Prepared remarks
Good morning, and welcome to Whirlpool Corporation's Fourth Quarter 2024 Earnings Call. Today's call is being recorded. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer, and Jim Peters, our Chief Financial and Administrative Officer. Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, I want to remind you that as we conduct this call, we will be making forward-looking statements 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 non-GAAP measures outlined in further detail at the beginning of our earnings presentation. We believe the measures are important indicators of our operations as they exclude items that may not be indicative of results from 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 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 Marc.
Thanks, Scott, and good morning, everyone. As we look back at 2024, we have to acknowledge that our financial performance has not yet been at the level where we all expect it to be. At the same time, we are pleased with the progress we made throughout the year in improving our operational performance and accelerating our portfolio transformation. The completion of the Europe transaction was a key milestone in our ongoing portfolio transformation, unlocking significant value-creation opportunities. Operationally, we delivered substantial cost reduction initiatives of approximately $300 million, while at the same time, stabilizing and, in some cases, reversing the negative input cost trends we had experienced before. We also simplified our organization and enabled business unit autonomy, delivering structural cost savings of more than $100 million. As a result, since the first quarter, we have sequentially increased ongoing EBIT margin by 170 basis points, achieving three consecutive quarters of margin expansion.
This sequential margin expansion, in combination with a favorable tax rate, allowed us to deliver over $12 of ongoing earnings per share. We executed our capital allocation priorities and returned approximately $400 million of cash to shareholders in dividends, while paying down $500 million of debt, reinforcing our commitment to reducing our debt levels. We achieved significant working capital efficiency, resulting in $385 million in free cash flow. As we look into 2025, we do not anticipate a sudden improvement of what has been a very challenging macro environment, in particular, in the US. We are highly optimistic about mid- and long-term prospects of the US housing market, at the same time, realistic about the pace of recovery and expect only a slow and gradual improvement in 2025. We are following the various initiatives and ideas coming from the new administration. While some of these might be favorable for our business, we have not factored them into our outlook, and instead, we remain focused on what is within our control.
As you will hear later in more detail, we will stay very disciplined in our cost controls. While we're not assuming significant raw material cost savings, we have already lined up cost actions amounting to $200 million and have started to develop additional opportunities to exceed this target. In the US, we have just recently announced a further reduction in the depth of our promotional pricing program. This, in combination with a compelling lineup of new and innovative products, is expected to help drive favorable price and mix in 2025. I'm confident that our expected 2025 margin expansion and free cash flow improvement puts us firmly on our path to a higher-growth, higher-margin company. Turning to Slide 6, I will provide an overview of our fourth quarter results. We had a fourth quarter with 2% organic growth, which, as a reminder, excludes currency and the Europe transaction, driven by strength in our SDA Global and international business.
Global EBIT margins expanded both sequentially and year-over-year, driven by previously announced promotional program and pricing actions in MDA North America and MDA Latin America. We delivered ongoing earnings per share of $4.57, and maintained our dividend of $1.75. Turning to Slide 7, I will provide an overview of our fourth quarter ongoing EBIT margin drivers. Price and mix unfavorable impacted margin by 100 basis points, slightly falling short of our initial expectation. Price and mix were negatively impacted by a retailer destocking in our MDA North American business, coupled with very strong sell-out as consumer confidence rebounded following the US Presidential election. Aside from this one-time impact, our price and mix saw the expected benefit from the pricing actions in MDA North America and MDA Latin America. Our cost takeout actions delivered 175 basis points year-over-year, led by our continued manufacturing and supply chain efficiencies and our organizational simplification actions.
Raw materials were essentially flat, as expected. Marketing and technology had an unfavorable 50 basis point impact as we increased investments in our new products. Currency reduced margin by 25 basis points year-over-year as the Brazilian real weakened relative to the US dollar. The European transaction positively impacted the fourth quarter by 75 basis points, as expected. Ultimately, we're pleased to have expanded margins year-over-year by 80 basis points. Now, I will turn it over to Jim to review our Q4 and full year segment results and our perspective on 2025, including our capital allocation priorities.
