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    Home - E-commerce & Retail - Watsco leverages digital tools and navigates tariff challenges
    E-commerce & Retail

    Watsco leverages digital tools and navigates tariff challenges

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    Watsco leverages digital tools and navigates tariff challenges
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    Watsco Inc. is leaning on its digital infrastructure and original equipment manufacturer (OEM) relationships to manage a fast-changing regulatory and pricing landscape, as it accelerates the rollout of next-generation HVAC systems and prepares for potential tariff-related disruptions.

    Chairman and CEO Albert Nahmad emphasized during the company’s Q1 2025 earnings call that Watsco is navigating a complex environment shaped by the transition to A2L refrigerant systems and tariff-driven pricing volatility. Despite a year-over-year revenue dip of 2.2% to $1.53 billion, the company reported double-digit growth in its core HVAC replacement segment and continued strength in gross margins.

    How Watsco is navigating the tariff environment

    A key pillar of Watsco’s strategy is its proprietary digital pricing and inventory tools, which allow real-time adjustments across thousands of SKUs and customers.

    “It’s not too hyperbolic to say that we have a different price for every product, for every customer, almost,” Nahmad said. “Our platform enables us to respond instantly to OEM price increases and to dynamically manage margin performance.”

    The pricing environment became more volatile in early April as OEMs implemented two rapid price hikes — moves attributed to anticipated tariff increases on key HVAC components and refrigerants. Watsco said it’s working closely with OEM partners to implement these tariff price changes efficiently.

    “Almost all manufacturers issued increases — not surcharges — which become part of our base inventory cost,” said Paul Johnston, executive vice president.

    91% of Watsco’s business is tied to the U.S. market. As a result, the company says it’s well-positioned domestically but is watching conditions in Canada and Latin America closely.

    “We’ll act and react as needed to grow sales and profitability in those markets,” Nahmad said.

    Technology is also playing a significant role in how Watsco manages the transition to new refrigerants. The company has updated platforms and trained thousands of contractors on A2L systems. Those systems now represent over 60% of recent unit sales. Inventory conversion is underway, with $1 billion in products moving to the new standard.

    Nahmad said Watsco’s long-term positioning remains strong.

    “The products we sell are a necessity,” he said. “We offer the broadest variety and operate the largest network in the industry. With the right digital tools and OEM relationships, we’re confident we can manage whatever challenges come next including tariffs.”

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