The pricing power of larger discount chains like Wal-Mart Stores,Inc. (NYSE:WMT) and the Target Corporation (NYSE:TGT) is being cited as a main reason that Whirlpool has sold its Hoover line of floor care products to Chinese-based Techtronics Industries.This should really come as no surprise given that ultra-low prices -- even in Target Stores with it's recently-revised image of mid-tier svelte -- are the going rage in certain categories of goods. Whirlpool NYSE:WHR) said that the sale of the Hoover floor-care business "allows us to focus on our core appliance business." I'll take that as a grain of salt.
Most likely, Whirlpool could not continue to operate profitably with the pricing structure of low-end floor-care products that continue to see price declines on a regular basis. In fact, Whirlpool announced several months ago that it intended to sell the Hoover operation -- as the division has had difficulty competing with a surge of low-cost imports -- mostly form China (where else) due to the vacuum manufacturer need to deal with relatively high labor costs.
What else is new -- this is the standard operating procedure these days in the goods manufacturing field of any industry. Add that to the ever-lower prices discounters require for these products and wham -- off to China we go.
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