Earnings Call Transcript - WHR Q1 2026

Scott Cartwright, Head of Investor Relations

Good morning, and welcome to Whirlpool Corporation's First 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 track with a presentation available on the Investors 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 these 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 in our operations as they exclude items that may not be indicative of our results from 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 reconciliations of non-GAAP items to the most directly comparable GAAP measures. Operator instructions were provided. With that, I'll turn the call over to Marc.

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Thanks, Scott, and good morning, everyone. During today's call, you will hear a few messages from us. First, we finished a tough quarter in our North American business. The month of March, which typically carries the quarter in North America, was exceptionally weak due to these four drivers, which I will discuss in further detail in the following slides. Second, we are taking decisive and bold actions to restore North American margins back to a healthy level. We have issued the largest price increase in more than a decade that raised prices by more than 10%, and we're doubling down and accelerating our cost actions despite higher inflationary headwinds. Third, our equity offering and a renewed revolver credit line, which we expect to finalize in Q2, puts our balance sheet in a strong position to weather this difficult industry cycle. Before we get into the numbers, I want to provide a bit of background about the macro environment in North America, not as an excuse, but as context for what happened in the second half of the first quarter. Turning to Slide 7. We can see that consumer sentiment has dropped to its lowest level in 50 years. The consumer sentiment was already on a very low level by any historical standard, but the war in Iran amplified consumer concerns about the cost of living. As a direct result, the consumer sentiment index in the U.S. plunged reaching the lowest level on record in March. Now while our view is that consumer sentiment is unsustainably low and should rebound from here, these events clearly pressured our industry and particularly discretionary demand. Turning to Slide 8, you can see the resulting impact on the U.S. appliance industry. The U.S. appliance industry demand declined 7.4% in the first quarter, with March being down 10%. This level of industry decline is similar to what we have observed during the global financial crisis and even higher than during other recessionary periods. Keep in mind that we are operating in an environment where replacement demand drives more than 60% of the industry, and this part of the demand is relatively stable. So this gives you a sense about how dramatic the impact on discretionary demand was. While we do believe that the negative industry demand in March was somewhat of an outlier, we do not anticipate a full recovery and are now forecasting the U.S. industry demand being down by 5% on a year basis. Turning to Slide 9. I want to share a snapshot of industry pricing over the past 15 months. This picture represents an aggregate view of literally thousands of price points which we collect weekly. It is based on publicly available retail sellout data. While it may not be 100% accurate at every single point, it is, in our view, directionally correct. In 2025, the multiple changes in tariff policy, delays and tariff exemptions as well as the effect of inventory preloading by Asian competitors created significant volatility and promotional behavior. However, immediately after Black Friday, pricing improved slightly above pre-Black Friday levels. While the price changes were still below the level needed to fully offset the accumulated inflation and cost of tariffs, it was a positive development in line with our expectations coming into the year. As you can clearly see in the small chart on the top right of the page, after the IEEPA ruling by the Supreme Court, promotional pricing reverted back in the following weeks. We believe the Supreme Court ruling, the broader skepticism about the durability of tariffs and the anticipation of refunds related to the tariff resulted in a resumption of an aggressive promotional environment. It is also obvious that price changes of 1% to 2%, as we've seen in February and March by the competition, did not even remotely cover the cost of inflation and tariffs. You can also see that after the price changes which we announced on April 17, Whirlpool set prices, as determined by our retail customers, have moved up by 10% compared to January 2025. At the same time, competitive behavior has shifted more favorably. The key development for the U.S. appliance industry this quarter was the change in Section 232 tariffs which brought clarity and predictability to the tariff landscape. We will later discuss these changes in detail. But what might appear as a small change in the 232 tariff has significant and lasting ramifications for the entire industry. Essentially, every imported appliance into this country, irrespective of where it comes from, will have to pay a tariff of 25% on full product value. And in the case of China, even more. The combination of the drop in consumer sentiment, decline of consumer demand and the irrational industry pricing created an almost perfect storm during this first quarter. But we are taking decisive and bold pricing and cost actions we expect will bring our North American business back on its path towards healthy margins. With that, let me hand it over to Roxanne, who will discuss the first quarter results in more detail.

Roxanne Warner, Chief Financial Officer (CFO)

