Pool stocks are plunging
Gloomy guidance from Pool Corp. is rippling across the industry.
This summer, it’s not time for a dip in the pool – but rather, a dip in pool stocks.
Shares of pool companies are sinking on Tuesday after an industry bellwether suggested new and remodeling activity could be down double digits this year.
Updated guidance from Pool Corp. has the stock down nearly 7%, its worst session in almost two years, that leaves shares near their October 2023 lows. Others in the industry, like Hayward Holdings, Latham Group, Leslie’s, and Pentair, have also been trounced, down anywhere from 5% to 9% in tandem.
“The most recent pool permit data suggests persistently weak demand for new pool construction, and with the peak selling season almost complete, we now believe that new pool construction activity could be down 15% to 20% for the year with remodel activity down as much as 15%,” said Pool Corp. President and CEO Peter D. Arvan.
The damage has even seeped over to another continent: Shares of Spanish pool firm Fluidra ended down nearly 8%, their worst day since last July.
Record-breaking earnings from Carnival Cruise show that the American consumer isn’t in dire straits, nor has some kind of newfound aversion to water. Rather, the signal from Pool is twofold: high borrowing costs are still weighing on interest rate sensitive sectors, and some industries that over-earned due to changes in Americans’ spending patterns during COVID are facing a drawn-out reversion to the mean.
The effective interest rate on mortgage debt outstanding in the US is still lower than it was before the pandemic, despite 30-year mortgage rates having risen more than 300 basis points to about 6.9% over this period. Households were able to refinance their mortgage at low rates, and (understandably) don’t want to sacrifice that. No new house? No new pool.
And if you wanted a pool, you probably already got one: Pool’s revenues are about 30% above their 2012-2019 trendline, as the pandemic pulled forward and accelerated home improvement spending. While the company was predicting another annual decline in revenues, it hadn’t been anticipating a belly flop this bad.