Thanks, Marc. Good morning, everyone. Turning to Slide 8, I'll review fourth quarter and full year results for our MDA North America business. Net sales declined 1% in the fourth quarter, driven by negative price/mix. This was primarily driven by the impact of the structural retailer destocking previously mentioned. In addition, following the US Presidential election, we saw consumer sentiment improve with strong sell-out. With many trade customer incentives tied to sell-out volume during the Black Friday period, we saw a negative price/mix impact within the quarter, resulting in EBIT margins of 6.7%, which was below our expectations for the quarter. Overall, the segment delivered a full year EBIT margin of approximately 6.5%, largely in line with our most recent full year guidance. Turning to Slide 9, I'll review the results for our MDA Latin America business. In the fourth quarter, the segment had strong net sales growth of 7% year-over-year excluding currency, driven by industry growth in Brazil and Mexico, along with pricing actions implemented in the quarter.
Fourth quarter EBIT margin of 7.6% expanded by 240 basis points year-over-year, driven by pricing, cost actions and fixed cost leverage. Overall, we are pleased with the 140 basis points of margin expansion to deliver a 7% full year EBIT margin, meeting guidance expectations. Turning to Slide 10, I'll review the results of our MDA Asia business. In the fourth quarter, the segment saw net sales growth of 9% year-over-year excluding currency, as share gains and strong industry drove volume growth. The segment delivered a 1.2% EBIT margin in the quarter with 170 basis points of margin expansion year-over-year from fixed cost leverage. Overall, MDA Asia delivered a 3.9% EBIT margin for the full year with 160 basis points of expansion year-over-year. Turning to Slide 11, I'll review the results of our SDA Global business. The segment had multiple exciting launches in 2024, with new products introduced in high-potential growth categories for our business.
These new products, along with strong direct-to-consumer sales, delivered year-over-year net sales growth of 6% for the quarter. The segment delivered an EBIT margin of 12.5% in the quarter, impacted by increased marketing investments in our new products. Overall, SDA Global delivered a strong EBIT margin of 14.3% for the full year. Turning to Slide 12, I will review our guidance for 2025. We have provided a reset baseline for 2024 results excluding both the European major domestic appliance business from Q1 of 2024 and India's July through December 2024 consolidated results from the anticipated Whirlpool of India market sale transaction that I will review in more detail shortly. The reset baseline excludes approximately $1.2 billion in net sales and approximately $6 million of EBIT, creating a like-for-like comparison for 2025 guidance. On a like-for-like basis, 2024 net sales were approximately $15.4 billion, with an ongoing EBIT margin of approximately 5.8%.
We expect growth of approximately 3% to $15.8 billion in net sales in 2025, driven by a strong product launch pipeline expected to deliver share growth in MDA North America and continued strength in our SDA Global and international businesses. On a like-for-like basis, we expect a 100 basis point ongoing EBIT margin expansion to be approximately 6.8%. Free cash flow is expected to deliver $500 million to $600 million, a 3.5% cash conversion of net sales, driven by improved earnings while sustaining lower working capital levels. We expect full year ongoing earnings per share of approximately $10. This includes an adjusted effective tax rate of 20% to 25%, which is an increase compared to 2024 and impacts 2025 ongoing earnings per share by approximately $7. Turning to Slide 13, we show the drivers of our 2025 ongoing EBIT margin guidance. We expect a positive impact of 75 basis points from price/mix from previously announced pricing actions in the Americas and new product launches.
