Pool Corporation
CEO : Mr. Peter D. Arvan
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | -9.7% YoY | -21.9% | -22.8% | 2023-07-20 |
Peter Arvan says,
Weather and Construction Challenges
- Challenging start to the year due to weather and construction pressures
- Delayed start to the pool season and shortened season due to cooler weather
- New pool construction under pressure, particularly at the lower end of the market
- Resiliency in the remodel market, with renovation outpacing new construction
Company Performance and Growth
- Recorded a strong quarter despite market conditions
- Investing in growth and focusing on customer experience
- Opened eight new sales centers and added nine new franchise stores in Japan
- Managing operating expenses in a declining demand environment
- POOL360 adoption growing and launching POOL360 water test application
Regional Sales Performance
- California sales declined 8% in Q2, but improved from Q1
- Arizona sales declined 7% in Q2, but improved from Q1
- Texas sales decreased 13% in Q2, affected by cooler temperatures and precipitation
- Florida sales decreased 7% in Q2, experiencing a slowdown in new construction
- Seasonal markets sales declined 11% in Q2, but improved from Q1
Product Sales Performance
- Equipment sales down 8% in Q2
- Chemical sales down 3% in Q2
- Building material sales down 8% in Q2
- Commercial swimming pool sales increased 8% in Q2
- Pinch A Penny franchisees reported relatively flat sales
Financials and Outlook
- Operating expenses were 13% of net sales in Q2
- Operating income for Q2 was $327 million, down compared to last year but a significant increase over 2019
- Expecting new pool construction to be down 30% in 2023
- Long-term outlook for the industry remains strong with a growing install base
Melanie Hart says,
Net Sales and Pricing
- Net sales for Q2 2023 were $1.9 billion, the second best top line in history.
- Inflation in the quarter was approximately 3% to 4%, with slightly higher inflation for equipment products.
- Overall pricing benefited from marginal price increases in chemicals.
- Trichlor prices experienced pressure, resulting in a 1% drag on net sales for the quarter.
Gross Margin and Operating Expenses
- Gross margin of 30.6% in Q2 2023 saw a 180 basis point decline compared to Q2 2022.
- Gross margin was somewhat negatively impacted by sales concession activity in response to slower season start.
- Operating expenses declined by 3% year-over-year in Q2 2023.
- SG&A cost as a percentage of net sales was 13% for the quarter, significantly better than Q1 2023.
Operating Margin and EPS
- Operating margin for Q2 2023 was 17.6%, a decrease from 20.4% in Q2 2022.
- Full year operating margin in 2023 is expected to be well above pre-pandemic levels.
- Diluted EPS, excluding ASU, was $5.89 in Q2 2023, comparable to 2021 Q2 EPS.
Inventory and Cash Flow
- Inventory reductions have been made by $186 million year-over-year.
- Cash flow from operating activities was $377 million, an increase of $348 million compared to last year.
Outlook and Future Spending
- Full year sales for 2023 are expected to be down in the range of negative 10% compared to 2022.
- Gross margin is expected to return to seasonally normalized levels in the second half of the year.
- Operating expenses will be well managed to limit full year base business expense growth to 1%.
- Anticipated spending includes acquisitions, capital expenditures, dividends, debt reductions, and share buybacks.
Q & A sessions,
New Pool Construction
- Expect new pool construction to be up around 30%, with a focus on lower-priced pools performing better than higher-priced ones
- Ability to gain share in new pool sales is consistent with previous expectations
Weather
- Poor weather in the second quarter, including a late start to the season, impacted sales
- Expectation of normal weather for the rest of the year
Consumer Buying Patterns
- Non-discretionary spend is strong, particularly in chemical sales due to hotter weather
- Consumers are deferring semi-discretionary purchases, such as pool repairs or new cleaners, due to current economic conditions and higher financing costs
Renovation and Remodel Market
- Renovation and remodel market is performing better than new construction
- Backlog of renovation projects expected to moderate
- Tile sales down 9% and pool finish sales down 2% for the year
Competition and Market Position
- Competition in the market is not new and not a concern
- Confident in maintaining and growing market share due to investments in expanding locations, value proposition, and network resources
- Vertical integration in chemical packaging and private label capabilities provide flexibility and competitive advantage
- Investments in digital tools, customer experience, and marketing to enhance service and attract customers
No bad stock 