Electrolux launches luxury kitchen into tough market

STOCKHOLM Mon Sep 17, 2012 8:36am EDT

A person walks past Electrolux headoffice in Stockholm December 15, 2008. REUTERS/SCANPIX/Janerik Henriksson

A person walks past Electrolux headoffice in Stockholm December 15, 2008.

Credit: Reuters/SCANPIX/Janerik Henriksson

STOCKHOLM (Reuters) - World number two home appliances maker Electrolux (ELUXb.ST) has launched an upmarket kitchen range, gambling on the resilience of luxury spending just as a slowdown in overall market demand spreads from crisis-hit southern European markets to the north.

The launch of the Grand Cuisine, a new product category the company estimates could be worth about 4 billion euros, is part of its plans to boost margins via premium-range goods and give itself a design edge.

Luxury goods companies have mostly coped better than mid-market and budget-focused firms in a faltering global economy, which has hit the less affluent particularly hard. But they have not been immune. Last week British luxury fashion brand Burberry (BRBY.L) stunned markets with a profit warning.

"There is a weak macro environment, there is no doubt," Electrolux chief executive Keith McLoughlin told Reuters on Monday after the group launched the new range, which is to have a starting price of about 80,000 euros, excluding a luxury Molteni stove.

The company, the second largest appliances maker after Whirlpool (WHR.N), said it was the first time a professional kitchen was being launched on the consumer market to "fully recreate Michelin-star restaurant experiences at home".

McLoughlin said the company, which launched the kitchen in London and would proceed to other cities, had seen a gap in the market for people who enjoyed cooking and would be ready to spend about 100,000 euros on fitting out their kitchen.

"This is a very small niche globally," he said. The company estimated about 50,000 households fell into the category the kitchen was aimed at, a market worth about 4 billion euros.

Even if the market was tough, he said the company was working on a long-term plan of several decades for the new kitchen rather than worrying about near-term demand.

"We will start small and hopefully get some percentage of that," added McLoughlin.

Looking at core markets overall, McLoughlin said he expected European market demand would come in at the bottom end of the company's 2012 forecast range of flat to minus two percent.

"Southern Europe weakness is now spreading to central and northern Europe. Central and northern Europe are still growing, but at slower rates," he said.

The group had already said it expected North American market demand would be closer to the bottom end of its forecast range of flat to a rise of two percent.

"We need to start having some pretty good demand to get it within that range," he added.

The U.S. housing market was looking better and an eventual upturn would benefit the company, he said.

Emerging markets in Latin America and China were still growing in line with forecast, he added.

At 7:50 a.m. EDT (1150 GMT), Electrolux shares were down 2.7 percent at 171.20 Swedish crowns.

(Reporting by Veronica Ek and Patrick Lannin; Editing by Mark Potter)