On Tuesday, Whirlpool (NYSE:WHR) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/677082488
Summary
Whirlpool Corporation's Q2 performance met expectations, with sequential margin improvement and strong North America operations, despite economic challenges.
The company is accelerating product launches, with a significant portfolio refresh in 2025 and plans to introduce over 100 new products in 2026, enhancing consumer and trade reception.
Whirlpool is undertaking structural cost reductions, optimizing logistics, and investing in manufacturing to drive long-term efficiencies, aiming for substantial EBIT benefits in the coming years.
Recent financial actions, including refinancing and divestments, strengthened the balance sheet, improving liquidity and financial flexibility.
The company reaffirmed its 2026 outlook, projecting revenue growth and margin improvements, supported by pricing strategies and new product momentum.
Full Transcript
Scott, Investor Relations
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 the non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of results from our 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 the reconciliation of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in listen-only mode. Following our prepared remarks, the call will be open for analyst questions.
As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Mark.
Mark
Thanks, Scott, and good morning everyone. During today's call, you will hear three key messages. First, our Q2 performance was in line with our expectations despite the persistent macroeconomic challenges impacting our industry and the broad economy. Second, we delivered sequential margin improvement in Q2 and we expect margins to continue improving throughout the remainder of 2026. North America, in particular, delivered strong operational progress relative to the first quarter, supported by our second quarter promotional pricing increase and a strong lineup of new products.
While we recognize that there's more work to do, this is a clear step towards stabilizing our business. And third, we continue to take decisive actions to better position our business in the near term and capture the upside when consumer sentiment and the housing market rebound. We are reaffirming our full-year operational outlook and adjusting EPS to reflect the updated interest expense expectation following our recent refinancing activities. Turning to slide 7, we will further discuss some of the decisive actions taken to better position our business.
We have accelerated the cadence of our new product launches and are performing exceptionally well. In 2025, we transitioned over 30% of our MDA portfolio in North America to new products. That is three times more than we would typically transition in a year and the largest portfolio refresh in the last 10 years. In 2026, we had an impressive performance at the Kitchen Bath Show, winning 23 awards, and are on track to launch more than 100 new products.
Our trade customers and consumers have reacted very positively to these new launches. Juan Carlos and Lude will provide more details on how some of these recent launches in MDA North America and the SDA Global are performing. In our last call, we discussed our announced price increases to mitigate years of cost inflation and some residual impact of tariffs. I'm very pleased to report that our execution of these increases has been strong. The initial benefit is already showing up in our sequential margin improvement and we anticipate further incremental margin gains moving forward.
We also announced new pricing actions in Latin America effective in August, which in combination with some of our strategic launches, in particular in refrigeration, are expected to restore margin in what has been a highly competitive environment. We continue to accelerate our structural cost takeout actions to help offset macroeconomic headwinds and to drive meaningful carryover benefits in the years ahead. Recently we announced footprint changes that are expected to deliver meaningful cost savings starting in Q4 2026 across key manufacturing facilities in Amana, Iowa, Rio Clara, Brazil, and more recently Ramos, Mexico.
We're also optimizing our logistics network, reducing the number of local distribution centers by 25% while maintaining a strong footprint that places 97% of our customers within 100 miles of an LDC. This allows us to maintain high reliability, on-time delivery, and maintain lead times as we optimize our global footprint. We're also investing in growth, including our new manufacturing plant in Pearisburg, Ohio. Together, these actions accelerate our path to vertical integration, automation, and supply chain modernization, reinforcing our competitive advantage as the leading domestic appliance producer.
Finally, we have completed a series of strategic actions to strengthen our balance sheet and expand our financial flexibility, giving us the resilience required to navigate the volatile macroeconomic environment while continuing to fund our organic growth. A look at our balance sheet before and after these transactions shows a dramatic improvement in our near-term liquidity and capital position. Our strategic recapitalization strengthened our balance sheet.
