Electrolux Shares Plummet following Third-Quarter Earnings Miss

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Shares in Electrolux, the home-appliance manufacturer, took a nosedive on Friday after disappointing third-quarter earnings and guidance were announced. The company also unveiled additional cost-saving measures in an attempt to mitigate the impact of weak demand and increased sales promotions.

Underperforming Results and Revised Savings Targets

Electrolux reported an underlying operating profit of SEK314 million for the third quarter, falling short of the expected SEK631 million. Sales also declined by 5.2%, further missing expectations. As a result, shares dropped by 13% to SEK90.50, reaching a 12-year low.

To combat these challenges, Electrolux implemented a group-wide cost reduction and North America turnaround program last year, aiming to save over SEK7 billion ($627.1 million) in costs by 2024. However, with persistently weak demand, the company now plans to cut an additional 3,000 jobs and seek SEK3 billion to SEK4 billion in further cost savings.

Dampened Investor Sentiment and Future Prospects

Investor sentiment was negatively affected by commentary from Electrolux stating that there will be no sequential improvement in underlying operating income in the fourth quarter. This is due to the time it will take for the new cost-saving measures to have a significant impact on earnings. As a result, analysis from Citi suggests that full-year consensus 2023 underlying operating income estimates may be reduced by over SEK1 billion, representing a cut of more than 40%.

Industry Trends and Consumer Behavior

Electrolux’s struggle with lower-priced product sales echoes recent comments from other appliance players, indicating a broader trend of consumers trading down and opting for more affordable options. These shifts in consumer behavior have resulted in reduced profit margins for the company.

Despite Electrolux’s increased cost-saving targets for 2024, analysts remain cautious about the future outlook. The company is expected to face continued challenges as it navigates the impact of economic pressures and evolving consumer preferences.

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