Thanks, Marc. Turning to Slide 10. I will provide an overview of our first quarter results. As Marc mentioned, our results in the first quarter were negatively impacted by the ongoing macroeconomic and geopolitical events that have developed since late February. We delivered an ongoing EBIT margin of 1.3% and ongoing earnings per share of negative $0.56. Our earnings per share, in particular, was negatively impacted by approximately $0.32 from the noncash loss associated with our minority interest in Beko Europe B.V. Looking at our segment performance, MDA North America was severely impacted by a sharp decline in consumer sentiment and the costs associated with our inventory reduction actions. MDA Latin America margin was pressured by the intense promotional environment. This was partially offset by the gains associated with the favorable tax ruling in Brazil. Conversely, the SDA Global segment continued to perform exceptionally well. Our free cash flow was negative $896 million as the benefit from our inventory reduction efforts was more than offset by lower earnings. Finally, we returned cash to shareholders and paid a $0.90 dividend per share in the first quarter. Turning to Slide 11, I will provide an overview of our first quarter margin walk. Price mix unfavorably impacted margin by 275 basis points. This was driven by two key drivers. One, collapsing consumer sentiment further reduced discretionary demand and negatively impacted mix. Two, the encouraging industry pricing progress we observed in the first few weeks of the year was heavily disrupted by the Supreme Court's IEEPA tariff ruling and the anticipation of refunds, which created further external volatility and the return of an intense promotional environment. Our net cost was negatively impacted by volume decline and one-time costs associated with the planned inventory reduction, resulting in 175 basis points of margin contraction year-over-year. We executed our originally planned inventory reductions and executed incremental reductions due to the unexpected industry decline. Overall, we drove 20% year-over-year volume reduction. Raw materials unfavorably impacted margins by 50 basis points, driven by inflation of steel, base metals and resins. The current and projected steel costs are now putting us at the maximum pricing of our long-term steel agreements. We experienced a neutral impact from tariffs in the first quarter as the incremental cost from changes to Section 232 implemented in the second half of 2025 were offset by tariff recovery and mitigation actions. Marketing and Technology was favorable 50 basis points versus prior year, driven by reduced transition costs and a pullback in spending as we saw consumer sentiment shifts. Currency was also favorable by 50 basis points, driven by the appreciation of the Mexican peso and Brazilian real. Lastly, transaction impacts were unfavorable 50 basis points due to the noncash loss associated with our minority interest in Beko Europe B.V. It is important to note that based on the current carrying value of this investment, Whirlpool will no longer recognize any further losses from Beko Europe B.V. Now I will turn the call over to Juan Carlos to review our MDA North America results.

Juan Carlos Puente, Executive President, North America and Global Strategic Sourcing

Thanks, Roxanne. Turning to Slide 12, I will provide an overview of our first quarter results for our MDA North America segment. In the first quarter, net sales decreased 8% year-over-year to $2.2 billion. Consumer sentiment collapsed to record lows due to the war in Iran, which prevented the recovery of the volume loss during the winter storms and resulted in recession-level industry contractions with discretionary demand down approximately 15%. The segment delivered break-even performance with EBIT margins negatively impacted by the sharp decline in demand, higher-than-expected cost to reduce inventory and the return of an intense promotional environment after the Supreme Court IEEPA ruling. While we experienced high cost from the actions to reduce inventory levels and higher tariff costs year-over-year, these were partially offset by tariff recovery and mitigation actions. As over three years of accumulated inflation continues to pressure our business, we have announced the largest price increase in a decade in conjunction with acceleration of critical initiatives to drive cost reduction. We expect these aggressive actions to put MDA North America profitability back on track. We'll share more details of those actions shortly. Now I'll turn it over to Ludo to review the MDA Latin America and SDA Global results.

Ludovic Beaufils, Executive President, KitchenAid Small Appliances and Latin America

Thanks, Juan Carlos. Turning to Slide 13 to review the results for our MDA Latin America business. Excluding currency, net sales decreased approximately 4% year-over-year. This is the net impact of an aggressive promotional environment in the region and volume increases from share gains. Due to the promotional pressure, the segment's EBIT margin was 6%. This margin was supported by a favorable Brazil tax ruling and our ongoing cost takeout initiatives, which partially offset the unfavorable price/mix. Turning to Slide 14, I'll review the results for our SDA Global business. This business continues to perform exceptionally well, delivering approximately 10% net sales growth year-over-year, excluding currency. EBIT margins expanded an impressive 250 basis points year-over-year to 21%, driven by continued growth in our direct-to-consumer business, solid execution of cost takeout initiatives and some marketing investment timing changes versus prior year. We are proud to celebrate the sixth consecutive quarter of year-over-year revenue growth, clearly underscoring the strength of our product portfolio and our value creation strategy. On Slide 15, we showcase a few exciting new products that we're bringing to the market this year. We're proud to bring meaningful consumer-centric innovation to the stand mixer while maintaining our iconic design and heritage. The new Artisan Plus stand mixer now features an integrated bowl light and precise speed control. Our compact fully automatic espresso machine with an iced coffee function gives consumers the option to brew at a lower temperature, while also delivering a space-saving design that fits effortlessly into many kitchens. Now I will turn the call back over to Juan Carlos to review the critical actions we are accelerating to recover profitability in MDA North America.