Our recent bond issuance successfully cleared our 2026 and 2027 debt maturity, giving us a clear operational runway. We completed a secured asset-based lending credit facility that provides us with needed liquidity and financial flexibility to operate in the current volatile environment. Lastly, we completed the sale of our interest in Beko Europe B.V., primarily for cash consideration, further enhancing our cash position. Importantly, our core capital allocation priorities are unchanged.
Turning to slide 8, let me cover our second quarter results. We delivered net sales of $3.5 billion which was impacted by softer industry demand in North America and promotional intensity in Latin America. However, we saw a sequential margin improvement of 50 basis points to 1.8%, resulting in ongoing earnings per share of negative 21 cents. As mentioned earlier, in line with our capital allocation priorities, we successfully sold our minority stake in Beko Europe B.V. for approximately $128 million, generating roughly $84 million of net cash consideration. Our free cash flow was a consumption of approximately $1.1 billion, which was largely driven by lower earnings in conjunction with seasonal working capital. Turning to slide 9, I will walk through our sequential ongoing EBIT margin drivers. We delivered margin improvement of approximately 50 basis points quarter on quarter. Our previously announced pricing actions in North America favorably impacted margin, fully offsetting unfavorable price/mix in Latin America and resulting in 225 basis points of improvement.
Net cost was a tailwind of 100 basis points as we compared to the higher costs associated with our inventory reduction actions in the first quarter. Raw material inflation unfavorably impacted margin by 50 basis points, primarily driven by elevated steel and base metal costs. Net tariff impact was an unfavorable 200 basis points driven by the implementation of Section 232 and the realization of credit benefits of an IEA decision in Q1. Marketing and technology, as well as currency, each represented a headwind of 25 basis points, partially offset by favorable transaction impacts of approximately 25 basis points.
And now I will turn the call over to Juan Carlos to review our MDA North America results.
Ludo
Thanks, Juan Carlos. Turning to slide 18, I'll review the results for our MDA Latin America business. Excluding currency, net sales decreased 2% due to negative price mix partially offset by higher volume in Brazil's highly intense promotional environment. This negative price mix resulted in an EBIT margin of 3% despite a tax case related net gain. Turning to slide 19, let me highlight the main actions that are underway to restore our margins in Latin America.
First, we have announced new pricing actions in Brazil fully effective in August, resulting in an overall increase of approximately 5%. Second, we're driving premium mix through product innovation in our direct to consumer channel. In particular, we have completed the relaunch of Brastemp's laundry, top mount refrigeration and bottom mount refrigeration lineups and we're about to launch our new French door refrigeration line. We are also deploying the Whirlpool and KitchenAid products Juan Carlos referenced earlier into the relevant countries in Latin America.
Lastly, we are executing a comprehensive operational review to aggressively reduce both variable and fixed costs across the region. Turning to slide 20, our SDA Global business continues to deliver solid results. We achieved an EBIT margin of approximately 12% in the second quarter in line with expectations while successfully funding our planned marketing investments. Underlying demand is positive with double digit sell through growth and share gains globally driven by product launches and continued expansion of our direct to consumer channel.
However, we did experience a temporary but sizable trade inventory burn in Q2 which impacted our top line results. Overall, our performance in the first half of 2026 was in line with expectations, achieving growth and double digit margins while reinvesting some of those gains to fuel future organic growth. On slide 21 I will review three of our latest innovations that are instrumental to our growth trajectory in the second half of 2026. The Artisan Plus stand mixer with its new Bowl, Light and Precision speed controls has been an absolute hit so far, driving approximately 1 point of share growth in the U.S. Our new line of compact fully automatic espresso machines is expanding our presence in a fast-growing industry category that has expanded over 25% in the U.S. through May 2026. It started to hit the shelves in Q2 and has already shown strong sell through performance and our Pure Power blender has delivered standout growth internationally, securing an impressive 10 points of incremental share in Canada, as an example. To summarize, we've had a strong, margin-accretive first half performance.
