Lennox: Business cool first half
Cooler-than-normal early summer temperatures in important North American markets contributed to lower shipments of air conditioners industry-wide. Recent reports from the Air Conditioning and Refrigeration Institute (ARI) showed year-to-date factory shipments of unitary air conditioners and heat pumps in 2001 down 7% at the end of May. On a positive note, distributor inventories at the end of May were also down 10% versus last year.
Continued soft economic conditions across North America also affected sales. Economic uncertainty is causing a higher number of consumers to repair rather than replace existing air conditioning units.
Officials said half of the retail segment's earnings shortfall in the second quarter can be attributed to operating issues and a third to unfavorable weather in May and June. The remainder is attributed to the economy and a shift in the business mix to the lower-margin residential new construction and commercial markets. There has been some significant short-term disruption created by management transition at some service centers and the implementation of other retail initiatives. However, officials are confident this will become less of an issue over time, as the company is making headway in implementing standardized practices and processes.
The previously-announced restructuring of 38 selected retail service centers is proceeding according to schedule and is nearly complete, according to the company, which continued to experience the negative impact of the centers involved in the restructuring in the second quarter. Restructuring costs and their impact are expected to remain within previous estimates.
"We are not satisfied with the financial performance of our retail operations," Schjerven said. "We clearly underestimated the time and complexity needed to deliver on our retail strategy and do not expect significant improvement in this segment until the second half of 2002." While the company expects modest operating improvement for the remainder of the year, operating margins for the full year in the retail segment, excluding the one-time charge, are projected to be down from the level achieved in 2000.
Given a conservative outlook on general weather patterns and prospects for North American economic recovery, officials expect total corporate revenue growth will be relatively flat for 2001 and full year earnings per share, before one-time charges, are expected to be in the $0.60-$0.70 range.