Watsco Inc.’s slack total 2023 sales of $7.28 billion hardly moved from $7.27 billion in 2022, but chairman and CEO Albert H. Nahmad nonetheless described last year as “exceptional” — and in a positive way bolstered by ecommerce technology and a robust acquisition strategy.
Albert H. Nahmad, chairman and CEO, Watsco Inc.
“In many respects, we consider 2023 an exceptional year given the extraordinary performance during the two preceding years and considering the softer comparative market conditions that have followed,” he said today in a Q4 and full-year financial statement. “We achieved market share gains during a down market, scaled the adoption of Watsco’s technology-leading technology platforms, drove productivity gains, expanded our network.”
Nahmad added during an earnings call that he sees Watsco — which he noted has grown from $1 billion in annual revenue 20 years ago to over $7 billion today — doubling its current annual revenue over the long term.
‘We’re very ambitious; we always want to grow’
“We’re never satisfied — that’s part of our culture,” he said. “We’re very ambitious; we always want to grow.”
He added that changes in the HVAC industry, including more efficient HVAC systems and greater customer participation in improved digital commerce and fulfillment technology, is making for a prime growth opportunity.
“Markets are creating innovation for the first time in a long time — it’s exciting,” he said on the earnings call.
The company noted several 2023 performance metrics resulting from its customer-facing technology systems.
- Watsco ecommerce sales grew 5% year-over-year to $2.4 billion, to about 34% of total sales.
- Active ecommerce customers produced 50% less attrition than non-ecommerce users.
- The gross merchandise value of products sold on Watsco’s OnCallAir digital sales platform for contractors increased 28% to $1.2 billion, as quote volume expanded 14% to about 256,000 households.
- Watsco’s authenticated user community for HVAC Pro+ Mobile Apps expanded to approximately 55,000 users.
Nahmad also pointed to several digital technology investments Watsco has made in the past year.
- Pricing optimization software, providing analytics and insights on more than 200,000 SKUs that help Watsco “enhance competitiveness and improve margins.”
- Warehouse management and order fulfillment systems for accelerated order fulfillment and “faster and more reliable customer service.”
- Demand planning and inventory optimization tools to improve fulfillment rates and inventory turns.
- Logistics and operations software and expertise to facilitate more efficient product movement.
Watsco is ‘well-positioned’ to invest in growth
Going forward, executives said acquisitions will remain a key part of growth.
“Watsco remains well-positioned to invest in most any-sized opportunity to build further scale in the estimated $60 billion highly fragmented North American HVAC/R distribution market,” the company said.
Since 1989, Watsco has acquired 69 companies. Its three most recent acquisitions are:
- Capitol District Supply, acquired in March 2023. It generated 2023 revenue of about $13 million.
- Gateway Supply Co., acquired in September 2023, which generated 2023 revenue of $180 million.
- Commercial Specialists, acquired this month, generated 2023 revenue of about $13 million.
As Watsco grows through acquisition, it will seek to gain market share by brands in each market it enters, Nahmad said.
Watsco operates a distribution network with 692 North American locations serving over 125,000 contractors across the United States, Canada, Mexico, Puerto Rico, and other markets in Latin America.
Watsco reported for the fourth quarter ended Dec. 31:
- Total sales grew 1% year over year to a record $1.60 billion.
- Gross profit declined 4.4% to $414.16 million for a gross profit margin of 25.8%.
- Net income declined 37.8% to $97.74 million.
For the full year, Watsco reported:
- Watsco ecommerce sales grew 5% year-over-year to $2.4 billion.
- Watsco ecommerce represented about 34% of total sales.
- Total sales were slack at $7.28 billion, compared to $7.27 billion.
- Net income declined 9.9% to $634.14 million.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s Watsco report.
Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.
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