If you don’t know Pool Corporation, they are one of the best pool companies out there. They specialize in swimming pool supplies, equipment and products, securing the entire industry. It has been one of the top 20 U.S. stocks for decades, riding the wave of housing investment and the demographic shift to warmer climates.
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However, it opened the day down 11.3% in one of its worst performances ever. This has since been reduced to 6.4% but may be a sign of macroeconomic deterioration.
The company said in a statement:
POOL provided an update on the 2024 pool season and revised its earnings guidance. The company reported a 6.5% decline in net sales year-to-date compared to 2023. Second-quarter 2024 revenues beat expectations due to lower new pool construction and remodeling. It is now expected to decline 15% – 20% and 15% respectively for the year, so POOL has lowered its annual earnings guidance to $11.04 – $11.44 per diluted share, down from $13.19 – $14.19.
The company reports earnings on July 25 and will provide some commentary after that, but this may be another canary in the coal mine. Earlier this month, Restoration Hardware saw a similar decline in its stock price after a poor quarter.
Here’s what CEO Gary Friedman had to say about the Fed and macro expectations:
I think the Fed is going to be very data-driven, which means the Fed is going to be behind the curve, right? So they were behind the curve when seeing inflation. I think they will be behind the curve in terms of assessing whether inflation is under control. I think they will be behind the curve in terms of when is the right time to cut interest rates. So our view is probably a little bit more negative than it was a quarter ago.
I think a quarter ago, we were feeling more optimistic that there would be interest rate cuts in the housing market that would start to move in a meaningful way in a sustainable way. I think it might not be until ’25 or Q2 ’25 maybe. So I think — I don’t think there’s going to be a sustainable upturn in luxury home sales at these interest rates. So yeah, not with lower interest rates, it’s just the affordability factor…and now you have interest rates of 7% or higher when it was 2.6% to 3.3%. I mean it’s just simple affordability now… Right now, we are experiencing a major downturn in the housing market and anything related to housing. It does not look like the housing market will recover anytime soon
I think there is no debate on this point, even with today’s house price indices showing increases. The Case-Shiller Index rose 7.2% year over year, and the FHFA Index rose 6.3%.