Reemerging: Pool Corp 2Q 2025 Results

1902 postcard of the swimming pool at Palm Beach, Florida.

Preferred Shares recently released my brief overview of Pool Corp. The story of the business is another amazing one from the annals of business history. Frank J. St. Romain of Metaire, Louisiana, founded the company in 1980 as South Central Pool Supply. SCP started with one location and organically grew business over the next thirteen years. Then Code Hennessy, a venture capital firm, acquired SCP in 1993 in a leveraged buyout. With access to capital and an aggressive owner, growth accelerated as the company started rolling up its industry. SCP changed its name to Pool Corp. along the way and it is now the largest distributor of pool products in the country. It went from nothing but an idea in 1980 to a business that generates $5.3 billion in annual revenues 45 years later.

Touching base on the current status, Pool reported its second quarter results two months ago. In my prior post about the company, results were still submerged as it continued to experience a difficult environment for the construction of new pools. About 15% of Pool’s revenues have historically come from products related to new construction.

Although 1Q 2025 was the ninth quarter in a row of negative revenue growth, 2Q 2025 showed 0.8% growth of quarterly revenues over the prior year. After over two years of results being dunked under the water, I think this could be the beginning of more normal period of growth for Pool Corp. Revenue growth is finally—albeit barely—back in positive territory.

The Macro Data for Pools and Maintenance Products

The search for data with any predictive value on the future of a publicly traded business is a never-ending quest for the sell side analysts. Yes, it’s important to understand the drivers of the business, but obsessing over it is not healthy for an actual shareholder of a business. Nevertheless, there are several factors that have a bit of signal amidst the noise: new home construction, interest rates, and the value of retirement accounts.

Current CEO Peter Arvan said in 2024 that new pool construction usually lags new home construction by 2- to 3- years.

“But typically, follow construction. There’s usually a 2- to 3-year lag, somebody builds a house, get everything out set up, and then they'll put a pool. And there are some markets, some parts of Florida that the pool and the home construction are very closely tied.

But overall, there’s a bit of a delay. But you can see there’s a bit of a correlation as construction picked up, so did new pool construction as construction new single-family homes cooled, so it did new pool construction.”

—Peter Arvan, Pool Corp CEO, 2024 Analyst/Investor Day

New pool construction can also be aided by interest rates and the value of retirement investment accounts. Arvan said this on the Q1 2025 earnings call:

“I don’t really have any new color to add on my confidence in new construction. There’s just so many factors at play, everything we discussed and then lay on top of that, the macro and how people are feeling about their disposable income, discretionary income, 401(k) value and then, of course, interest rates on those pools that will require some financing. I think if the Fed were to ease rates, that would certainly help encourage people.”

—Peter Arvan, Pool Corp CEO, Q1 2025 Earnings Call

The chart below shows Pool’s stock price along with the Fed Funds Rate (blue line) and the number of new permits for housing units in the U.S. (purple line). With the number of permits still below 2021 highs and the FFR still elevated, perhaps it shouldn’t be a surprise that Pool’s share price is also still below 2021 highs…

Rates Aren’t Everything

However, interest rates aren’t everything. Former Pool Corp. CEO Manny said back in 2018 that rates had little impact on new pool construction in prior periods:

“And just for context, when you go back in the history of this industry, going back to the 1960s when there were changes in interest rates, that had no impact on the demand for in-ground pools. Just like … GDP didn’t impact demand. Unemployment didn’t impact demand. The only thing that impacted demands most severely was two factors.

One was the decline in single-family home values that happened 10, 11 years ago…. And second was the financing markets not being available. So even when interest rates were well into the teens back in the late ‘70s, early ‘80s, that did not deter the ongoing growth of new pool construction then because financing was available, albeit at those levels. I frankly believe that, and this may be a little bit counterintuitive, but I think that higher interest rates within reason, not to go from 5% to 15%, but interest rates at 6%, 7%, 8% from a pool standpoint are fine because … it’ll attract more lenders to a market that have been staying on the sidelines because they didn’t get the returns on lending given what the interest rates were.”

—Manuel De La Mesa, Pool Corp CEO, Q3 2018 Earnings Call

Now, I know the 2020s aren’t the same as the ‘70s or ‘80s, but with the Fed recently cutting rates by a quarter of a point and values of retirement accounts likely reaching new all-time highs for many baby boomers who will continue to retire to the Sun Belt states, the time seems right for the reversion of Pool’s business back to growth. If I’m a retiree who has been putting off a new pool since 2022 or 2023 because of rates or economic uncertainty, and I see that the value of my investments have only gone up, seeing interest rates start to go down just a bit might be the only catalyst I need to pull the trigger on a big home addition.

Summary

In conclusion, after more than two years of a challenging demand environment, Pool Corp’s recent positive revenue growth, albeit slight at 0.8%, suggests the company may be emerging from a difficult period. With interest rates beginning to go down a bit and the market at all-time highs, Pool might be at the beginning of a new period of normal growth if this all leads to increased new pool construction.

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Further Reading & Listening

Pool Corp. (POOL)

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Disclaimers for this Substack

The content of this publication is for entertainment and educational purposes only and should not be considered a recommendation to buy or sell any particular security. The opinions expressed herein are those of Douglas Ott in his personal capacity and are subject to change without notice. Consider the investment objectives, risks, and expenses before investing.

Investment strategies managed by Andvari Associates LLC, Doug’s employer, may have a position in the securities or assets discussed in any of its writings. Doug himself may have a position in the securities or assets discussed in any of his writings. Securities mentioned may not be representative of Andvari’s or Doug’s current or future investments. Andvari or Doug may re-evaluate their holdings in any mentioned securities and may buy, sell or cover certain positions without notice.

Data sources for all charts come from SEC filings, Koyfin, and other publicly available information.