In North America, this reflects recently announced promotional pricing actions and the carryover pricing actions from Q2 2024, as well as the carryover pricing actions implemented in Latin America from Q4 2024. We also have a very exciting lineup of higher mix products and over 100 new products launching this year. In MDA North America, we expect to transition over 30% of our products, the largest one-year transition in over a decade. We do not expect a material catalyst for existing home sales in 2025, and as a result, we expect stable demand year-over-year. Therefore, we are not factoring in an improvement in the mix from a discretionary demand rebound. We will drive further reductions to our fixed cost structure and expect 125 basis points of net cost margin benefit from more than $200 million of cost takeout actions. Based on previously executed supply agreements, we expect minimal to no impact on EBIT margin from raw materials this year.
With a strong cadence of new product introductions this year, we plan to increase investments in marketing and technology, which will impact margin by approximately 50 basis points. Currency is expected to negatively impact margin by approximately 50 basis points as the Brazilian real has weakened relative to the US dollar. Finally, we expect our portfolio transformation to provide approximately 50 basis points of margin expansion due to the closure of the Europe transaction and anticipated India market sale transaction.
Thanks, Jim. Turning to Slide 22, let me review what you heard today. I'm proud of what the team has accomplished in 2024 through a very challenging macro environment. The European transaction was a major milestone, delivering value to shareholders. The anticipated transaction to reduce our stake in Whirlpool of India that we announced today also unlocks additional shareholder value and further strengthens our balance sheet. We delivered approximately $300 million of cost savings and see further opportunities to deliver more than $200 million in 2025. We are excited about our very strong pipeline of new products that we'll launch in 2025, helping us to drive sustained growth and margin progression. Our Latin American business remains a bright spot, delivering strong top-line growth and substantial margin expansion. We expect our Global SDA business to continue to accelerate growth in high-potential categories as their new products resonate with consumers. And overall, I'm confident that we have the right strategy and operational priorities in place to deliver our guide of 3% organic net sales growth and 150 basis points of margin expansion. And now, we will end our formal remarks and open it up for questions.
Questions and answers
Your first question comes from Susan Maklari from Goldman Sachs. Your line is open.
Thank you. Good morning, everyone.
Good morning, Susan.
Marc, my first question is thinking a little bit about the shift that you saw in volumes this quarter, you mentioned that there was a significant destock at one of the retailers. Can you talk a bit about, was that Whirlpool-specific? And then, with that, how should we also think of the move in industry volumes perhaps and your volumes relative to AHAM and perhaps relative to some of the geopolitical trade actions that could be coming through with the new administration?
Let me break down the answer into two parts. First, regarding retail destocking, this situation is a sign of improved supply chain efficiency. A few years ago, post-COVID, retail inventory levels were high due to an unstable supply chain. We have worked together to eliminate many inefficiencies and now have a more efficient supply chain that ensures product availability. The inventory reduction is a one-time adjustment bringing levels down to what is necessary, and while it wasn't ideal to have this happen at once rather than over several quarters, it's now behind us. Essentially, it reflects a more efficient supply chain, requiring less inventory than two or three years ago, which noticeably affects our Q4. Now, regarding AHAM, this year's numbers have shown some unusual distortions and re-reporting, so I advise caution in interpreting the monthly or quarterly AHAM figures. Overall, our market share for 2024 has remained stable, with a slight decline.
It improved after our promotional price adjustment in April. We are optimistic about this. Although we lack complete industry data, our specific sell-out data, which we prioritize, showed strong performance, especially following the election. While this strong sell-out momentum did not translate directly into sell-in for the quarter, we are encouraged by the strong sell-out figures. As for geopolitical matters, we did anticipate an increase in imports from Asia during November and December, and we still expect that trend. Although we don't have all the customs data yet, I believe that once we access the complete information, we will see a rise in shipments as businesses prepare their inventory ahead of potential policy changes. Based on trends, including container tariffs, it seems reasonable to expect a temporary increase in shipments from Asia, although we still await final data on this.
Okay. That's very helpful color. And then, turning to price, you mentioned that you have another promotional price increase that is out there. Can you give us your thoughts on the ability to realize that effort in there given the operating backdrop and the demand environment that you outlined on the call? And how should we be thinking about the potential for mix as those new products that you talked about gain some momentum?