Juan Carlos Puente, Executive President, North America and Global Strategic Sourcing

Thanks, Ludo. Turning to Slide 17, I'll review some of our bold actions to restore MDA North America margins. On April 17, we announced the largest price increase in more than a decade. This price change is being executed in two steps. First, we executed a promotional price increase, which is already in effect, of more than 10% relative to the first quarter prices. This is the most impactful change and is expected to start driving price/mix improvements in Q2, ramping up throughout the year. Secondly, we announced a list price increase effective on July 9. The second wave represented an additional price increase of approximately 4%. This multi-step plan is designed to offset the cost inflation accumulated over the last three years that has not yet been reflected in prices, the anticipated cost inflation in 2026 and some residual impact of tariffs. In addition to these pricing actions, we will continue to deliver product innovation and expand our mass-premium and premium product segments. The momentum on the back of the record year of product launches in 2025 is largely installed. We are seeing the results as our major appliances continue to deliver strong sell-through performance year-over-year despite the softer industry. Our robust innovation pipeline was further validated by the outstanding award performance at CES, where Whirlpool Corporation secured an impressive 23 awards. Turning to Slide 18. I will highlight the successful launch of our Whirlpool-branded UV laundry tower, which we presented in our last earnings call. The national rollout of this product featuring the industry-first UV cleaning technology that reduces bacteria in the wash while keeping fabric care in mind has been exceptionally well received and is exceeding expectations. This innovation is driving rapid share gains, capturing approximately five points within weeks and increasing our placement with trade partners who have placed the units in their stores. This confirms the competitive advantage of our UV clean technology. Turning to Slide 19. I'm pleased to showcase the new KitchenAid intelligent wall oven, which earned the prestigious Best of Show Award, the highest honor at CES. This new wall oven is one of the many products available in our new KitchenAid suite, which began shipping late last year. This product allows consumers to experience cooking through a new lens with the intelligent cooking camera that identifies food, monitors doneness and remembers your preference for your favorite recipes. We continue to see strong sell-out through and our market share gains trend towards the highest level in over a decade. Turning to Slide 20. I'll highlight exciting innovation coming to our dishcare business. The new LED Defense odor-fighting offering features a UV-free LED light that kills 99% of common odor-causing bacteria. These innovation features address one of the biggest consumer pain points of bacteria odor. This is yet another product that we saw recognized at CES this year and as the neighbor to the dishwasher it continues to position us well for the eventual housing recovery. Turning to Slide 21. Let me provide an update on the initiatives we are accelerating to bring our business back on track. As we navigate the current macro pressures, we maintain our commitment to deliver our $115 million in cost savings target in 2026, which will be fundamentally supported by our ongoing design-to-value engineering efforts. Given our current EBITDA margins, we're taking decisive structural actions across several key levers to accelerate our cost actions. First, we are heavily leaning into vertical integration, automation and the optimization of our manufacturing and logistics footprint. As part of these initiatives, we announced three key projects: one, our new strategic investment in Perrysburg, Ohio; two, the ongoing modernization of our Armada, Iowa plant; three, shifting production from Pilar, Argentina to Rio Claro, Brazil. Together, these footprint and integration moves are expected to unlock approximately $40 million in savings in 2026, while significantly improving our product quality, speed of innovation and overall supply chain resiliency. Additionally, as we shared previously, we are renewing our strategic sourcing initiatives. We have already completed the first phase of this project, and we're making good progress on the second phase. We expect to capture roughly $15 million in savings in 2026. Finally, we're introducing new measures which encompass targeted fixed cost actions within our corporate center. We expect to generate approximately $20 million in savings, which we will plan to share more details about in the near future. Collectively, these actions will have a carryover benefit into 2027, ensuring that we are actively managing the elements within our control to offset external headwinds and restore our profitability. Turning to Slide 22. Let me detail the acceleration of our vertical integration and how we significantly strengthened our U.S. manufacturing footprint. We recently announced that we are making a $60 million investment in our new state-of-the-art production facility in Perrysburg, Ohio. This represents our 11th factory in the U.S. and our sixth in the state of Ohio, reinforcing the legacy that we are incredibly proud of. We started in America and we stayed in America for over 100 years. The strategic investments will drive greater efficiency and are expected to deliver approximately $30 million in annualized EBIT benefits. Turning to Slide 23. We are executing critical factory footprint changes to unlock greater operational efficiencies within our regional manufacturing network. First, in Armada, Iowa, we are undergoing a multiyear modernization effort. This modernization will refocus our manufacturing of bottom-mount refrigeration and optimize our cabinet production and subassemblies, generating an expected annualized EBIT benefit of approximately $70 million. We're also optimizing our Latin America operations by shifting washer production from Argentina to our Rio Claro facility in Brazil. This strategic shift drives valuable manufacturing cost efficiencies and logistic cost optimization, which we expect to deliver an additional $20 million in annualized EBIT benefit. Turning to Slide 24. Let me provide an update on Section 232 tariffs. While the Supreme Court overturned IEEPA tariffs in late February, the administration took significant actions in early April to strengthen Section 232 steel tariffs on home appliances. The updated 232 framework represents a significant win for U.S. manufacturing and a lasting structural advantage for Whirlpool. As a reminder, Section 232 steel tariffs were first implemented in 2018 and have proven durable by remaining in effect throughout multiple administrations. While home appliances were officially covered under the framework in mid-2025, the recent updates in April have increased the overall tariff rate on home appliances and greatly simplify both compliance and enforcement. Because we proudly manufacture the vast majority of our products domestically and continue to invest in advanced manufacturing, this trade policy strongly supports our position. We estimate that a 25% tariff will increase costs for many competitors by approximately 10% to 15% of a U.S. major appliance's net sales. By contrast, the impact on our MDA North America business is estimated to be about 5%. Ultimately, these changes bring much needed predictability to the industry and deeply strengthen our competitive advantage as by far the largest domestic appliance producer. Now I will turn the call back over to Roxanne to review our revised expectations for 2026.

