A.O. Smith posts water heater sales dip, plans December price hike

A.O. Smith is set to raise prices before the end of this year, as the manufacturer battles rising input costs driven in part by tariffs and fuel prices, and as water heater demand softens. 

What’s happening: A.O. Smith last week reported that third-quarter North American water heater sales fell one percent year-over-year, driven primarily by “lower” residential volumes. (The company didn’t disclose specifics.)

The big picture: A.O. Smith expects the U.S. residential water heater industry to be down low single digits this year, according to a presentation. 

• From January to August, U.S. shipments of residential gas and electric water heaters are down 2.4 percent and 4.8 percent, respectively, compared to the same period last year, according to the latest available AHRI data. 

Yes, but: The one percent dip in water heater sales was partially offset by a 13 percent year-over-year increase in North American boiler sales and a five percent increase in water treatment sales. 

Zoom in: A.O. Smith has announced that an up to 9.5 percent price increase on select water heating products, including residential, will take effect in December due to rising input costs, including steel, energy, and transportation. 

Go deeper: CEO Stephen Shafer said last week that the price increases are industry-wide and that he has seen competitors react similarly.

• “We are pretty confident that I think this is a price change that is going to be required for the industry to remain profitable,” he said.
• However, Scott Graham, an analyst at Seaport Research Partners, said on the company’s earnings call that he has not seen a price increase this large apart from changes to efficiency standards.

— With assistance from Noah Zahn