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Why Sears ended a century-old partnership with Whirlpool

Sears had been selling Whirlpool appliances since 1916. (Ethan Miller/Getty Images)
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Shoppers will no longer be able to buy Whirlpool, KitchenAid or Maytag appliances at Sears, following a pricing dispute that has ended a 101-year relationship between the department store chain and the country’s largest appliance maker.

Whirlpool, which announced this week that it is raising prices to make up for costlier raw materials, said it notified Sears Holdings in May that it would stop supplying appliances to the retailer.

“We simply could not reach terms that were acceptable to both parties,” Marc Bitzer, Whirlpool’s chief executive, said on a Tuesday call with investors.

The dispute highlights escalating tensions between manufacturers and retailers over exactly how much items should cost. Retailers have grown accustomed to offering steep discounts to win over consumers. Manufacturers, meanwhile, say they are struggling to keep up with growing expenses and stiffening competition, often from overseas.

The news deals yet another blow to Sears, which has already closed hundreds of stores this year. Once a dominant seller of appliances, the company has lost much of its cachet and market share in recent years. It has not turned a profit since 2010, and last year it reported a loss of $2.22 billion.

“Sears is breaking up with everybody — the business is in steep, deep decline,” said Mark Cohen, director of retail studies at Columbia Business School and former chief executive of Sears Canada. “They’ve lost half of their market share in the last 14 years, and vendors aren’t seeing much value in the relationship anymore.”

Sears is giving shoppers even fewer reasons to go to its stores

Sales at Sears make up about 3 percent of Whirlpool’s total revenue, Bitzer said on Tuesday. “In terms of the impact, to be honest it’s not a whole lot,” he said.

Harikesh S. Nair, a marketing professor at Stanford University’s Graduate School of Business, said tussles over price between retailers and manufacturers are common, particularly when the retailer can still offer its own house brand. “Sears already has a large private-label appliance brand, so it helps to be able to say, ‘If we can’t stock your products, we can always stock ours,’ ” he said.

Indeed, Sears characterized the decision as an effort to support its customers.

“Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price,” Sears said in a memo to employees last week. “Associates should continue to sell with confidence our Kenmore brand.” (Whirlpool will continue to manufacture at least some Kenmore appliances for Sears, although both companies declined to provide specifics.)

Sears used to sell houses by catalogue. Buyers then put them together. The Sears brand may soon vanish, but these sturdy homes live on. Step inside for a look. (Video: Lee Powell/The Washington Post)

Sears’ stock fell about 9 percent on Tuesday. Shares of Whirlpool, meanwhile, tumbled nearly 11 percent to their lowest level in about a year. The manufacturer also posted financial results that fell short of Wall Street’s expectations, and said it was taking “strong actions” to make up for narrowing operating margins.

During the most recent quarter, the company said operating profit fell 10 percent to $$376 million. Earnings rose about 5 percent to $272 million, or $3.83 per share, up from $244 million, or $3.66 per share, a year earlier. Revenue, meanwhile, increased 3 percent to $5.4 billion. (Analysts had expected about $5.5 billion.)

Sears says it will close 20 more stores

The split with Sears comes as Whirlpool awaits a federal decision on a trade dispute filed with the International Trade Commission. In it, Whirlpool alleges that Korean manufacturers Samsung and LG have been selling washing machines in the U.S. at unfairly low prices for years.

“If not for this unlawful behavior, we believe our washer category would have thrived like the rest of our North American business,” Jeff M. Fettig, Whirlpool’s chairman, said in a statement earlier this year. (Fettig stepped down as the company’s chief executive this month.)

It’s not a new dispute for Michigan-based Whirlpool: The company won two earlier tariff cases it brought in 2012 and 2016, in which the United States imposed new duties on washing machines from South Korea, Mexico and China.

This time around, the company is calling for blanket tariffs on Samsung and LG washing machines from all countries. The ITC, which ruled this month that Whirlpool has in fact been harmed by LG and Samsung’s trade practices, is in the process of recommending a tariff amount. The president can then decide whether to impose tariffs for up to four years.

Bitzer said Tuesday that the company expects a decision on the tariffs by early January.

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