Tough Comps Ahead!

BY Brian Loftus
3/20/2019 - HVAC Analytics

2018 was a record year for the HVACR industry. The 11.4% average annual sales growth in 2018 by HARDI distributors was the best pace for any twelve-month period since before the Great Depression. The top line was helped by the price increases and unusually warm temperatures at the beginning of the year.

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Click here to see CDD in your state

It’s tough to repeat exceptional performance like that. Ask any Cubs fan. Should you be planning for 5% to 10% sales growth or would flat sales be considered a win? Let’s look at the beginning of the cooling season last year.

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April was a slow start to the cooling season, so sales were very strong once the heat arrived in May. The blue bars in the chart reflect the cooling degree days and the significant year-to-year increases that helped fuel the impressive sales growth by HARDI distributors that are seen in the red bars. Unusual percentage growth rates like we see in the Great Lakes and Central regions can frequently be attributed to an unusually weak prior year. That did influence the 285% year-to-year increase of Cooling Degree Days in the Central region last year. The amazing, or scary, feature of May 2019 there was 150% more Cooling Degree Days than normal in the Great Lakes and Central regions during May of 2018. A forecast of sales growth for May 2019 in these regions will require a forecast of exceptionally warm weather.

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June is one of the crucial months for annual sales by HARDI distributors. The blue bars illustrate an accommodating demand environment in the Southeast, Great Lakes, Central and Southwest during Dune of 2018. Another perspective on the CDD change in these regions is there were 25% more Cooling Degree Days than normal in the Great Lakes and Southwest region. The Central region had 40% more Cooling Degree Days than normal! The red bars of average distributor sales growth per region is was suppressed by one less billing degree day in June of 2018.

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The red bars of TRENDS growth in July of 2018 reflect one extra billing day versus 2017. The Northeast and Western regions were the only two with well above normal temperatures last July.

We know that weather will dictate short term demand and can destroy the most carefully constructed near-term budget. Identifying the prior year periods that experienced unusual weather benefits can help model expectations and build an effective budget. Click here for the opportunity to select any state to see the 2018 Cooling Degree Days and Normal Cooling Degree Days to help with your peak season planning. Flat sales this year would be a win for some of these months when Cooling Degree Days were far above normal last year.

This article was published in the March 2019 edition of the HARDI’s Data-Driven Newsletter.