Watsco Sees Slower Sales and Margin Growth in 1Q - Modern Distribution Management

Log In

Watsco Sees Slower Sales and Margin Growth in 1Q

The company reported a 2% increase in sales over the same quarter in 2022 to a 'record' $1.55 billion.

On April 20, Miami, Florida-based HVACR equipment distributor Watsco announced slower sales growth during the first quarter of 2023 despite reporting a 2% increase in sales over the same period last year to a record $1.55 billion.

“This quarter’s results follow a record-breaking year in 2022 and a particularly strong comparative performance achieved in the first quarter of 2022, when sales grew 34%,” Watsco said in its earnings report. “It is also important to note that the first and fourth quarters are highly seasonal due to the nature and timing of the replacement market for HVAC systems, which drives sequential growth in the second and third calendar quarters. Accordingly, the company’s financial results may be disproportionately affected by this seasonality.”

For 1Q 2023, Watsco reported gross profit of $448 million (28.9% gross margin) versus $450 million (29.6% gross margin) in 1Q 2022. The company also reported a 4% decrease in operating income to $165 million (operating margin of 10.6% versus 11.2% last year).

Watsco ranked No. 6 among Industrial Distributors and No. 1 for HVACR Distributors on MDM’s 2022 Top Distributors List.

During the first three months of 2023, Watsco reported a 2% increase in HVAC equipment (68% of sales), a 2% decrease in other HVAC products (28% of sales), and a 12% increase in commercial refrigeration products (4% of sales).

“We view the first quarter performance as exceptional in many respects,” said Albert H. Nahmad, Watsco’s Chairman and CEO. “Last year’s results were driven by robust unit demand, unprecedented levels of OEM pricing actions, and overall strong end-markets, which culminated in the highest single-quarter growth rates in our history. In contrast, OEM pricing actions in 2023 were less, occurred later, and unit volumes are now adjusting toward more conventional run-rates. Despite these factors, Watsco delivered record sales and successfully navigated the regulatory transition to higher SEER products across its markets. Sales of heat pumps continued to expand and our commercial business remains strong. We also executed well in terms of gross margins, maintained SG&A discipline and gained operating efficiency. We intend to build on this success as our selling season unfolds and we have confidence in our team’s ability to navigate changing market conditions and are optimistic about the year ahead.”

Related Posts

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events



You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.