Roxanne Warner, Chief Financial Officer (CFO)

Thanks, Juan Carlos. Turning to Slide 26. I will review our updated guidance for 2026. Given the rapid deterioration of the macro environment since late February, we have revised our expectations for our 2026 results. On a like-for-like basis, we expect revenue growth of approximately 1.5% in 2026 due to our revised expectations for the North American industry. Even though the industry has seen substantial degradation, new product launches are expected to continue delivering growth in MDA North America. We expect our MDA Latin America business to regain momentum and expect continued strength in our SDA Global business. On a like-for-like basis, we expect approximately 70 basis points of ongoing EBIT margin contraction to a full year ongoing EBIT margin of approximately 4%. Free cash flow is expected to deliver more than $300 million or approximately 2% of net sales, driven by significant structural inventory optimization. We expect full year ongoing earnings per share of $3 to $3.50. This includes approximately $1 impact due to the recent equity offering alongside an additional $1 impact due to an adjusted effective tax rate of approximately 25%, which is an increase compared to 2025. Turning to Slide 27, we show the drivers supporting our 2026 ongoing EBIT margin guidance. We have updated our expectation of price mix to negative 150 basis points reflecting the current impact of collapsed consumer sentiment, offset by the impact of our board pricing actions announced in April. We expect to substantially improve price/mix as we progress through the year with the benefits starting in May and ramping throughout the year. Net cost takeout reflects the expectation of delivering more than $150 million supported by our accelerated cost actions. While we have long-term steel contracts in place, the current and projected costs are putting us essentially at the maximum pricing of those contracts. This has a minor impact on our full year raw material expectations. However, combined with the inflation of base metals and resins, we have updated our expectations to approximately 75 basis points of negative impact from raw materials. We expect approximately 175 basis points of negative impact from the tariffs announced in 2025 and updated in April 2026. We expect the benefits seen in Q1 from the tariff recovery and mitigation actions to be more than offset by additional tariff costs due to the Section 232 tariff changes announced in April. It is important to note that these impacts represent currently announced tariffs and do not factor in any future or potential changes in trade policy. Our expectations for marketing and technology, currency and transaction impacts remain unchanged. Turning to Slide 28, I will review our segment guidance. Starting with industry demand, we expect the global industry to be down approximately 3% in 2026. In North America, given the drastic decline already seen in Q1 and the anticipated prolonged inflationary environment, we now expect full year industry demand to decline by approximately 5%. Our industry expectations for MDA Latin America and SDA Global remain unchanged. For MDA North America, we now expect to deliver a full year EBIT margin of approximately 4%. The board pricing actions we've taken and accelerated cost takeout initiatives are expected to drive profitability recovery in MDA North America. Margin expectations for MDA Latin America and SDA Global remain unchanged. Turning to Slide 29. I will provide the drivers of our free cash flow guidance. We have updated our cash earnings and other operating accounts, consistent with full year EBIT guidance. We have not changed our expectations for capital expenditures and continue to focus on delivering product excellence and investing in our U.S. manufacturing footprint. We have taken necessary actions to optimize our inventory and are updating our expectations to improve working capital by approximately $150 million to support cash generation in 2026. As seen in our first quarter results, our working capital initiatives are off to a very strong start and we expect these structural changes to improve our day-to-day inventory levels. Our expectations for restructuring cash outlays related to our manufacturing and logistics footprint optimization efforts are unchanged. Overall, we expect to deliver free cash flow of more than $300 million or approximately 2% of net sales. Turning to Slide 30. I will review our capital allocation priorities, which have been updated to reflect the current business environment. Investing in organic growth through product innovation remains critical to our business, and this will continue to be one of our top priorities. We will continue to invest in product innovation, digital transformation and cost efficiency projects with approximately $400 million of capital expenditure expected this year. Secondly, we are committed to reducing our debt levels now more than ever. We expect to pay down more than $900 million of debt in 2026, continuing our commitment to deleverage. Lastly, after careful consideration with our focus on ensuring financial flexibility during this challenging operating environment, we have made the prudent decision to pause our quarterly dividend starting in the second quarter. This decision is critical to ensure that we create the capacity on our balance sheet to pay down debt and fund organic growth. Turning to Slide 31. I will review how we are taking additional actions to manage our debt maturities and ensure liquidity in an uncertain macro environment. We recently executed a strategic equity offering that successfully raised approximately $1.1 billion in capital. The use of these proceeds was focused on debt paydown and accelerating our vertical integration and automation efforts. The proceeds were used as expected. We paid down more than $900 million in debt and began to invest in vertical integration with the acquisition of our Perrysburg, Ohio facility. We are in the process of moving to an asset-based lending facility. As we transition, we entered into an amendment to our existing credit facility reducing our available line of credit from $3.5 billion to approximately $2.25 billion effective in May. This amendment provides us with valuable near-term flexibility and ample borrowing capacity. We have strong lender support on the asset-based lending facility and are tracking well to closing the next credit facility over the coming weeks. These decisive actions demonstrate our continued focus on debt paydown as we work to drive our long-term debt below $5 billion. Now I will turn the call back to Marc for closing remarks.

