Hamilton Beach Brands Holding Company today confirmed the wind down of the retail operations of its Kitchen Collection subsidiary and the closure of all of its 160 stores by the end of 2019.
The Kitchen Collection brand has been operating for more than 35 years, offering a wide variety of bakeware, cookware, small appliances, marble and ceramics to consumers across the States.
But the speciality retailer no longer features in the group’s long-term plans and after the closure of 37 stores since September 2018 it will shutter the entire portfolio before the year ends.
Its website is currently advertising price reductions of 10%-30% as it looks to clear stock.
Revenue from the Kitchen Collection during the third quarter fell $6m year-on-year to $20.3m, which the company said was due to the store closures and a continuing decline in foot traffic as consumers purchase more online. Operating losses for the quarter totalled $2.4m.
Bosses at the group said the business would incur expenses in the range of $4m to $6m during the fourth quarter, primarily for severance obligations and professional fees related to the wind down. In total it is likely to cost the business between $6m and $8m to shut the operation.
Its exit from the Kitchen Collection will see the company focus entirely on its Hamilton Beach Brands segment, where revenues in the third quarter hit $150.9m compared with a record $172.5m the previous year.
The revenue decrease was due to lower sales volume in the US and international consumer markets. Reduced sales volumes in the US were affected by a significant change in retailer order patterns driven by the adverse impact of tariffs.
Much of the revenue shortfall is expected to be recovered in the fourth quarter of 2019 but the impact of current and pending tariffs on the company has become more significant, Hamilton Beach said.
Additionally, in the third quarter, nearly 50% of the shortfall in the company’s US consumer market revenue was due to lower direct import sales.
As a result of tariffs, retailers are less inclined to take ownership of some inventory from the company’s suppliers in China, which has the benefit of cost savings to the retailer and earlier revenue recognition to the company.
Retailers have increasingly opted to take ownership of inventory from the company’s US warehouse, which can add up to five weeks to the date on which the company can recognize the revenue, resulting in a timing shift from the third quarter to the fourth quarter for a large amount of revenue.
Also contributing to the third-quarter revenue shortfall was a loss of placements in the dollar store channel resulting from the company’s decision to not maintain very low margin business.
The adverse impact of tariffs was evident in the US small kitchen appliance industry’s performance in the third quarter of 2019.
Industry sales overall were flat, while the mass segment of the market, in which the Hamilton Beach and Proctor Silex brands participate, decreased.
The smaller premium segment of the market, in which the company’s ‘only-the-best’ brands participate, increased.
The US food service and hospitality industries are also adversely affected by the impact of tariffs, it added.
Based on early fourth-quarter results, Hamilton Beach Brands said it expects to recover much of the third-quarter revenue shortfall.
The extent of recovery will ultimately depend on retailer and consumer response to increased product costs and higher prices at retail caused by the tariffs.