Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi speak with Whirlpool CFO Jim Peters about the company’s blowout earnings report.

Video Transcript

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BRIAN SOZZI: Whirlpool out with another quarter where it cleaned up as more people remodeled their homes during the pandemic or just bought a new home. The company thumped Wall Street estimates for fourth quarter sales and profits and got into another year of earnings growth in 2021. Whirlpool CFO Jim Peters just wrapped up his earnings call, and he joins us now.

Jim, good to good to speak with you again here. A lot of talk on the earnings call this morning regarding demand. And you called it-- you continue to see robust demand. Why that level of confidence given where we are in the pandemic?

JIM PETERS: Yeah. Well, and again, thank you for having me on this morning and good morning. As you've just commented, we did have a record year and 2020, and we expect another record year in 2021. And we're very optimistic about the demand, not just in the near to mid-term, but really in the longer term.

And I think some of the big drivers that we're seeing is you already mentioned that very positive growth within housing, not just new housing, new home construction, but also you're seeing strong existing home sales. And then with the consumer's continued focus on the home and nesting, what we're seeing is a lot more in terms of home renovations where people are investing in their kitchens that they've been spending more time in.

But we continue to see that trend gaining steam. And if you think about just the back-- the low-level of existing homes for sale right now, as well as the backlog of new home construction starts, you know, we see that trend continuing on a very positive line for an extended period of time here. Additionally, one of the things we talked about this morning on demand, and now we're even starting to start to expect from a positive perspective is that consumers have been using their appliances more and more during this COVID stay-at-home period.

And so we were nearing the trough of the replacement cycle, which is typically 8 to 10 years. So when you look back, you know, the trough of the industry would have been about 8 to 10 years ago. We do believe, if anything, this could have accelerated that. So we'll begin to see even more positive demand from a replacement perspective.

BRIAN SOZZI: When we last spoke to you, Jim, three months ago, you were still dealing with a crush of demand. There were a lot of concerns in the supply chain. Just couldn't make appliances fast enough because just couldn't get the parts. Has that situation improved? And when will it get better?

JIM PETERS: Here's what I would say is, is right now we are able to keep up with the existing demand as it comes in. Our backlog is still at the level it was at the end of Q3, and as we said on the call about seven to eight weeks. What you think about as the industry grew during Q4, and we expect it to continue to grow.

We've been able to ramp up our production to levels that at least keep in line with where the current demand levels are. And then we expect to work through most of that backlog by the end of the second quarter.

MYLES UDLAND: And so what is that balance there Jim, between trying to keep up with this new demand trend that you've kind of seen happen here during the COVID period, and not wanting to ever get yourself in an oversupplied situation? Odd that we would talk about that today, but, you know, things can change over the next couple of years. What's that balance like for you guys as you see the market today?

JIM PETERS: Yeah. I'd say the good thing on that is right now with where we are, there's two things we see is, one, our inventories are at lower levels than normal. So as we begin, might see a slowdown in demand. We'll begin to normalize our own inventory levels.

But additionally, retailer inventories are at a much lower level. So there's a couple of buffers in there, as I would like to say that even if overall consumer demand and sell-through might slow beyond a pace right now, which we expect to be still up significantly year-over-year, we do have a couple of points where we will see that ahead of time and be able to adjust our production accordingly. But as we mentioned right now, if anything, we're very focused on just trying to meet those current level demands and work through the backlogs.

JULIE HYMAN: And Jim, you were talking about how the replacement cycle is going to be maybe fueled a little bit-- you know, a little bit more extended than usual? But when do you expect this hot demand to slow down a little bit or normalize a little bit and allow you then to sort of normalize your supply chain?

JIM PETERS: Yeah. So here's what-- as I said, we expect our supply chain to normalize probably by the middle of this year, so the end of the second quarter. As we look at demand overall and what we've said for the full year, especially within the US, we expect demand overall to be about 4% to 6% up year-over-year, which is still above what is typically a 2% to 3% growth. So we'd still expect positive consumer demand trends heading into 2022 at that point in time.

Additionally, on a global basis right now, what we're seeing is we expect demand to be up about 4% overall. So it's not just within the US. We tend to focus on a lot of that. We're seeing positive trends within EMEA, within India, within Brazil. And even if you think about Brazil, Brazil had been a market that had gone down significantly within recent mid-term times. And we're starting to see the demand bounce back significantly there. So it's not just a trend we see within the US, but it's on a more global basis.

BRIAN SOZZI: Jim, you crunch the numbers at Whirlpool. Has the pandemic changed how you think about investing in the business over the next three years? Do you need to build more plants to satisfy what appears to be a new normal in terms of demand?

JIM PETERS: Here's what I would say is, I don't know that we necessarily need to build more plants because we've talked a lot in the past about how we really feel we have the capacity within our existing footprint. What we do intend to invest in is-- obviously on top of the new products that we're launching, is investing breaking bottlenecks within those factories and expanding capacity within those walls. Additionally, we'll look at investing in more supplier diversification so that when we do have disruptions to our supply chain, that will also help us to deal with it.

But right now from an overall capacity perspective, brick and mortar is probably not the thing that I'd say we necessarily invest in, but it's more making sure that we get the production levels or optimize the production levels within our existing facilities.

BRIAN SOZZI: You talked a little bit about on the call this morning some redesigns you've made to your appliances. What is-- what are the appliances of the future look like after the pandemic? How might they be different?

JIM PETERS: Yeah. Here's what I'd say is, some of the things that we've focused on lately, and as we were talking about, is, you know, like this year, we launched a dishwasher that actually has higher capacity. And the way we got higher capacity is we made the third rack within it usable, where traditionally that third rack might have been something you put cutlery, utensils on, but you couldn't put glasses or bowls. That new dishwasher actually allows you to do that.

So think about in this pandemic environment, even, where you're eating more in your home; you have more dishes. It's actually probably been, you know-- it's something that we've since seen be successful in the market, but it's something that people have realized even more benefits from in a pandemic type of situation.

I think the next thing that we, you know, we talk about more and more is the connected appliances as we begin to roll those out. And not only are you-- can you connect and adjust your appliances remotely, but it begins to tie into the whole cycle of what are the consumables and things that you use with it?

And Mark talked about on the call earlier today, we just launched a high concentrate laundry detergent into the marketplace that will work well with our washers. And so we're looking at how do our washing machines actually tell you when you need that? And how do they help you to actually place your order for the detergent?

BRIAN SOZZI: Well, Jim, with all due respect to Whirlpool, I'm trying to eat less during the pandemic and do more Peloton-ing. But we will leave it there. Jim Peters, Whirlpool CFO, always good to see you. Please do stay safe.

JIM PETERS: Great. Thanks a lot. Thanks for having me.

BRIAN SOZZI: All right, thanks so much.