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Thanks, Roxanne. Turning to Slide 32. Let me summarize what you heard today. As we discussed, our first quarter results were heavily impacted by severe external volatility and one-time events. The sudden macro pressures from the war in Iran resulted in a plunge in consumer sentiment and the disruptions to industry demand and pricing all masked the underlying operational progress we have made. However, we're actively managing what is within our control. We have announced significant pricing and structural cost actions that are firmly in place to restore profitability to our MDA North America business. By driving over $150 million in cost takeout initiatives and executing our largest price increase in the decade, we're aggressively addressing our margin pressures. More importantly, our ongoing U.S. footprint optimization and the recent Section 232 tariff update meaningfully strengthened our competitive advantage as a domestic producer. Because we produce approximately 80% of the products we sell in the U.S. here in America, we're structurally positioned to win in this new tariff landscape. Additionally, our SDA Global business continues to perform exceptionally well, remaining a bright spot in our portfolio, consistently delivering revenue growth and margin expansion. Whether in small appliances or our major domestic categories, we continue to hold a leading position supported by our portfolio of iconic brands and innovative products. Looking further ahead, we know the U.S. housing market drop will be over at one point, and the March read of housing starts may be an early indication of a more positive trend. The eventual tailwind from an inevitable recovery will be strongly catalyzed by our leading established position in the channel as well as the strength of our in-store business. Now we will end our formal remarks and open it up for questions.

Operator, Operator

Operator instructions were given. Your first question comes from the line of Michael Rehaut from JPMorgan.

Michael Rehaut, Analyst, JPMorgan

I want to take a step back and just kind of — my question is really just on the consumer. And you highlighted the all-time low in confidence impacting results. So far this earnings season, we've heard from other building product companies where volumes are down, but not to the extent that we're seeing in appliances and many have kind of reported that while the consumer confidence is shaky, demand trends have been somewhat more stable, perhaps than what you've seen in your own industry. So I was wondering if you could kind of contrast what the drivers are that maybe has created that greater amount of volatility in appliances as you see it from the consumer's perspective compared to other products like power tools, flooring, paint, plumbing, et cetera. Right. And I guess secondly, obviously, big price increases by yourself, and it looks like from Slide 9, the industry as well in the most recent couple of weeks. How are you thinking about second quarter EBIT margins for North America? And if your assumptions hold, what are you thinking about the trajectory for the back half as well?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Yes. So Mike, obviously, I mean, just to repeat the numbers, we saw minus 7.4% industry demand in Q1, of which March was minus 10%. So that is even in our industry, a very, very unusual low level. I mean that's why we pointed it out. The last time you've seen minus 10% was during the global financial crisis. I think one of the key elements which makes our category slightly different from other categories is that for the majority of U.S. households, appliances represent a significant portion of discretionary income. Ultimately, it's a decision against the confidence the consumer has about the financial future. So it's a big-ticket item. It's not a $50 purchase. And that, I think, explains a little bit what we saw in Q1. And while we're being a bit anecdotal, one of the strongest businesses we had in Q1 was actually our spare parts and repair business, which indicates that consumers are holding back on replacing products and rather repairing them. Now the flip side is consumer confidence is on a 50-year low, but we've seen in other phases consumer confidence actually moves pretty fast. I wouldn't expect that level of confidence, and also that level of industry demand being that much down for the rest of the year. So we do anticipate a recovery. But I mean the first three months already were so much down, no matter how you do the math, if you anticipate kind of a more flat environment going forward, that's why we ended at minus 5%. I do consider and I agree with you, March was probably an exceptionally low outlier, which we didn't expect. Will that be the same going forward? No, but it's not going to be an immediate recovery in the consumer environment. Regarding Q2 EBIT margins, as you know, we're not giving specific Q2 margin guidance. But let me give you a little bit broader perspective on the pricing and what we're seeing and how it flows through our bottom line. So first of all, and I want to refer to a slide which we presented, this is the biggest price increase — I think we'll refer to the decade — honestly, in three decades in the company, I have not seen that level of price increase. Keep in mind, there are essentially three components of that price increase. One, a very significant promotional price MAP increase of more than 10%. That's already out there, and you see that already reflected in retailer pricing towards the consumer. Two, we significantly reduced our participation in promotions. So for example, July 4, we're supporting two weeks as opposed to three weeks when participating in all-house promotions. And three, we have a list price increase also kicking in July on the vast majority of our products. So it's kind of a multi-tiered approach. I would say the first two weeks of what we've seen in consumer-visible prices have been very encouraging. So you could use the term in the first two weeks, yes, the pricing is sticking. That is key to everything going forward on the EBIT margin. And if that holds, then we will be in a good place. Now keep in mind also, and this explains a little bit of Q1, the consumer-visible price movement is not exactly how it immediately flows to our bottom line. For example, in Q1, you still pay the former promotional investment on Q4 because it's a delayed or trailing effect. So even if prices rise in April, you're still partially paying for the large promotions out there. So there's a little delay effect, which also will flow through Q2. But again, if the pricing holds, as we've seen in the two weeks, I think you will absolutely see the gradual recovery of our EBIT margin as we've outlined.