We have continued to invest in growth and are seeing great success with our most recent product launches. On top of that, we have more launches coming in time for the holiday season. All of this gives us confidence in our ability to continue to capture double digit growth globally at the highly accretive margin we've been guiding towards. Now I will turn the call over to Roxanne to review our balance sheet and capital allocation priorities.
Roxanne
Thanks, Ludo. Turning to slide 23, let me review the decisive actions taken recently to lock in our liquidity and clear our debt runway. Creating balance sheet flexibility, we executed a $1.1 billion equity offering and made the prudent decision to suspend the common dividend to maximize our cash preservation. Improving near term liquidity, we finalized a $2 billion asset-based lending facility to provide financial flexibility. And finally, we issued $2 billion in secured bonds which removes near term refinancing risk by addressing our 2026 and 2027 debt maturities.
Combined, these actions significantly improved our financial flexibility, cleared our debt maturity runway and have positioned our business to better participate in growth opportunities. As you can see on slide 24, these actions have successfully secured over $3 billion in liquidity and cleared our debt maturity ladder until 2028. This gives us the financial runway necessary to execute our operational plans and improve profitability while still navigating an uncertain macroeconomic environment.
And while this recent bond issuance increased our gross debt, our net debt in Q2 stayed largely flat at $5.8 billion. We maintain our commitment to deleveraging and we expect to exit 2026 with a net debt below $5 billion. Turning to slide 25, let me outline an update to our capital allocation priorities. Investing in organic growth through product innovation is critical to our business and 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 CapEx expected this year.
To support our balance sheet strength, we strategically raised gross debt through new bond issuances. We have successfully completed the divestment of our interests in Beco Europe and we will continue evaluating all options to further strengthen our balance sheet. Turning to slide 26, we are updating our earnings per share guidance range. As a result of the revised interest expense associated with our recent bond issuance, our operational outlook is unchanged on a like-for-like basis.
We expect revenue growth of approximately 1.5% in 2026. We expect full year ongoing EBIT margin of approximately 4% supported by continued momentum with our new product launches, pricing actions and structural cost takeout. Free cash flow is expected to deliver $300 million or approximately 2% of net sales driven by significant structural inventory optimization. We are updating our full year interest expense outlook from $300 million to $350 million as a direct result of our recent debt refinancing activities.
Guidance drivers and segment details can be found in the appendix of this presentation. Now I'll turn the call back over to Mark for closing remarks.
Mark
Thanks, Roxanne. Turning to slide 27, let me summarize what gives us confidence that our business is on the right track to deliver long-term shareholder value. Looking to the second half of 2026, we expect to see continued margin expansion and as we move towards 2027, the margin expansion will be driven by sustained momentum from our new product launches, the compounding benefits from the pricing actions we have already taken, and the structural cost reduction initiatives that are fully underway.
We are taking decisive actions to create shareholder value now and in the future. Our aggressive investments in our U.S. domestic footprint continue to strengthen our competitive advantage and as we look further ahead, our portfolio of iconic brands and our leading established position in the builder channel ensure we are well positioned to catalyze the tailwinds of the eventual U.S. housing recovery. Now we will end our formal remarks and open it up for questions.
OPERATOR
At this time I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of David McGregor from Longbow Research. Your line is open.
David McGregor, Analyst at Longbow Research
Yes, good morning everyone and thanks for taking my time. Yeah, good morning Mark, Roxanne, just on pricing, can you just talk about what you're seeing in July that gives you confidence in the 4% list price increases and also, I guess with regard to the PMAPs, how confident you are that the industry will maintain PMAP discipline through year-end promotions.
Mark
David. So David, first of all, I mean obviously as we pointed out in the earlier remarks, we feel very good about how the pricing and the pricing actions which we communicated late April turned out. During Q2 you saw a significant price increase on the promotional side. You also saw the effect of us reducing the promotional window, particularly around July 4th. So that all worked out very well. It is important to note that even on Q2, de facto Q2 only has about two-thirds of a pricing impact because by definition pricing largely kicked in early May.
