Watsco Reports Sales Growth Despite Soft HVAC Market - Modern Distribution Management

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Watsco Reports Sales Growth Despite Soft HVAC Market

Watsco's 2023 follows two years of record-setting performances and faces softer comparative market conditions.

Despite facing softer market conditions and following a company-record-setting performance in 2022 and 2021, Miami, FL-based HVACR equipment distributor Watsco reported a 1% year-over-year sales growth in the fourth quarter of 2023 to a “record” $1.6 billion.

The quarter was met with more conventional levels of pricing actions and normalized levels of HVAC system replacement compared to the landscape of the previous two years, which led the company to outperform thanks to unusually high levels of replacement demand, above-average inflationary pricing actions by the company’s suppliers that benefited sales and gross margins and generally stronger end-markets, Watsco officials said in a Feb. 13 news release.

Excluding acquisitions, Watsco recorded a 2% decrease in sales, flat sales for HVAC equipment (69% of sales), a 6% decline in other HVAC products (27% of sales), and a 3% decline in commercial refrigeration products (4% of sales) in 4Q. 

The company noted its fourth quarter financial results are disproportionately affected by seasonality due to the nature and timing of the replacement of HVAC systems.

Meanwhile, 2023 sales came in at $7.28 billion compared to $7.27 billion in 2022. Gross profit was $1.99 billion compared to $2.03 billion in 2022 (gross margin of 27.4%).

Watsco’s Chairman and CEO Albert Nahmad said he considers the year “exceptional” in many respects given the market conditions.

“We achieved market share gains during a down market, scaled the adoption of Watsco’s industry-leading technology platforms, drove productivity gains, expanded our network, fortified the quality of our balance sheet and once again provided our shareholders a meaningful dividend increase,” Nahmad said.

More Numbers

  • eCommerce sales grew 5% in 2023 to $2.4 billion, or approximately 34% of total sales.
  • ~60% of 2023 HVAC equipment sales represented new products in 2023, reflecting significant product transition to higher-efficiency systems in response to regulatory requirements that went into effect.
  • Watsco’s unit volume for unitary HVAC systems decreased 8% during 2023 (a 4% decline during the fourth quarter), reflecting a more balanced performance in the midst of a challenging industry backdrop.
  • Product information management platform expanded to more than 1.5 million SKUs.

Watsco ranked twice on MDM’s 2023 Top Distributors List, at No. 4 on the Top Industrial Distributors list and No. 1 on the Top HVACR Distributors list.

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