Watsco Announces Actions to Improve Profitability
This will be accomplished by closing and integrating several locations, eliminating unproductive product lines, and restructuring the company’s manufactured housing operations.
Trimming Locations, Product LinesIn the first facet of the plan, Watsco completed the closure, consolidation, and integration of 25 locations in 2000, in order to improve operating efficiency, reduce overlap in certain markets, eliminate underperforming locations, cut operating costs, and reduce inventory levels.
As a further measure to improve profitability and efficiency, Watsco has planned the closure and integration of seven more locations during the first half of 2001. The company’s location closure and integration includes efforts to retain customers and key employees of the affected locations.
The company has adopted a plan to eliminate a variety of product lines that have unacceptable gross margins and sales growth rates. The exit of these products and reduction of SKUs will occur throughout 2001.
Also, additional products will periodically be added to Watsco’s distribution network in order to leverage its infrastructure and broaden product offerings. Long-term retention of new products will be continually evaluated on the relative strength of gross margins and sales growth.
Sales, Earnings ReportsFor the year ending December 31, 2000, Watsco expects to report record sales of approximately $1.3 billion, including same-store sales growth of 6% in the company’s core hvac business.
Watsco is also expected to report operating profit, excluding the impact of restructuring and other charges, of approximately $56 million to 57 million.
Earning per share, also excluding charges, is expected to be $0.98 to $0.99 per share. The company is scheduled to announce its year 2000 operating results on February 8.
As for the year 2001 outlook, Watsco expects earnings per share in the range of $1.15 to $1.17 per share, with overall same-store sales growth of 4-5% based on its current assessment of market conditions in its core residential and commercial air conditioning and refrigeration business, including anticipated market share gains.
More information can be found at www.watsco.com (website).
Publication date: 01/29/2001