So that is already carryover benefit on the list price increase which we announced. We announced them a long time ago and we're executing and so far we don't see a big issue. So we feel actually very confident about the journey which we're on on the price increase. The other element also for Q3 which we talked about earlier, we also have the effect of builder price increases kicking in in Q3. That is something which we announced earlier. So put that all together.
The carryover from a price increase in Q2, the additional list price increase, and the builder pricing — that gives us the confidence that our pricing actions are really having good traction and we feel good about Q3.
David McGregor, Analyst at Longbow Research
Good. Second question is just on net costs and on the net cost guidance of 100 basis points year over year. This presumably would include the $150 million cost takeouts, which implies that ex cost takeouts, the guidance is flat for the full year, if I'm reading that correctly. Can you just talk about that line and bridge for us the first half to the flat full-year number.
Mark
Yeah, David, and I would particularly point also to page nine of our presentation. You saw sequentially we had, in pure net costs — that is our factory productivity, logistics productivity — we had about 100 basis point improvement Q2 versus Q1. Keep also in mind Q1 we took a lot of inventory out, so that's a little bit the element kind of offsetting here. In Q2, also going forward, we feel very good about the net cost actions which are in our control — that is engineering or redesign of certain products.
So these actions are on track. But what is right now already was in Q2 a headwind is the raw material side is becoming more challenging. I mean we have, on the steel side, very high end of the contract which we have, we have base metal increases, and as you all would have expected from oil price changes, there's some pressure on resins. So that's the offsetting element which right now, on a full-year basis, points out a little bit challenge. The other element — and Juan Carlos referred to this earlier — we took fairly sizable and significant actions in the first and second quarter around our factory footprint, particularly related to Amana, Iowa, our SUPSA factory in Mexico, and also Argentina factory. These are fairly significant moves. The important thing, however, to note is the vast majority of the benefits are more like a 2027 effect because it takes some time until you get the full benefit of this one. But there is also a portion which will help us in 2026.
OPERATOR
Your next question comes from the line of Sam Darkesh from Raymond James. Your line is open.
Sam Darkesh, Analyst at Raymond James
Good morning everyone, and Mark, best wishes for a speedy recovery. A couple questions here. The first, you obviously have a lot of pricing going through, largely matched by the industry. You also have difficult market share comparisons in the back half included within your guidance. What are you contemplating for a market share performance in the back half on a year-on-year basis?
Mark
Yes, Sam. So first of all, year to date, our market share in particular in North America is largely flat. We feel actually pretty good about — obviously we had significant price increase and we didn't lose market share. So that's a good element. In the back half, I mean first of all you have the effect of all these new product launches which help us. So we have a good product mix, good product lineup — that will help us. But at the same time we will continue our strategy on promotions.
We will invest in promotions when it creates value for us and the retailer. And that may be a little bit the offsetting element. And you saw that also in July 4th. We didn't go all aggressive. I'll put it differently. We want to have structurally healthy organic market share and maybe kind of give away a little bit of ground on some aggressive promotions. So that is our basic strategy. But even on a full-year base we expect a flat to maybe slightly up market share.
Sam Darkesh, Analyst at Raymond James
Thank you. And then my follow-up question — and actually I have a clarification question from David's prior question. Hopefully this doesn't count. If you could characterize what you're seeing in July. But my actual question: in the second half, you're guiding for effectively $1.6 billion in cash flows from operations. How much of that are you expecting in the third quarter versus your normal heavy fourth-quarter cash flow generation? Thanks.
Mark
Yes. Question 1B. So as you know, we don't typically give quarterly guidance on the cash flow. But I think there's one big element and that's a little bit different from every year. We took a lot of effort to get our working capital in balance in the first half. That is, we didn't produce as much as we typically would produce in Q1 and Q2. So we enter the second half with actually pretty good inventory levels, even to a point where we could actually slightly increase inventory.
