By Dominic Chopping
STOCKHOLM–Shares in Electrolux sank toward the bottom of the Stoxx Europe 600 index Friday after posting a big miss in third-quarter earnings and guidance while launching further cost-saving measures.
At 1107 GMT, shares traded 13% lower at SEK90.50, a 12-year low.
With hard-pressed consumers trading down and buying lower priced products, Electrolux has been forced to ramp up sales promotions to shift stock, which is weighing on margins.
The home-appliance manufacturer launched a group-wide cost reduction and North America turnaround program this time last year as it faced weak demand in Europe and North America, which aimed to cut 3,500 to 4,000 jobs while saving more than 7 billion Swedish kronor ($627.1 million) in costs in 2024.
In its new plan announced Friday, it expects to cut a further 3,000 jobs and will seek an additional SEK3 billion to SEK4 billion in cost savings.
The company reported a third-quarter underlying operating profit of SEK314 million, missing the SEK631 million expected in a company-compiled consensus, while sales fell 5.2%, also missing expectations.
Also weighing on investor sentiment Friday is commentary that Electrolux doesn’t expect a sequential improvement of underlying operating income in the fourth quarter due to the lag between the new actions being put in place and the time it will take to have a full earnings impact.
“The earnings miss and no expected improvement in 4Q are clear negatives, despite significantly increased cost savings targets for 2024,” Citi analyst Martin Wilkie said in a note.
“Consumers shifting to lower price products echoes recent comments from other appliance players, but the negative impact on earnings is far worse than expected,” he added.
Wilkie thinks full-year consensus 2023 underlying operating income estimates could be cut by around SEK1 billion, which is a cut of more than 40%.
Write to Dominic Chopping at [email protected]
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