Summer is here - but pool demand less so, Pool Corp. says

By Bill Peters

'Despite the recent trends dampening discretionary spending, we continue to believe that the desire for swimming pools and outdoor living projects remains strong,' CEO says

Swimming-pool gear distributor Pool Corp. on Monday slashed its profit outlook for this year, citing "persistently weak" demand for new pool construction, sending shares sharply lower in after-hours trade.

The company - which among other things sells pool chemicals, cleaners, filters and building materials - made the weaker forecast as the summer begins and as the peak pool-selling season wraps up. But more-expensive essentials continue to weigh on spending for leisure activity, while higher interest rates and home prices have put a freeze on the housing market.

The stock slid 11% after hours on Monday, following a trading halt ahead of the profit warning. Shares of Pool Corp. (POOL) are down 15.3% so far this year.

Shares of rival Leslie's Inc. (LESL) fell 4% in after-hours trading on the news, amid fears it will report a similar slowdown. Leslie's stock is down 37% year to date.

Pool Corp. said it expected per-share profits of $11.04 to $11.44, down from an earlier outlook of $13.19 to $14.19. Executives said they believed that new-pool construction could be down 15% to 20% for the year, with remodel activity down as much as 15%.

For the second quarter, management said it expected earnings per share of $4.85 to $4.95. That outlook was well below FactSet forecasts for $5.83.

They said that year-to-date sales, while better than in the first quarter, had trended around 6.5% lower, adding that it now expected full-year sales to land "in a similar range."

Chief Executive Peter Arvan said in a statement that more than 60% of the company's business came from "recurring revenues" that were "generally not impacted by macroeconomic conditions." But the company said that shoppers have shied away from spending on swimming-pool installations and other big outdoor living projects.

Sales in maintenance-related items, like chemicals and some equipment, "have remained stable," the company said, with a 2% dip in equipment sales for the year overall, better than the 3% decline in the first quarter.

"Despite the recent trends dampening discretionary spending, we continue to believe that the desire for swimming pools and outdoor living projects remains strong, which allows our industry to grow over time as new pools are added to the installed base every year," Arvan said.

"We are confident that the strategic investments in our business position us for growth coming out of this economic cycle and are allowing us to continue to gain market share by providing unmatched value to our customers and suppliers," he continued.

-Bill Peters

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06-24-24 2015ET

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