Operator, Operator

Your next question comes from the line of David MacGregor from Longbow Research.

David S. MacGregor, Analyst, Longbow Research

My first question was just on the guidance. And I guess a few parts to this, but can you explain why you're calling out the improving price environment at the same time taking down your full year price/mix guidance? And would you tell us how much of the price improvement you're including in the revised guidance. It looks like you've got kind of partial inclusion with the reduced MAP, but maybe none of the July increase? And then how much are you specifically assuming for mix? And then I have a follow-up. Got it. Okay. Just as a follow-up, I guess this is maybe a higher-level question, but can you just update us on the path from where we are now to your 9% target for EBIT margins longer term? How does that 500 basis point bridge look in terms of price/mix, net cost, volume leverage, RMI, the framework you typically employ?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Yes. So David, first of all, the full year number which you've seen on Page 27, keep in mind, we basically have three months of negative pricing, and you saw that in the earlier pricing margin walk. So you first have to overcompensate on a full year base for what you already lost in Q1. Put differently, yes, on a full year basis, it looks like it's kind of down, actually, on the Q2 to Q4 point it is significantly up. Did we factor in the full amount of a price increase? No, which also means the success and stickiness of price will determine a lot, but we took, of course, a certain assumption into account here, but maybe not the full amount. But let's see how these things develop. The big uncertainty, and this is why we were still a little cautious, and you alluded to this one, is mix. Let me explain that a little because that's probably on everybody's minds. I know some people will ask about what happens to price elasticity. Actually, in prior years, we've not seen much of an impact on consumer price elasticity for a simple reason: the last time consumers were squeezed was many years ago, and by and large, prices are similar. So we don't see huge elasticity from pure demand, particularly in the replacement market. What you do see, however, particularly in a distressed environment, is that consumers enter the store with a budget in their mind. So what I mean is a consumer may have a budget like $600 and they're going to stick by that price point. So what you see is instead of buying a higher-value product, consumers may choose a lower-priced model. That impacts mix. We've seen in other circumstances not necessarily an impact on total volume demand, but you do see management of mix. That's the biggest uncertainty. That's why we didn't fully factor in what happens to mix and how much we can compensate or mitigate. We have tools in place, in particular with our new products, to manage the mix in the right direction, but consumer uncertainty about mix is significant when consumers feel financially constrained. Regarding the 9% target, the first big step is actually what will have to happen in '26. The guidance we've given of 4% this year implies an exit rate that is very different from where we are today. Without getting into quarter-by-quarter detail, you're basically talking about an exit rate in North America that's meaningfully higher than current levels. The pricing actions together with the cost actions will put us on the right trajectory. Many of the cost actions, especially those tied to manufacturing footprint and vertical integration, have carryover benefits. So while you see modest benefits in '26, the real benefits start in '27 and beyond. That carryover combined with additional cost actions will put us on a path toward 9% over time. I'm not saying that's a '27 number, but it puts us on the right path.

Operator, Operator

Your next question comes from the line of Sam Darkatsh from Raymond James.

Sam Darkatsh, Analyst, Raymond James

So the two questions. First off, around the RMI guide, I think you raised it by about $100 million versus prior. Does that contemplate current market prices for PVC and resin and base metals? Or does that contemplate some giveback from current market prices in the second half of the year? And then I've got a follow-up. But the second half does contemplate like current market prices for resin and oil throughout the year, and then it just hits you in the back half, just clarifying that.

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Sam, the short answer is yes, let me give you a little context. As you know, our number one purchased raw material is steel — to Roxanne's point — and we're kind of getting to a cap of our long-term agreements. That is fully factored in. On resins, it does not reflect the current spot because the way we procure materials and the timing of contracts means spot moves don't immediately flow through. But our guidance anticipates that in Q3 and Q4 we have some headwinds on our plastic components. That is a result of what we're seeing in oil prices. There is another element which may be relatively more favorable for North America as opposed to Asia; there might be some supply constraints in plastics for Asia that could ultimately drive prices in Asia as well. To clarify, the view implies an increase of plastic prices in Q3 and Q4 versus where we are today.