Yeah, Susan, good question. So, let me maybe just split it into two pieces. One is more the promotional investments or promotional depth, and the other one is more the mix element. And again, stepping back even what we communicated last year when we did the first reduction of promotional depth, ultimately, it's reflective of the marketplace. And again, I'm zooming out here a little bit, but last year, we saw a 30-year low of existing home sales. Existing home sales drive discretionary demand. The market right now is strongly driven by replacement demand. In that environment, it just does not make economic sense to go very deep on promotional investments. That's what we corrected last year in April, and frankly, we found traction. We're very pleased with the progress which we saw in Q2 and Q3, and it also largely was sustained in Q4. So, the decision which we made last year was absolutely the right one.
Given that the environment around it has not structurally changed, we continue to see the same opportunity going forward. It just does not make sense to go that deep and that long on promotional periods, and that's what we communicated already through our trade environment. And based on what we've done last year, we're very confident that we'll find traction. Now, the other part, and this is, I think, Jim alluded to this one earlier, and that is big for us, in particular North America. Again, I want to reemphasize, in the last 10 years, we've never launched as many new products in North America as in '25. And you know and you followed our industry for a long time, our industry mix is the name of the game, and mix comes from new product introduction. So, what we showed earlier, an entire new KitchenAid line, and we haven't launched for 10 years. We have with JennAir a fantastic new downdraft, and we basically renewed the entire refrigeration range in North America.
So, that's, we're very confident, will drive mix. So, the combination of promotional lack or reduced promotional depth and product mix coming from new product introduction gives us the confidence while we kind of communicate now, 1 point or minimum 1 point of positive pricing in '25.
Your next question comes from the line of Michael Rehaut from JPMorgan. Your line is open.
Thanks. Good morning, everyone. Thanks for taking my questions. First, I wanted to hit on the new product launches that you've described, and it seems pretty extensive. Just, if you could kind of give us a sense of how those product launches are expected to impact the financials throughout the year, perhaps on a quarterly basis or first half/second half in terms of impact on revenues, price/mix, perhaps even margin? I'm particularly interested in what you anticipate the impact will have on mix for the year and also if there's any sort of above average, let's say, I don't want to say one-time cost, and the new products are always kind of a constant part of your efforts every year, but if it's an outsized level, if that's kind of a, let's say, a particular headwind this year relative to perhaps next year?
So, Michael, again, overall, we communicate 1 point of positive pricing. Now, that is a combination of what I mentioned earlier, but promotional and the mix. To your point, and you know that also, mix has multiple components. One, of course, there's just a positive mix from getting the new products at an attractive price or margin point, but, yes, we also invest in product transitions. That is fully factored in. You could call these transitions where also, to some extent, one-time expenses, but they're factored in. So, it's a kind of a combination of all these elements. In terms of timing, these launches are spread throughout the year. So, there are a number of refrigeration products which we introduced in March. We will display and show kind of a JennAir product at the KBIS, that will be largely Q2, and the KitchenAid launch is later in Q3. So, it's pretty much spread throughout the year.
So, there's not one quarter where everything comes through, but it's pretty much spread throughout the year. The reason why we're actually very bullish on the positive impact on mix is also, keep in mind, KitchenAid and JennAir are premium brands, and to have new attractive products, in particular, premium brand, typically brings a good lift in margin. And the other side of the equation, refrigeration tends to be below our average margin, having now new products with frankly better cost base also helps on that side. So that's why these products matter a lot. And based just on our margin profile, I think we will get a good lift.
And Michael, just to add to what Marc said, as you think about the KitchenAid transition throughout the year and it will help our mix, help our margins, increase our share in that space, but also remember, we anticipate this year the discretionary segment will still be under pressure. So, this gets amplified as a benefit as you go forward and that segment begins to improve. So that's why we're really excited about this launch kind of ahead of the improvement in the discretionary segment is I think then you'll just see even more significant benefits as that starts to come back.
