So there’s a lot of very subjective things that go into the repair versus replace that I think we’ve tried to explain away in the past with some fairly simplistic concepts that now I think we need to dig deeper and find out more detail as far as what really does drive that.Operator And our next question will come from Tommy Moll with Stephens.Tommy Moll Good morning. Appreciate you taking the questions. Al, you mentioned that the OEMs moved a little bit later this year on their pricing initiatives. But vis-à-vis your distributor competitors, are you seeing any emerging signs of price based competition? And if not on a like for like basis, do you think pricing could actually be up again this year across the industry?Albert Nahmad Tom, it’s a very good question and I’m going to go to my two guys, Paul and Barry.Paul Johnston Yes.
Regionally and with certain customers, yes, there is still this price competition going on. There always will be price competition existing in our industry among the OEMs and among distribution. I think with the changeover in products and with a lot of the other aspects that we’ve been talking about, it probably hasn’t been as significant as perhaps it’s been in the past. But still, it’s there. It’s always going to be there. It’s a very competitive industry.Aaron Nahmad Yes. Paul, I mean, one thing that sticks out, and I agree it’s regionally and kind of noise, not the signal. But we heard from one of our northern businesses yesterday that they’re later in the transition to the M1 product, the new products, that some of the old products are being moved in their region at lower prices.
So that’d be an example of kind of a regional, if you will, but a temporary and not material, I think, in the end of the day.Paul Johnston Right. And hopefully transitory.Albert Nahmad The whole offering of M1 is more expensive than what they’re replacing. Right. And that’s just new in the market now, beginning this first quarter. Yeah, that would be impact.Aaron Nahmad Right. That’s the big story. The other stories are just noise, is my point.Tommy Moll Right. Maybe to put a finer point on it. Do any of these dynamics feel like they’ve accelerated or moderated this year in particular, just given that industry wide volumes may be pressured? Or do you still think that net-net across the industry pricing does, in fact move higher through this year?Albert Nahmad Well, I hope, it’s hard to predict, but we’ve had a pricing action that takes place now, just starting, and it’s more moderate than it has been.
But it’s hard for us to advise you that we expect no changes in pricing. I just don’t think that’s something that we have, we would know that comes from the OEM. Paul, anything to add?Paul Johnston Yes, I think I agree with Al completely. I mean until we start seeing normal supply chain, until we start seeing where the weather goes and what the consumer dynamic is, making a prediction like that in April would be a wild guess on our part.Barry Logan Just to add a layer to that. I think this is just important, educationally. We have a store in Miami here that sells more than $50 million of equipment. That’s more than a Home Depot sells. Right. We’re selling to a couple of thousand customers at different prices. Our pricing to the market, to our customers has variability.
It has customization, it has competitive thinking to it. It has technology around it now. And what’s really not well known is we’re buying from our manufacturers at different prices to match and closely manage margin as we sell products in Miami. And now let’s extrapolate that to 90,000 customers and 670 locations. It’s a mammoth math and science equation where pricing is that granular across that many markets and customers. So two points to that is there’s a lot of fluidity in how we can manage margin, no matter what a local market is doing or how another OEM might be behaving. It’s an immense equation that is very fluid. And the good news is, and I’ll say it again, third time in this call, there’s now technology in place to look at all of that, to manage that, to prosecute that strategy in a way we didn’t have it two or three years ago.Tommy Moll Appreciate the context.
If I could ask one on market share again, just starting from the construct of industry volumes down, let’s just say somewhere in the mid-single digits this year, in recent years, you’ve taken significant share. I presume you’ll plan to repeat that again this year. But could that net to Watsco volumes flat or even up on the year, do you think?Albert Nahmad You mean in units or in dollars?Tommy Moll In units.Albert Nahmad I would certainly hope so. Given it’s always a good shot.Paul Johnston We’ve never set a goal to not increase market share in a year. That just isn’t something that’s in the Watsco DNA.Albert Nahmad I think he’s referring to the environment. And we’re going to have the environment that grows here. The variables to that are if you get hot weather, it doesn’t matter what we want to do, the demand is going to be there because heat creates demand.
Hot weather grows demand.Paul Johnston Well, also, I think this year what we’re looking at is spicing the market into different segments. Not just looking at market share in split systems, but looking at market share in heat pumps versus straight cool versus the mini splits for the ductless type product. So I think it’s going to become a more complicated equation than we’ve looked at in the past. And it’s also going to be probably more important that we’re looking at markets here, in the markets that we think have got the longest legs and the longest future. That obviously is the ductless product and the heat pump product.Tommy Moll Appreciate the insight, I’ll turn it back.Albert Nahmad Dimension, right, in terms of share, I think that’s correct statement of those products.Operator And our next question here will come from Jeff Hammond with KeyBanc Capital Markets.Mitchell Moore Hey, guys, good morning.
This is Mitch Moore on for Jeff. It seems like the supply chain for residential equipment is pretty close to normal here, but I was just wondering if there’s any areas where within resi where lead times are still an issue.Albert Nahmad Yes. We’re not going to identify it, but we have. We have an issue with the equipment still. And the issues are more serious in different places and different brands. Yes, we still are overcoming shortages of equipment itself. No question about it.Mitchell Moore Okay, that’s helpful. And then just on inventory, I was wondering maybe what’s a realistic source of cash from inventory kind of this year?Albert Nahmad What would I like? Or what do we think is going to happen? I mentioned before I’d like to get another $200 million out of our inventory and cash flow, but, yes, we’ll see what happens.
But we’re better prepared for that because of the various supply chain as it improves, we improve our churn because equipment that isn’t matched right now will be matched, will be freer to sell it. And just our technology has got a lot better so that we can obviously improve the churn. That’s what our goal is. So I gave you a number. It’s a goal, it’s not a projection.Operator Our next question here will come from Patrick Baumann with JPMorgan.Patrick Baumann Good morning, Al. How’s it going? I hope you feel better.Albert Nahmad Yes, it’s just a cold. Thank you, though.Patrick Baumann Good. I had a quick one, a few, actually. In the press release, you mentioned that unit volumes are adjusting to more conventional run rates. But what was meant by that comment?
Maybe that’s a Barry question.Albert Nahmad Barry and Paul. And Patrick, may I suggest that you come visit us. We always want to have you guys come visit. Are you going to, hope you’ll be able to do that soon.Patrick Baumann Yes, we are. We’ll be coming down there soon. We will.Albert Nahmad Thank you for that. Okay, guys. Well, answer that.Barry Logan Yes, Patrick, I mean, if you look at 20-30 years of data, the growth rate of the industry is right around 3% unit growth. It’s been closer to 7%-8% the last two or three years. And so the comment really is that some adjustment is going on, obviously, the last few quarters. And I think the realignment towards that longer term growth rate is probably what we’ll see at some point. And so it’s just a reset.
It’s not meant to tell you what we think unit growth will be short term, but it’s part of the reset that obviously has been in the cards now for probably the last year kind of taking place.Patrick Baumann Makes sense. And then switching gears on HVAC products sales. Can you talk through what you’re seeing there? The decline in the first quarter was modest, but just kind of curious if you could parse that out a little bit, whether it’s volume or price or however you want to talk about it. I know there’s a lot of stuff within that subset of sales. Just kind of curious if you could talk about that subset.Albert Nahmad Patrick, I didn’t hear your question.Patrick Baumann Yes. Just want to talk a little bit about HVAC product sales. Not the equipment side, the product subset of sales.