Sam Darkatsh, Analyst, Raymond James

Got you. And then my follow-up, you cut out a lot of production, obviously, you get the inventories in better shape during the first quarter. The rest of the year, are you anticipating production and shipments to largely match? Or are there more production cuts to come?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Yes. So Sam, first of all, to clarify Q1, we already planned and we alluded to this in January, we wanted to bring down inventory to the right levels. Obviously, with the industry being what it is, we had to cut even more production than we ever had in mind. That caused us in the quarter around $60 million of incremental cost. But the good news is right now our inventories in North America are at what we call a healthy, sustainable level. Having said that, we are anticipating on a full year basis that industry demand will not fully recover. So going forward, we will produce less than we produced last year, but we know that now we can adjust accordingly. So there's not going to be a big one-time reduction in inventory, but rather we will keep production in line with industry demand.

Operator, Operator

Your next question comes from the line of Mike Dahl from RBC Capital Markets.

Michael Dahl, Analyst, RBC Capital Markets

I wanted to ask first about tariff dynamics in two parts. First, you didn't record a material tariff impact in first quarter and you're still lapping the tariffs from last year. So curious if there was any booking of refunds or anything one-time in nature there? And then when you think about the net tariff impact going up for the full year despite that, can you just help us parse out like what the — like obviously, your competitors are more impacted by 232, but what your net puts and takes are around the current guide? And what's contemplated and how much is specific to 232?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

So Mike, let me first talk about how it impacts us and then the broader 232 tariff. First of all, as you know, we as a company pay different types of tariffs historically — 301 in the past, IEEPA, and now 232/122. In Q1, we had a number of favorable tariff mitigation actions. That's a combination of post-summary corrections, tariff refunds and other mitigation on the IEEPA piece as well as other tariff remediation. So in Q1, it was pretty neutral — a wash in many ways. On a full year basis, we do anticipate, and that's now effective for 232 and also with 122 changes, that tariff costs on a full-year basis go up. That's factored in. Keep in mind, in every given quarter you may have ins and outs depending on shipment patterns, but at the current state, if the tariffs stay, you should expect an increase — roughly on the order we've described in our guidance. On the broader comment on 232, while a change may look small in form, it is actually large in implication for our industry. Previously the rules were complicated and left room for differing treatment. What changed is a flat rate of 25% on the full declared product value. That brings stability and clarity because customs authorities have robust procedures for full product declaration. With a flat 25% on every imported appliance, it's much harder to escape the tariff. With our domestic production footprint, this creates a more level playing field and supports domestic manufacturers. That has been an important development for us.

Operator, Operator

Your next question comes from the line of Eric Bosshard from Cleveland Research.

Eric Bosshard, Analyst, Cleveland Research

Just a clarification of two things. One, the March and April demand — this is industry shipments, is that correct? Second, I was curious on sell-through. Is the sell-through at what you're seeing at retail down 10% in March and at a similar level in April? Or is this just a shipment issue?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

That is correct, Eric. What I'm referring to is industry shipments into the trade. In Q1, and of course, we don't have industry inventory levels. We know our own product inventory levels with retailers. I would say that in the 7.4% decline, probably about 0.5 to 1 point could be attributable to inventory reduction at the trade, but not much more. That's our estimate. On our products, because we don't have full industry sellout data, our products in Q1 actually held reasonably good ground. Over the last 13 weeks what we've seen is pretty much flat to slightly down sellout, a little better sell-out relative to the shipment decline. We continue to see that our new products are selling; KitchenAid products, in particular, are still growing at double-digit rates. So our products are performing, but the overall industry sell-in was the thing that dropped substantially in March.

Eric Bosshard, Analyst, Cleveland Research

Okay. So the dramatic change in March was on sell-in and the sell-through has not changed meaningfully — that's your point?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

I need to clarify: on our products, even in March, sell-out was weak for a short period — maybe a week or two — but overall our sell-out held up relatively better. Market-wide sell-in was the big issue in March. Going forward, we continue to monitor sell-through closely, but the more pronounced drop was in shipments into the channel.

Operator, Operator

Your next question comes from the line of Rafe Jadrosich from Bank of America. The caller on behalf is Sean Calman.

Sean Calman, Analyst, Bank of America (covering for Rafe Jadrosich)

Just first one, you guys are raising price a little more than your competitors despite the higher tariff impact for them. Are you expecting them to have to catch up on the price increases? And then with that in mind, what are you guys expecting for share gains this year? Okay. That makes sense. And then on the 10% to 15% impact from 232 to competitors — how does that compare to what you guys thought the IEEPA impact was?