Great. No, thanks for that. Secondly, I wanted to hit on a couple of areas that, one, just a clarification on the inventory reduction that hit you in the fourth quarter. I was curious if you could kind of quantify perhaps what you estimate the impact was on both sales and the lost incremental leverage of that if you sold that your sell-through rate, if you have any estimate on how that impacted 4Q North American sales? Secondly, any comments on if you've been able to kind of quantify tariff exposure if we have 25% tariffs, let's say, on China, Mexico and Canada?
Michael, you clearly affected retail. While we can't specify the exact size of the destocking impact, we consider it significant, and we use that term cautiously. You can understand that the difference between our North America run rate for Q4 and our expectations is mainly due to this singular event. However, this event is now in the past, and the impact was substantial. Moving forward, it coincides with improved supply chain efficiency. Regarding tariffs, as mentioned earlier, any effects from potential additional tariffs are not included in our guidance due to the uncertainty involved. There is much speculation around this issue. It's important to note that over 80% of the products we sell in the US are produced domestically, which sets us apart from our competitors. We are proud to be a US producer and rely heavily on the US market. While many might think we would benefit from tariffs, they can have both positive and sometimes unforeseen negative effects. Once we receive clearer information, we will be able to provide a more accurate assessment regarding this, but for now, we remain focused on our status as a US producer.
Your next question comes from the line of Laura Champine from Loop Capital. Your line is open.
Thanks for taking my question. The small appliances business was a little bit light of what we were looking for in sales, but especially margins. I know you're making marketing investments in new products there. How do you get comfort that your marketing investments are targeted correctly and that the product is strong enough to support those investments?
The overall SDA market is currently stagnant, showing little growth, and many subsegments are actually in decline. We experienced solid single-digit growth in Q4, but we aim for double-digit growth moving forward. Our marketing investments, which we detailed in the presentation, contributed nearly 0.5 points to the company's overall margin, a significant part of which was allocated to the SDA business. We launched new products like our coffee maker and KitchenAid Go, which are key investments for our future. Entering a new category, such as fully automatic coffee makers, requires us to effectively communicate the launch to the market. We're encouraged by the momentum in these new subsegments, but building awareness will take time. The margin impact in Q4 was primarily due to our significant investment in these new product launches.
Your next question comes from the line of David MacGregor from Longbow Research. Your line is open.
Yes. Good morning, everyone. Thanks for taking the question.
Good morning, David.
Good morning, Marc. When we think back to the third quarter call and you had talked about fourth quarter margin expansion, you talked about pricing, cost actions, the recovery in production rates and then reduced EMEA joint venture drag. I just wanted to focus in on that recovery in production rates for a moment and just talk about the extent to which you were able to achieve that, or how it factored into the numbers. And then, should we be thinking about that as a potential benefit in 2025? Is there an opportunity to realize some productivity off of absorption there...
Yes, David. Your observation is correct. When we noticed the destocking in Q4, we adjusted our production volumes accordingly. We produced less than we initially expected in Q4, which is reflected in our low inventory levels. We aimed to avoid keeping the factories running at high capacity and building up inventory. As a result, we are starting the year with relatively low inventories. This also means that cash flow doesn't include the potential for additional working capital efficiencies, as we may need to slightly increase our inventory. We are not starting the year with the need to reduce inventory; instead, we anticipate healthy and steady production volumes in relation to our sales expectations. While this could lead to some volume leverage, we'll have to see how the quarter and the year unfold. You are correct that we did not achieve volume leverage in Q4; in fact, it was quite the opposite.
David, I mean, just to reiterate, as Marc said, we really came out of the year with what we would say are lower, but more appropriate inventories. And I think throughout this year depending where the market goes and all that, we'll continue to try and obviously keep our production and our inventory levels matched to our sales. And so, while there could be some upside because of some of the little bit of upside in the production, we're still going to keep that match throughout this year, so it's not a significant amount of upside in production.
