If you don't know Pool Corporation, it's one of the all-time great compounders. It specializes in swimming pool supplies, equipment and products, locking down the entire industry. It has been one of the top-20 US stocks for decades as it rode the wave of housing investment and a demographic shift to warmer climates.
Today, however, it opened 11.3% lower in one of its worst performances ever. It's since trimmed that to 6.4% but it may be a sign of macro deterioration.
In a release, the company said:
"POOL has provided an update on the 2024 swimming pool season and revised its earnings guidance. The company reports a 6.5% decline in year-to-date net sales compared to 2023. Q2 2024 revenues missed expectations due to lower new pool construction and remodeling activities, now anticipated to be down 15%-20% and 15%, respectively, for the year. Consequently, POOL has reduced 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 offer some commentary then but this could be another canary in the coal mine. Earlier this month Restoration Hardware saw a similar decline in its stock price after a poor quarter.
CEO Gary Friedman had this to say on the Fed and macro outlook:
I think the Fed is going to be massively data dependent, which means the Fed will be behind the curve, right? And so they were behind the curve on seeing inflation. I think they'll be behind the curve as it relates to assessing is inflation under control. And I think they'll be behind the curve as it relates to its 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 a little bit more optimistic that there would be rate cuts in the housing market would begin to meaningfully move in a sustained manner. I think it may not be until '25 or second quarter '25 maybe. So I think -- I don't think there's going to be a sustained inflection in luxury home sales at these interest rates. So yes, not with interest rates going down It's just an affordability factor... And now you've got interest rates 7% or higher when they were 2.6% to 3.3%. I mean it's just simple affordability now... right now, we're in a massive housing recession and anything that's tied to housing. It doesn't look like that the housing market is going to snap back anytime soon
I think that's inarguable that this point, even with the release of house price indicators today showing rises. Case-Shiller rose 7.2% y/y and the FHFA measure was up 6.3%.