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Sean, first of all, I want to be clear: we're raising price not just because of tariffs. We have three years of pent-up inflation that has not been reflected in consumer prices. At one point, that needs to be passed on to the consumer in addition to tariffs. The mix of inflation and tariffs may be different for competitors and they will make their own decisions. We know what we have to do because of our cost base. We're reflecting the cost of our products in consumer prices. Regarding whether competitors will catch up: some will and some won't. We also have a large set of new products which command higher value and help support price realization. On the 232 versus IEEPA comparison, IEEPA created a lot of uncertainty and opportunities for differing treatment. The new 232 treatment is more stable and harder to circumvent. So while the absolute number may be slightly higher, the real effect is that it's now a durable framework that creates predictability and a level playing field. That predictability is a material difference versus where we were a year ago.

Operator, Operator

Your next question comes from the line of Susan Maklari from Goldman Sachs.

Susan Maklari, Analyst, Goldman Sachs

My first question is on the strength that you actually saw in SDA, which seems to be quite contrary to what is going on with MDA and your overall comments on demand. Can you talk about how much of that strength is driven by your product specifically and the investments in innovation versus the exposure that you have there at the price point? And how you're thinking about the sustainability of that given the environment? Okay. That's helpful. And turning to the dividend. Can you talk a bit more about the decision to suspend that — what needs to happen to perhaps start to bring that back in? And then just more broadly, your thoughts on the current capital structure post the offering. And I know you talked about that path to deleveraging. But can you just give us a bit more color on how you're thinking about the future of the capital structure and what that will mean for uses of cash?

Ludovic Beaufils, Executive President, KitchenAid Small Appliances and Latin America

Susan, thanks for the question. In terms of the overall industry, we have not observed as much of a compression in consumer demand in SDA as in MDA, be it in North America or in other regions. There are a couple reasons for that. First, SDA products are generally lower ticket items, and consumer resilience is stronger for lower-ticket purchases. In that context, we're gaining share. I think this is based on the fact that we're selling more premium products where consumer resilience is stronger. Second, we're doing really well with our new products. Whether that's the carryover effect from launches last year in blenders, or the stand mixer innovation and compact espresso machines, we're seeing strong numbers across SDA. We're very pleased with how that's performed so far. We'll continue to monitor the industry, but with the strategy and the launches we've done so far, we're pretty upbeat about the rest of the year.

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

Susan, to clarify the dividend decision: the dividend suspension was made by our Board and it was a difficult decision. As CEO, I can tell you it is painful and not something we want to maintain longer than necessary. We would like to resume a dividend as quickly as possible. What needs to be true is we need a better ongoing operating margin and continued progress on debt paydown. That's the priority: improve operating performance, reduce leverage, and then reassess the dividend. The decision allowed us to keep investing in capex for product and manufacturing while accelerating debt reduction, including the $900 million paydown we executed. Ultimately, it's a Board decision and we'll reassess as margins and leverage improve.

Roxanne Warner, Chief Financial Officer (CFO)

Susan, to expand on capital allocation post the equity offering: we do have ample liquidity to operate the business in the current uncertain environment. As Marc mentioned, we executed the equity offering and used proceeds to pay down debt and invest in vertical integration. We also amended our credit facility and currently have a $2.25 billion unsecured revolver effective in May, which provides flexibility. Given the uncertain environment, we will continue to evaluate all opportunities to bolster our balance sheet, including potential asset sales and financial alternatives like accessing capital markets if needed, with a focus on ensuring our net debt leverage continues to improve.

Operator, Operator

Your final question comes from the line of Kyle Menges from Citi. The caller on behalf is Randy.

Randy, Analyst, Citi (covering for Kyle Menges)

I was just hoping you could talk a little bit about what you're seeing in the promotional environment in Latin America. And I guess your expectations around how you'd expect pricing behavior to shape up in that market from here?

Ludovic Beaufils, Executive President, KitchenAid Small Appliances and Latin America

Yes. In terms of the promotional environment in Latin America, the general background is one of pretty significant growth in the market at this point. We're seeing growth in Brazil and a large number of markets around Latin America. With that said, the promotional environment has been particularly intense in Brazil lately, driven by aggressive pricing from foreign competitors on the back of a stronger real. We're responding to this with product launches, particularly on the premium side where we have a strong lineup — successful in refrigeration and laundry — and we're also accelerating cost actions to remain competitive. That includes vertical integration and expanding production in Rio Claro to take volume previously produced in Argentina. We're confident these moves will enable us to be successful in a highly competitive environment.

Operator, Operator

Ladies and gentlemen, that concludes the question-and-answer session.

Marc Bitzer, Chairman and Chief Executive Officer (CEO)

I think that pretty much concludes today's questions and the earnings call. First of all, I appreciate everybody joining. We had a challenge in Q1, driven by a very rough environment in North America. But importantly, we took bold and decisive actions. These actions are not just plans, they are already in place. You can see the pricing chart and we start seeing the effect. Yes, Q1 was challenging, but the actions are in place, and we have 100% focus on reversing the current profitability trends in North America, and we have full confidence behind that. Thanks for joining me, and we will talk to you in July. Thanks.

Operator, Operator

Ladies and gentlemen, that concludes today's conference call. You may now disconnect.