So we feel very good about where we are from working capital and we don't have to take that strong action which we typically do in Q3 to Q4 to correct it. So we're in pretty balanced level here. And then on top of that, yes, we have the earnings and the earnings expectation of the second half kicking in on this one. And that's why we feel confident about the $300 million plus free cash flow for the full year.
OPERATOR
Your next question comes from a line of Mike Dahl from RBC Capital Markets. Your line is open.
Mike Dahl, Analyst at RBC Capital Markets
Morning. Thanks for taking my questions. Just another question on kind of the cadence — obviously, you know, in North America the guide still requires you to do kind of a 6% in the back half after doing the one and a half in the first half on an EBIT margin basis. So could you clarify kind of cadence of, you know, is it going to be, in your internal expectations, is that an immediate step up from 2Q to 3Q to around those levels? Or should we think about the guide implying kind of a ramp and an exit rate north of that the way you contemplate it?
Mark
Yeah, Michael, it's Mark. So first of all, I mean, and also want to point out between Q1 and Q2, North America at the moment, two points of margin improvement. So that was a very sizable step. And that is, as I mentioned before, with only two-thirds of a price increase kicking in and there's more coming. So obviously with a price increase being successful in the marketplace, I think these significant step-ups as we've seen in between Q1 and Q2 we also expect going forward.
So it's not all back-end loaded to Q4, but it is absolutely critical in Q3 that the traditional pricing actions and the carryover momentum in pricing — that we have a similar step-up in Q3 as we had in between Q1 and Q2.
Mike Dahl, Analyst at RBC Capital Markets
Okay, that's helpful, Mark, thanks. And then secondly, can you talk a little bit more about the inventory dynamic in SDA — you know, what you think drove it, whether there was something that happened in kind of the cadence of sell-through trends that led to a different decision on inventory replenishment, where inventory levels sit versus your view of what would be normal. And I think I heard you guys say you still expect that business positioned for double-digit growth.
So just, again, kind of square that with what played out between the sell-through dynamics and the inventory effectively destocking in Q2.
Mark
Yeah, Michael, overall, I think we're not at all nervous about the underlying growth of KitchenAid SDAs. As Ludo pointed out earlier, even in the second quarter, the underlying sell-through in retail was double digit. There was an inventory reduction, or you can also put it differently, there was a very sizable order which came late in the quarter, so we couldn't recognize it fully. July is looking already very healthy and we feel very good about the July run rate.
So we're absolutely on track with KitchenAid SDA, with the underlying sales growth, which we're very confident also about the full-year guidance on revenues. But let me also — maybe you want to add a little bit from a KitchenAid perspective.
Ludo
Yeah, just a little extra color. We had growth internationally in terms of sell-through that was in the very high teens and that was also true in the U.S. So globally, looking at very high double digits — high teens, like I said — across the entire globe, based on, in particular, our new product introductions, which have been received extremely well so far. So that momentum building early in Q2 really bodes well for Q3 and the rest of the year. And as Mark said, this one-off situation in terms of inventory burn is going to correct itself in Q3. We're very bullish about where that's going to lead to.
OPERATOR
Your next question comes from the line of Susan McLaury from Goldman Sachs. Your line is open.
Susan McLaury, Analyst at Goldman Sachs
Thank you. Good morning everyone.
Mark
Hey Susan.
Susan McLaury, Analyst at Goldman Sachs
My first question — good morning. My first question is around the new products and how you're thinking about innovation as you see the success of the recent launches coming through and it seems like it's allowing you to not only maintain your share but perhaps grow it. You're moving in line with the industry. How do you think about what that means in terms of future investments in innovation and how are you balancing that relative to other needs for capital allocation?
Mark
Yes, Susan, I mean, first of all, just want to echo again what you already highlighted and what we said also in the script. We feel really good about all the products which we've launched in 25, but also in 26. So this was not just a one time shot in 25, 25 was just an extraordinary amount of new product introductions. I know we repeatedly pointed out the KitchenAid suite, which is hugely successful, but you've all seen, like the laundry tower, the UV on the laundry.