I want to revisit the pricing strategy and the introduction of new products. With such a comprehensive launch of new products and the redesign of the refrigeration line, along with the manufacturing design opportunities that come with it, I would expect to see a greater pricing benefit than what is currently reflected. I'm curious if there are offsets to consider. You've mentioned the promotional efforts needed to support this initiative, but the current figures seem a bit low. Could you elaborate further on this?
David, on the new product introduction, there's two factors. First of all, there's just timing. I mean, as I said, it takes for pretty much an entire year to launch all these products. And in particular, the KitchenAid line comes in Q3, so there's a timing element. And the offsetting element, and I think Michael Rehaut was referring to his own earlier, all the new product launches come with transition expenses. So, they're fully factored in, and I think Jim alluded to this one earlier. Of course, that will not then be a factor in '26, but we factored that in '25. You launch new products. You get a good mix. You have to pay for both product transitions in the markets, and that's the element in there. But inherently, I'm with you. These new products, in particular on the premium side, they will drive upside for us.
Your next question comes from the line of Sam Darkatsh from Raymond James. Your line is open.
Good morning, Marc. Good morning, Jim. How are you?
Good morning, Sam.
Good morning, Sam.
Two quick questions. First, these are pretty straightforward, but what's the expected North American margin progression that you're expecting this year?
So, Sam, overall, we are guiding for 7.5%. We don't provide a quarterly breakdown. I would expect to see more balanced seasonality throughout the year. We are not planning for any sudden spikes. We continue to focus on all aspects, and we understand we have some carryover advantages. Therefore, I believe it will be more balanced from a seasonal standpoint.
Yeah. I mean, Sam, think about a lot of the cost actions we put in place in 2024 will continue and strengthen throughout 2025 and early 2025. And then, with the promotional pricing that we announced in December, obviously, you start to get the benefits earlier in the year for that. So, I mean, that's why Marc said it will probably be less of a progression throughout the year and more steady.
Got you. I apologize if you mentioned this before, but could you quantify the sell-through for your own products and perhaps the industry as well in the fourth quarter, and what you're seeing so far in January?
So, Sam, again, sell-through I can refer to our numbers, because of course, we don't know about the broader industry numbers. We have some indication. First of all, in general, just for clarification, I'm referring to the North American market or US market particularly. The sell-through in the industry and with us was pretty soft coming into the election, very soft. I mean, we used to election cycles, but it was softer than before and picked up strongly post-election. So, again, it's not completely different from previous election cycles, but just the magnitude of swings were more pronounced. So, we saw very strong sell-outs kind of in December. I mean, it was very strong. So that, to some extent, has slowed down a little bit in January, but of course, we're not releasing January numbers, and you can say, is that related to weather or whatever else, but we certainly saw very good momentum in the market towards the back half of Q4.
And we feel very good about how we did in that market based on qualitative feedback we get from our trade customers in terms of balance of sale, which we either maintained or in some cases even strengthened. I would, certainly, for our numbers, you should strongly assume that our sell-out in Q4 was quite a bit ahead of a sell-in which we had in the quarter. I mean, that's consistent with the prior comments. So, we know pretty much where every sell-out is very precisely and was well ahead of what we shipped into the industry.
Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open.
Hi, good morning. Thanks for taking my questions.
Good morning, Rafe.
On the first one, just the 75 basis points of price/mix that you're assuming in the '25 guidance, can you give us, or I guess, help us understand how much of that is carryover from 2024 versus mix versus the price related to the product launches? And maybe what's sort of the realization that you're seeing on the '25 price so far?
