in 30 basis points of net sequential EBIT margin benefit. More recently, we announced an additional 7% price increase, effective November 1st in Canada and December 3rd in the U.S. While the impact of Q4 results will be limited, we expect this action, combined with our structural cost take-out actions, to further expand margin in 2027.

Turning to slide 11, let's review the positive impact of this price increase in our retail sell-out price data. As a reminder, this chart represents the aggregated view of thousands of price data points collected every week from public sources. The yellow line shows that our price realization progressed strongly through Q3, maintaining 8%-9% gains over the January 2025 baseline prices. The blue line shows that competitors' average pricing has also meaningfully moved upward since the beginning of 2026. This trend is consistent with the full burden of tariffs and increased transportation costs, ultimately reinforcing our confidence in the long-term value of our domestic footprint. Another element that is central to our strategy is delivering meaningful product innovation that delights our consumers. Turning to slide 12, you can see our latest industry-first product innovation in our refrigeration lineup.

We recently launched the industry's first refrigerator with an in-door nugget ice maker under the Whirlpool brand. This true counter-depth French door refrigerator is a great addition to our portfolio. It hits the marketplace as consumer demand for nugget ice accelerates across North America, setting a new benchmark for consumer innovation. By combining highly valued features with premium design, this product serves as a standout differentiator that directly supports our premium growth strategy. Turning to slide 13, we're bringing another industry-first innovation to our core laundry category. Our top-load washer now features a Removable Delicates Basket, which addresses a long-standing consumer pain point by allowing delicate items to be gently washed at the same time as the everyday laundry load. By combining delicate care with daily laundry capacity in a single cycle, this unique offering drives premium mix and reinforces our product leadership in MDA North America.

On slide 14, we're maximizing benefits from our manufacturing and supply chain footprint to optimize our structural competitive advantage. In our last earnings call, we discussed three key manufacturing footprint initiatives that we announced in Q1. A multi-year modernization and operational optimization of our plant in Amana, Iowa. Unlocking supply chain efficiencies through vertical integration in our facility in Perrysburg, Ohio, and shifting refrigeration production between Supsa and Ramos, Mexico, to leverage scale and lower conversion costs. We have hit key milestones across all three initiatives, and our progress year-to-date gives us confidence in our operational trajectory. In U.S. logistics, we have completed a 25% reduction in our local distribution center count and continue to advance with the consolidation of regional distributions and return centers. Importantly, we are maintaining reach and proximity, with 97% of our customers remaining within 100 miles of our distribution centers.

In total, these manufacturing supply chain actions represent $290 million in structural cost benefits. While these benefits are largely expected into 2027, our cost initiatives continue to progress, contributing to our sequential margin progress and offsetting incremental fuel logistic costs. Now I'll turn the call over to Ludo to review our MDA Latin America and SDA Global results.

Thanks, Juan Carlos. Turning to slide 15, I will review the results for our MDA Latin America business. Excluding currency, net sales increased 2.5%, driven by higher volume, partially offset by price mix. We experienced temporary margin pressure as our mix shifted out of Grupo Casas Bahia's more premium portfolio, resulting in an EBIT margin of 2%. As retail inventories adjust and our volume redistribution settles, we expect the mix to normalize over time. We have announced incremental price increases across the segment of up to 10%, effective in Q4, which, alongside our key new product launches, are expected to increase profitability in 2027. Turning to slide 16, you can see two key product launches that are driving premium growth in MDA Latin America. First, a new lineup of induction cooktops in Brazil, featuring a fresh design that aligns with the premium Brastemp aesthetic.

Second, the new Whirlpool and Brastemp French door refrigeration line, with its stunning black liner combining sophisticated design with versatile functionality. These are just two examples of how we are expanding our premium product pipeline in Latin America with high-margin products as we continue to focus on margin expansion. Turning to Slide 17, let us review our SDA Global business. New product launches in our direct-to-consumer channel continue to support share gains globally and help deliver a healthy EBIT margin of 18.6% in the third quarter. We had another quarter of strong sell-out globally, while seasonal order shifts pushed the top line growth into Q4, as evidenced by the approximately 40% increase year over year in our October U.S. orders. We continue to take actions to grow our business beyond our core categories and have recently bolstered our portfolio of licensed products by expanding our kitchen accessories sales through our direct-to-consumer channel.