Town of Genesee-based Generac Holdings Inc. experienced a substantial decrease in residential product sales in the first quarter of 2023, exacerbated by an ongoing mix of macroeconomic headwinds.
Generac’s net sales decreased 22% to $888 million during the first quarter of 2023 compared to $1.14 billion in the first quarter of 2022. Residential product sales were hit the hardest, declining 46% to $419 million compared to $777 million in 2022. Commercial and industrial (C&I) product sales increased 30% to $363 compared to $279 million last year.
On top of sales being down by almost $250 million, gross profit for Generac dropped by 24.5%, which the company attributed to ongoing inflationary pressures. The company also dealt with higher interest expenses of $23 million compared to $9.6 million in quarter one of 2022.
The decline in core sales was driven primarily by lower home standby and clean energy product shipments the company said. This decline was partially offset by strong growth in C&I product sales across all channels.
Generac’s net income during the first quarter was $12 million, or $0.05 per share, a major decrease compared to $114 million, or $1.57 per share, for the same period of 2022.
“As expected, first quarter sales were down year-over-year due to a challenging prior year comparison related to the significant excess backlog for home standby products as we entered 2022,” said Aaron Jagdfeld, president and chief executive officer of Generac. “In addition, residential product sales in the current year quarter were impacted by elevated levels of field inventory for home standby generators and a decline in clean energy products as we continue to expand our distribution network.”
The company is maintaining its full-year 2023 net sales guidance of a decline of approximately 6% to 10%. This is due to an expected increase in demand for home standby generators and a “significant” backlog for C&I products.
Generac expects home standby generator sales growth to return to normal levels by Q3 and Q4 of 2023.
In a February earnings call, Jagdfeld said the company looks favorably at the future need for residential products due to increased instances of severe weather events and people seeing how unreliable the country’s electrical infrastructure is.
He also said higher home standby generator field inventory levels continue to impact orders and shipments, and clean energy product shipments have been lower than expected as Generac works on improving the reliability of those products.
One bright spot for the company continues to be its recent acquisition of ecobee, which is slated to launch a smart doorbell product later this year that can be integrated with the company’s smart thermostats. Generac sees ecobee as chance to bring together all of the pieces of the home energy world for consumers.