After October’s clearly split inventory positions, November showed 76 percent of distributors reporting higher inventory levels as compared to the same month last year, likely caused by 2010’s unexpectedly high demand and an underperforming November 2011.

“The November sales report is showing the effects that the approaching expiration of last year’s $1,500 tax credit had on the HVAC market,” said HARDI economist Andrew Duguay. “The comfortable same month year-over-year sales growth that was experienced through much of 2011 diminished in November.

“At the same time, it can be viewed as somewhat encouraging that same month sales were down only 1.7 percent on average even though the real cost to consumers of many HVAC services is much more this year than last when factoring in tax credits. December should also be a challenging month for year-over-year comparisons given December 2010 was the last month of the full tax credit.”

Days Sales Outstanding (a measure of how quickly customers pay their bills) continued a fourth consecutive month of increases up over 6 percent from October. Distributor productivity reflected by sales per employee backtracked for the fifth consecutive month, down 5 percent from October and 27 percent from its July peak.

“Keeping up with last year’s fourth quarter tax credit-infused sales growth was never a realistic expectation and one we worked in September to dispel,” said HARDI executive vice president and COO Talbot Gee. “But, our members’ ability to keep November’s comparison to low single digits is a testament to how effectively HARDI distributors are adjusting to a repair-based economy.

“Distributors’ equipment sales volumes are off over 15 percent from last November while total sales declined far less,” he said. “Knowing this, one can only imagine what growth rates could be if replacement rates returned to traditional levels.”

Publication date: 01/16/2012