We have some really, really good products where I feel very good about it, and that obviously helps us offsetting other challenges which you may have on a promotion environment. So we feel very good about the product introductions and we will certainly not slow down. The important thing, I think we highlighted this already in the last earnings call. Despite the obvious challenges, we have not cut back our capital investments on products, period. We kept that as a company.
We're convinced our innovations are good. We will continue to feed the pipeline, and we have not cut back anything on capital investments on products, and we have no intention to do so.
Susan McLaury, Analyst at Goldman Sachs
Okay, all right. That's very encouraging. And then as you think about the cost takeout initiatives that you've announced and the way that they're sort of positioned across the footprint, can you talk a bit more about the opportunities to realize further efficiencies, how technology plays into that, and how we should think about ultimately where your sort of operational efficiencies can go over time?
Mark
Yeah, Susan, let me maybe just trying to simplify also what we put on certain slides. There's always ongoing cost takeout initiatives, either on the product redesign, which have a fairly quick turnaround, but also in factories, we have put in a lot of investments about automation. We put in investments to drive more vertical integration that's particularly related to the plastics and what we do with the Perrysburg facility. But then on top of that, and that is, I think these were the big announcements in Q1 and Q2, fairly sizable factory footprint decisions that impacts Amana, where we basically reduce the overall volume and refocus the factory entirely on bottom mount refrigeration. The second one was in particular related to the Argentina factory, which is a too expensive factory for us in that environment. And we basically consolidate that with our Brazil operations. And the third element is what we announced in Mexico, where we have today essentially two refrigeration factories and we consolidated in one kind of big factory. Obviously, it's typical for these footprint moves, they don't immediately give you a return one quarter later because it typically stays in and phase out may take anywhere between six to 12 months.
But we have initiated them and that would structurally drive a much better cost position. But the major benefit of this one is actually in 2027, it's just the lead time it takes until you fully capture these benefits. But these footprint moves are very significant and will help us sustain our best cost position in North America and South America.
Danielle Brown, SVP and CIO
If I can add, Mark, maybe you mentioned the role of tech. We're also investing significantly in IT infrastructure, whether it is behind our direct to consumer platforms which we are globalizing across the business units in the various regions, which drives efficiencies in the way that we go to market as well as the enablement of AI for the transformation of our overall approach across the business.
OPERATOR
Your next question comes from the line of Eric Bessart from Cleveland Research. Your line is open.
Eric Bessart, Analyst at Cleveland Research
Thanks. Two things. First of all, just a quick follow up on SDA. Sell through in the US in 2Q was 10% and Global was up 15 to 20%. I guess I heard that right. Is that seems like epic market share growth? Am I, Did I hear that right?
Ludo
No, Eric, what I mentioned, this is Ludo, is we were up high teens across the globe and this was true of the US as well. The US was 16% POS growth, which is notably above the market. Exactly. It does point to market share gains. We saw those in terms of stand mixers and the mixing segment as well as in some of the new product areas meaning espresso, which is a very dynamic industry in which we are gaining share. Blenders as well we've been gaining share in.
Eric Bessart, Analyst at Cleveland Research
Okay. And then secondly Mark, I appreciate you had kind of two thirds of the promo price increase in the June quarter and so you'll have all of that in the third quarter. In addition, the list price increase that's coming. In addition the builder price increase that's coming. And then you mentioned some incremental promotions that can be a little bit of an offset. I'm just curious as we're now into two excuse me, into 3Q. Like how is this playing out?
And obviously trying to get to the the net impact of it. But how the consumers are responding to this pretty material incremental increase in price.
Mark
Yeah Eric. So first of all, you're absolutely correct. These are the big three elements of our pricing. Again, the promo increase from Q2, the list price from 4% in July and the build up. These are the big building blocks. What I refer to a promotion is just a basic promotion policy which we already execute in Q2. We will participate when we think it drives a significant lift in a return investment for us and the retailer. That is not a change policy and we've demonstrated that in July 4th we only went two weeks on the promotion period, as opposed to three weeks.
