Benefiting from what it calls the “Home as a Sanctuary” trend, Waukesha-based Generac Holdings Inc. saw a 30% increase in sales of its home standby generators during the second quarter. Aaron Jagdfeld The company had previously seen increased demand in California as homeowners dealt with power outages last year, but Aaron
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Aaron Jagdfeld[/caption]
The company had previously seen increased demand in California as homeowners dealt with power outages last year, but Aaron Jagdfeld said for Generac the number of in-home or virtual sales consultations has increased in every state.
“The widespread nature of this, it’s kind of like a major event in every corner of the U.S.,” said Jagdfeld, Generac’s president and chief executive officer.
Generac often sees increased demand in localized areas for its products in the aftermath of natural disasters like hurricanes or ice storms.
In this case, however, Jagdfeld said the fact that people are spending more time at home because of COVID-19 is driving an increased desire to have backup power. The same trend also drove increased sales of the company’s Chore products used for home improvement projects.
The result of these trends shows up in Generac’s financial performance and its outlook for the year.
While net sales were up about 1% to $546.8 million in the second quarter, sales of residential products increased 27% to $341.4 million. Commercial and industrial product sales, on the other hand, dropped almost 33% to $154.9 million. Net income increased from $62 million to $66.1 million.
Generac also raised its guidance as a result of the increased demand. The company previously expected a 5% to 10% decline in sales for the year, but is now forecasting 5% to 8% growth.
At the midpoint, the change represents a more than $308 million swing in expected revenue to nearly $2.35 billion.
Part of the reason for the optimism is that Generac would typically just be entering its heightened selling season as hurricane activity picks up in the southeast part of the country.
“That’s been the normal seasonality in the category for 20 years,” Jagdfeld said.
This year, things started to ramp up three or four months earlier and the company had to respond. Jagdfeld said Generac typically maintains safety stock of parts, some finished goods in its warehouses and inventory in the field. Those resources helped meet initial demand but are now at low levels, he said.
As Generac moves into its traditional busy season, the company is ramping up even more to meet the additional demand.
Jagdfeld said the company is currently trying to hire around 400 people and will expand production of generators to a second facility. Most of the products are currently made in Whitewater. Jagdfeld did not specify where the new operations would be but said it would come online around the fourth quarter.
He also noted that investments the company made in automation over the last 18 months are looking like a smart decision.
“We thought it was going to help us for the next three to five years. It’s going to help us for the next three to five months,” he said.
