Pool Corporation (POOL) | Treading Water
Growth has stabilized but margins are squeezed until 2027 + a new CEO
With PoolCorp’s recent earnings report, the first since its surprise CEO transition, I figured now would be a good time to do a check in on how the business is performing and to evaluate any commentary from the new CEO.
Previously, I wrote about PoolCorp in January, trying to understand its business model and competitive positioning. If you’re new to this business, I’d suggest starting with that report. You can read it here:
I like this business a lot and even more so as the stock trades to the lower-end of its historical median valuation multiple.
In this report, I will review the following:
Earnings, commentary, and valuation
The new CEO
Insider activity
Sycamore’s take
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Earnings, commentary, and valuation
Revenue
First and foremost, the thing I am paying attention to most is revenue growth. The company experienced an extraordinary pull-forward in demand through the Covid years. Digesting this and getting top-line back on track is the first order of business.
In the most recent quarter (Q2 2026), net sales were $1.82B, up 2.2% Y/Y.
In the chart below, you can see the trend over the past five years. From the Covid pull-forward growth collapse, to stabilization and recovery, to now back to positive growth.
It’s great to see to see top-line inflect positive. The company has guided for low single digit growth for the full-year. This is being driven primarily by price as volume was flat in the quarter, but for now we’ll take it however we can get it. Two thirds of the business is driven by recurring maintenance. The non-discretionary nature of this revenue also means they are able to pass-through rising costs, which you’re seeing the benefit of here.
Margins
Gross margin was 29.7%, down 30 bps from 30.0% a year ago. The decline was attributed to elevated inbound freight costs, along with unfavorable customer mix as larger customers grew faster than smaller ones. The freight costs are outside of management’s control. And faster growth from larger customers is a long-term positive.
The margin compression was partially offset by gains in private label and exclusive product sales. Management said freight-related cost actions begin early in Q3, and that full margin recovery may take until 2027.
Net income margin held up better than gross margin. Reported net income was $188.1M, a margin of roughly 10.3%, and adjusted net income was $195.7M, a margin of roughly 10.7%, both essentially in line Y/Y.
End market commentary
Building materials grew 4%, with continued share gains aided by the national Pool Trend showroom rollout (notable given continued softness in new pool construction
New pool construction remained muted. U.S. pool permits are tracking down low-single-digits year to date
Europe grew 11%, the strongest of any region, on improving sentiment (the CEO also cited extreme heat in Europe on the conference call as well)
Seasonal (non-year-round) U.S. markets grew 6%
Equipment sales were up 3% on price and repair-related demand
Chemical sales were down 2% on price deflation
Year-round Sun Belt markets (California, Texas, Arizona) were down mid-single-digits. Florida was down 1%, with the Horizon irrigation/landscape business cited as a drag (CEO also suggested some pull-forward from Q1 and if you back that out, not a concern)
Retail customer sales were down 1%. Pinch A Penny franchise sales were flat
Maintenance and aftermarket demand continued to be described as the steadiest category, tied to the installed base of existing pools (the main thesis for this business)
Digital platform
Pool360 reached a record 18% of sales in the quarter, up from ~16% from Q2 2025 and ~14% two years prior. The steady growth is a strong signal of customer lock-in. This is a trend/metric I watch closely.
Valuation
The multiple continues to be contracted. Perhaps warranted for now while the market waits to see if top-line can continue its upward trajectory, margins are now being squeezed until 2027, and the new CEO is hand-tied while he focuses on execution during the peak selling season before making any meaningful changes.
I think sets up a good opportunity for long-term oriented investors who are okay buying into a bit of uncertainty. Especially as growth has stabilized and recovered, the multiple has continued to contract over the past three quarters anyways.
The new CEO
Peter Arvan stepped down as CEO and from the board on May 4, 2026, after nine years in the role. The company assured investors that it did not stem from any disagreement over operations or policies. Instead, framing it as the outcome of ongoing succession planning.
John Watwood was named President and CEO effective the same day as Arvan’s departure.
Background
Watwood joined PoolCorp as EVP in January 2026, only four months before being named CEO. He has 20+ years of experience in industrial and specialty distribution. Most recently he served as SVP of Sales and Operations at Motion Industries (Genuine Parts Company subsidiary). Earlier in his career he held roles at Applied Industrial Technologies and SMC.
His progression at Motion Industries over 17 years included:
Fluid power specialist (joined 2008)
Branch manager roles in Mississippi and Tennessee
Division VP/General Manager (2014)
Group Senior VP, Southeast Group (2019)
Senior VP of Sales and Operations for US & Canada (2025)
He holds an MBA from the University of North Alabama and a BS in industrial distribution/marketing from the University of Alabama at Birmingham.
During his four months prior to his promotion, it is understood that Watwood spent the majority of his time in PoolCorp sales centers where he met extensively with customers and suppliers. Given his swift promo he obviously made an impression.
“John has gained the trust of our employees, customers, and suppliers in a very short period of time. He understands distribution at its core, but more importantly, he understands the value of relationships and the local support that our customers need. Our field teams have seen firsthand his commitment to listening, supporting our customers, and helping us continue to evolve our already successful service model. There’s real excitement across the organization about where we’re headed under John’s leadership.”
Kenny St. Romain, Senior VP
Stated priorities
Watwood’s stated priorities as outlined on his first call as CEO:
Sales excellence: investing in sales team talent, training, and the digital platform
Pricing and supply chain discipline: running category-specific pricing playbooks and expanding private label/proprietary products
Operational execution: consistency across all 455 sales centers, emphasis on ramping recently opened greenfield locations
Disciplined M&A: tuck-in acquisitions with clear operational, cultural, and financial fit, rather than large transformational deals
Watwood noted that structural changes will wait until after the current selling season. What seems to be clear is that the board specifically brought in someone with a track record of driving operational efficiency, which fits PoolCorp's position as the largest distributor in the space by sales center count. Perhaps the read through is that the bigger opportunity now is running that footprint more efficiently rather than expanding it. This checks out given his listed priorities.
Insider activity
In the eight or so weeks leading up to and through the CEO transition, there was a series of insider stock purchases. Director and former CEO Manuel Perez de la Mesa made three open-market purchases totaling ~$4.7M:
5,000 shares near $205 /sh in mid-March
10,000 shares near $190/ sh on May 7 (just after the CEO announcement)
10,000 shares near $176/ sh on May 13
Additionally, directors John Stokely (now Executive Chairman) and James Hope also bought shares in the same early-May window totaling close to $200K worth of stock.
I guess the takeaway is that the board approves of their own work!
Sycamore’s take
With top-line growth stabilized and the stock trading near the lower end of its historical multiple range, the risk/reward here looks attractive for long-term oriented investors, provided you're comfortable underwriting some near-term uncertainty on margin and new CEO execution.
POOL is a current holding in the Sycamore portfolio. Position sizing and cost basis is detailed in the monthly Sycamore portfolio updates for paid subscribers.
Thanks for reading!
Matthew Blake
Founder & CIO | Sycamore Capital Management, LLC
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