And I think that basic policy is unchanged for Q3 above and beyond this one. Obviously we're not making any future pricing announcements that would first be public and then we can talk about it. But if we stick to the promotional discipline, these three pricing elements, that's what gives us a lot of confidence for the pricing Q3 and Q4.
OPERATOR
Your next question comes from the line of Sean Kellon from Bank of America. Your line is open.
Sean Kellon, Analyst at Bank of America
Hi guys. Thank you for taking my questions. So the price realization you're seeing is encouraging, but could you talk about what you're seeing from a mix standpoint? Are you starting to see trade down and then are the new product launches enough to offset those mix headwinds at this point?
Mark
Yes. So I think, first of all, I think it's important to remind ourselves we're still operating in North America environment, which is largely a replacement of the rest market. That is just the simple reality. That is, if you largely operate in replacement market, the overall volume of what some people refer to price elasticity is very limited. If a washer or refrigerator breaks down, people buy it. What you do see, however, but this is nothing new, we experienced that on Q1 and Q2.
But sometimes consumers stay on the same price point, i.e. they don't want to spend more than 499 for a washer and they stay to the price point, which is a slight mix down. The offsetting element, which is more in our control, are the new products which give you a mix up. So I think with a new product we can certainly offset the negative impact which sometimes come when you have overall price increases on the replacement mix.
Sean Kellon, Analyst at Bank of America
Okay, great. And then I just had one on refunds. Are you seeing competitors hold on to IPO refunds or do you expect them to return those to their customers? And then just if there. Is there any impact from the changing 232 dynamic set would impact that decision?
Mark
Yeah, I mean, obviously I cannot speak for our competitors. I can only refer to what was publicly announced. And those competitors who gave more detailed statements on Q2, they largely recognized these benefits in Q2. That's what we've seen. So I would say if at all that would have been visible in Q2. So it's largely behind us as you relate to the new tariffs. I don't particularly the 301 tariffs. I don't expect a major change in the tariff environment around us or put it differently, the tariff expenses or costs which we have in Q2, we expect similar levels in Q3 and Q4 plus minus.
OPERATOR
Your next question comes from a line of Edward Magi from BNP Paribas. Your line is open.
Edward Magi, Analyst at BNP Paribas
Hey, good morning guys. Thanks for taking my questions. So the first one, you held MBA lat m margins steady for the guide and my math was suggesting you might need to post second half margins potentially as high as 8% plus. So it would be helpful to hear about how you're viewing the sequential uplift from Q2 to Q3 and then for Q3 to Q4 as well, given the promotional environment you're seeing there.
Mark
Yeah, and again, we typically don't give Q3 or Q4 specific margin guidance, but I think you particular two big elements you have in the back half. First of all, as a very important reminder, our KitchenAid SDA business is a very seasonal business. So there's a lot coming Q3 and Q4. So by definition, and that has not changed, we basically having a step up overall between Q1 and Q2 versus the second half in KitchenAid SDA profitability. The other element is North America. As I pointed out earlier, between Q1, Q2 we had very sizable step up on the margin on the back of pricing and we see and we do expect similar improvement in Q3 and Q4 in North America based on pricing and the additional cost actions.
Ludo
If I may add, I think the question is also directed at Lars. So we're taking pricing pretty significantly in Brazil right now, which is really where we are turning the tide from a margin standpoint. The rest of the continent is actually being performing really well. So in Brazil specifically we're taking pricing and we're doing that on the back of really strong brands and really strong new product introductions that happened earlier this year that are continuing to roll through Q3 and the earlier part of Q4.
So a little bit similar to the conversation for North America, you'll see pricing take hold progressively as we move through the quarter. It's already effective from a direct to consumer standpoint, but it was announced to be effective August 1st from a retail perspective. So it's going to take a little bit of time to kind of seed through the quarter in Q3 and then expand fully into Q4 and then on the cost side also a bit of a progression sequentially from Q2 to Q3 to Q4 as we take fixed cost and variable cost out of the overall P and L.
