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Watsco Keeps Market Focus

While several companies have focused their attentions on become a global force, HVAC distributor Watsco Inc., No. 4 on MDM's list of top 12 HVAC/Plumbing/PVF distributors, is taking a different tack.

"We're not worldwide, and not about worldwide domination," said Barry Logan, senior vice president and secretary. "We really are a U.S. business." Logan spoke for Watsco at the Morgan Stanley Global Industrials Conference.

For the Coconut Grove, FL-based distributor, even calling it a U.S. company could be stretching it. After all, Logan states that 90 percent of Watsco's business comes from the Sun Belt. And that's the region the distributor will continue to focus its growth efforts on as the recovery builds.

The business strategy has been successful for the company. Same-store sales for the second quarter (ended June 30, 2010) were up 14 percent over last year, and Logan says the trend appears to be set to continue.

Why? First, by focusing on the Sun Belt, Watsco is focusing on a market it knows will continuously need its products. "About 30 percent of our business is in that unitary air conditioning," Logan says. And for people living in Florida, it's necessary that system works.

And secondly, as new regulations are implemented in the U.S., and more efficient and cost effective models are introduced, replacements become more attractive than repairs. "They're all going to break; they're all going to face extinction of some kind," Logan says of existing AC units.

So, while visibility is still cloudy for many companies, Watsco is operating on the belief it will return to its optimal margin range of 10 percent within about two years.

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