Why This Matters to Distributors: The refrigerant transition is still affecting demand, but the market is starting to stabilize. As contractors adjust and pricing normalizes, distributors may see more consistent sales heading into the peak summer season.
Watsco Inc. reported flat sales in the first quarter as the HVAC market continued to adjust to the industrywide shift to A2L refrigerants.
Sales for the quarter ended March 31, were $1.53 billion, unchanged from a year earlier. Net income fell 1.2% to $79.1 million from $80.1 million.
The transition to A2L refrigerants, which began in early 2025, continued to affect demand. Watsco said the shift applies to about 55% of the products it sells across roughly 650 locations.
Higher prices helped offset lower unit sales. Average selling prices for HVAC equipment increased about 9%, reflecting a greater mix of A2L and higher efficiency systems. Equipment sales, which make up about 65% of revenue, declined 1%. Sales of other HVAC products rose 4%, while commercial refrigeration products increased 11%.
U.S. sales increased 2%, while international sales declined 11%.
Chairman and CEO Albert Nahmad said conditions are beginning to stabilize as the industry approaches its peak summer season.
“Our markets are experiencing improved stability as we approach the summer selling season,” Nahmad said. “Our teams are collaborating well with our contractor customers.”
The company also reported improvement in cash use compared with a year earlier, driven by tighter management of inventory and receivables. Watsco ended the quarter with $593 million in cash and short-term investments and no debt.
Digital sales continued to grow. Ecommerce sales increased 16% and totaled about $2.6 billion for the 12 months ended March 31, representing 36% of total sales. Watsco’s OnCallAir platform generated $394 million in sales during the quarter, up 20% from a year earlier. The company said about 74,000 contractors, installers and technicians are now using its digital tools.
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