Mark
Thanks, Ludo. And sorry, Ed, for misunderstanding your question. I thought you referred to the overall company as opposed to Latin America. Apologize.
Edward Magi, Analyst at BNP Paribas
No worries. Color on both segments is helpful either way, so I appreciate that. And then, yeah, just as a brief follow up, I'm curious if you could quantify the amount from the Brazilian tax tailwind in the quarter. I'm not sure if I had missed that on the call or anywhere else,
Roxanne
so. Hi, Haya, this is Roxanne. In terms of the Brazil tax, we did get a meaningful benefit as it relates to the tax which we have mentioned both in the presentation as well as on the script. I would say the net impact is roughly 14 million. We had some puts and takes, but overall net would be around 14 million 1.4.
OPERATOR
Your next question comes from the line of Jeffrey Stevenson from Loop Capital. Your line is open.
Jeffrey Stevenson, Analyst at Loop Capital
Hi. Thanks for taking my questions today. So it's been several months since the changes in section 232 valuation and wondered if the study improved in competitor pricing and a challenging residential backdrop through July gives you confidence that the industry has become more rational from a pricing and promotional standpoint moving forward.
Mark
Yeah, Jeffrey, it's Mark. So first of all, you're correct. The 232 is now kind of the final change of 232 has now been a couple months in the market. So, as such, we've seen stabilization. It's a very important thing, however, to note also what we did in the pricing is not just tariff-related; it's also related to inflation, which we have been facing over the last two or three years. So it's a compound effect on tariff and basic inflation costs. I think what we're seeing right now is people pass on the real costs of the products to the market.
And that's what we're doing. We have a real cost and we pass it on to the market. If you call that a rational environment, yes, that's what it is. And I would also expect—keep also in mind—that the cost of tariffs for us is lower on a relative basis than for our competitors. So, put it differently, our competitors will feel the impact of tariffs significantly more than we do. But I can only speculate about their pricing, and that's their job to do.
But I would say overall, as an industry, in the long term, people are expected to reflect cost in the product pricing.
Jeffrey Stevenson, Analyst at Loop Capital
Understood. Thanks, Mark. And then can you discuss the decision to consolidate regional distribution centers and return centers, and what factors were considered in the 25% reduction that will be closed or consolidated? And then, on top of that, how we should think about the timing of the expected 60 million in annualized EBIT benefit.
Mark
Yeah, Jeffrey. I mean, first of all, this may be more for a broader audience. Essentially, as a company, you have three types of distribution centers. You have a factory distribution center, you have this big regional distribution center, and then you have a local distribution center. I would say by definition, we probably have the tightest net of local distribution centers of anybody in the industry. What you do when you make these local distribution decisions, you basically, on one hand, want to be close to the customer in physical distance.
But what you also have to recognize is the more distribution centers you have, you basically spread your inventory pretty thin, which doesn't help on availability. So we're kind of dialing back in terms of still being very close physically to the customer. As you heard before, 97% of our customers are within 100 miles. But with a reduction of a distribution center, that actually will help our availability and, at the same time, obviously will help the operating costs from local distribution.
So actually that's what we call a rebalancing. We still have a super, super well-covered local distribution center network, but I think the outcome will be lower cost and better availability. I think that was the last question which we had on the call. So, first of all, I want to thank you all for participating in today's call. Again, as a reminder, hopefully you heard that today we actually feel pretty good about where we are for Q2. We had more incremental margin improvement between Q1 and Q2.
Our pricing work, in particular in North America, sticks. We announced additional pricing also in Latin America. We talked a lot about new products and we feel very good about the new products. But we all recognize we still have a step up in front of us for Q3 and Q4. But hopefully you heard today, we feel kind of encouraged by what we're seeing in Q2, and we will continue on the path of incremental margin improvement. So thank you all for joining us and have a wonderful day.
OPERATOR
Ladies and gentlemen, that concludes today's conference call. You may now disconnect.
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