Yeah. So, overall, on the price/mix overall, so there's a small portion of carryover, but that comes from last year's April. So, you basically have essentially only one quarter of carryover. The bigger portion on the promotional changes comes from what we just announced, which we start seeing pretty much as of our March numbers internally. So that's the larger portion. And, yes, then the element of a new product launches. We're not splitting out in terms of how much the two different elements are, but that starts in particular building throughout the year.
Okay. That's very helpful. On the fourth quarter North America margin, were there any additional factors besides the price/mix impact from the inventory shift? Was there any other production challenge in the fourth quarter? The guidance for '25 appears to be below the previous expected fourth quarter run rate for North America, but this seems like a one-time inventory adjustment. We're trying to understand if there are any other changes as you move into '25.
So, Rafe, in Q4, aside from what we discussed, there aren't many upper moving parts. There are always fluctuations in business, but none that are significant or impactful. We did adjust our production to avoid excessive inventory, which unfortunately had a negative effect. Regarding the 2025 guidance of 7.5% EBIT, I want to be transparent. In the past year or two, we did not meet our expectations. As we enter this year, we aim to safeguard our commitments and ensure that all pricing and cost measures effectively deliver these results. While you may interpret the 7.5% differently, we acknowledge that it doesn't fully represent the business's potential, given its past performance and possibilities. However, we also want to be realistic and confident that we can achieve the 7.5%.
And I want to remind everybody that the 7.5% is a 100-basis-point improvement on a full year type of basis. And so, you got to look at not just the exit rate and the quarterly run rates, but on a full-year basis, that's 100 basis points. Additionally, as we point out, we will have some incremental marketing and technology investments within the year and while probably KitchenAid had a disproportionate amount this year, as we put more marketing behind the new product launches in North America, it's probably a little bit more disproportionate to the North American market that we are going to invest behind the product launches we're doing this year. So, I think that's a couple of things to keep in mind.
Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.
Hi. Thanks for taking my questions. Just back on a couple of the tariff dynamics, understood that you're not in a position to necessarily quantify potential impacts at this point, but I think two things that might be helpful. One, can you remind us what percentage of your cost of goods are in Mexico right now and how that compares to your sense of the industry? And then, you did mention, Marc, the dynamic around maybe some load in on imports ahead of potential tariffs. How have you accounted for that and whether or not there's puts and takes around that flowing into the market in your guide?
So, Michael, to clarify production volumes, over 80% of what we sell in the US is produced domestically, with the remaining 20% generally coming from China and Mexico, roughly split between the two. Our production profile significantly differs from our competitors, who are primarily importers. In fact, we produce more appliances than the entire rest of the industry combined. We are a US manufacturer, while the majority of other companies rely heavily on imports. The sourcing of our products is spread over several countries, including China, Vietnam, Thailand, and Mexico. However, we are currently uncertain about the potential impacts of tariffs and how they might affect our operations moving forward. Regarding your question about Asian imports, we don't have complete customs data yet, but it should arrive in the next few weeks. We expect to see some imports coming in, especially with the seasonality linked to the Chinese New Year, which typically influences loading patterns. This year, there appears to be an increase in these imports in anticipation of potential tariffs. At this moment, we lack final details, but we recognize the current market dynamics, and container costs are a good indicator to watch.
Your next question comes from the line of Michael Rehaut from JPMorgan. Your line is open.
Thanks. Good morning, everyone. Just wanted to follow up on the portion of your remarks referring to the inventory destocking in Q4. Could you help us quantify the size of the impact perhaps on both sales and the leverage of that sell-through rate?
Michael, yes. The retail destocking we termed sizable, and while we cannot quantify it down to an exact dollar amount, directional impacts indicate it was a significant detractor from sales. We had lower inventory levels as a proactive decision to avoid excess production amidst market uncertainties. This was a one-time adjustment, and we expect inventory levels to stabilize moving forward. In summary, while challenges exist, we see promising avenues for growth through product innovation and strategic pricing, building a healthier margin profile in the coming year.
Ladies and gentlemen, that concludes today's conference call. You may now disconnect.