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Tuesday, 05/10/2022 4:43:40 PM

Tuesday, May 10, 2022 4:43:40 PM

Post# of 171
Generac - >>> Higher prices, slower economy don't dampen Generac's red-hot home standby generator sales: Jagdfeld


Demand for Generac's standby generators exceeded executives’ expectations during the company's first quarter.


By Rich Kirchen

Milwaukee Business Journal

May 6, 2022


https://www.bizjournals.com/milwaukee/news/2022/05/06/higher-prices-dont-dampen-generacs-red-hot-home.html?ana=yahoo


Generac Power Systems implemented price increases on its home standby generators the past year or so, but homeowners continue showing strong demand that president and CEO Aaron Jagdfeld believes would continue if the economy slows.


Generac (NYSE: GNRC) raised prices on the standby generators in the “upper teens” percentages the past 15 to 18 months, Jagdfeld told analysts this week. The Waukesha-based company plans another price increase effective June 1.

The price increases have covered part of Generac’s higher costs for raw materials, logistics and labor, Jagdfeld said during a May 4 analyst call. Demand has exceeded executives’ expectations and Generac saw higher-than-expected shipments of the home standby generators for the quarter ending March 31, he said.

The all-in price for installing a home standby generator used to be $9,000 to $10,000 and now has increased to $11,000 to $11,500, Jagdfeld said. The Generac product itself is "maybe half of the total cost of the project," he said.

The extra expense “doesn’t seem to be dampening the enthusiasm for demand for the category,” Jagdfeld said.

The strength in home standby generator sales is driven by continuing trends in which homeowners are seeking resiliency in their power sources, Jagdfeld said.

“The category is incredibly durable with respect to the demand and with respect to the impact from pricing,” he said.

Jagdfeld pointed to the 2008-2009 recession as an example of the durability of the demand.

“Our overall consumer or residential business was up even in the depths of that,” Jagdfeld said. “And I think if anybody would have said that, that category would be up — kind of a large ticket kind of arguably discretionary product tied to residential investment — I think most people would have said, ‘You're kind of nuts.’ But we actually did outperform.”

Homeowners' standby generator projects fall into the category of home improvement, Jagdfeld said.

“Think of it as the impact of the price of that product in relation to the home's value,” he said. “A lot of home values are way up. So when you think about it in the context of as a percentage of the home's value, it's not up significantly at all.”

Robert W. Baird & Co. analyst Mike Halloran said in an investment update that Generac’s price increases raise questions “around friction with channel partners” who have to either pass along price increases to customers or absorb the higher prices. Generac executives said the push back has been less than they anticipated, Halloran said.

Generac reported sales increased 41%, to $1.14 billion, for the quarter ending March 31 compared with $807 million in the same quarter a year earlier.

The company’s adjusted net income decreased to $113.9 million, or $2.09 per share, from $149 million, or $2.38 per share a year ago. The per-share profits exceeded the analyst consensus of $1.92.

The heavy demand has caused the backlog to grow for Generac home standby generators to over $1 billion, executives said. However, the company’s production levels have increased at its Wisconsin and South Carolina plants, which enabled Generac to reduce lead times to 20 weeks from 27 weeks as of year-end 2021.

Generac is seeing some moderation in increases of commodity costs. The company is a big user of steel, copper and aluminum with steel remaining elevated and copper moderating, said chief financial officer York Ragen.

The company increased its full-year 2022 net sales guidance to an increase of between 36% and 40%. Generac previously predicted sales would increase 32% to 36% this year.

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