DEF: Pool Corp. Faces Headwinds, Reports EPS Decline

Pool Corporation's 2026 proxy statement reveals a decline in 2025 operating income and EPS, with executive incentive payouts below target, despite strong long-term growth and shareholder support for compensation practices.

Summary

• The 2026 Annual Meeting of Stockholders will be held virtually on Wednesday, April 29, 2026, at 9:00 a.m. Eastern Time.
• Stockholders will vote on the election of nine director nominees, the ratification of Ernst & Young LLP as the independent auditor for fiscal year 2026, and a non-binding advisory vote on named executive officer compensation.
• The Board of Directors unanimously recommends voting FOR all proposals.
• For fiscal year 2025, net sales were $5.3 billion, comparable to 2024.
• Operating income declined 6% to $580.2 million in 2025.
• Earnings per share (EPS) decreased 4% to $10.85 in 2025, compared to $11.30 in 2024.
• Adjusted diluted EPS, excluding ASU 2016-09 tax benefits, decreased 3% to $10.73 in 2025 from $11.07 in 2024.
• Cash provided by operations was $365.9 million, representing 90.0% of net income, or 106.9% when excluding $68.5 million in deferred federal tax payments from 2024.
• The company returned $531.2 million to stockholders in 2025 through dividends and share repurchases, marking its 20th annual dividend increase.
• Executive annual cash incentive plan payouts for 2025 were below target, with the CEO receiving 81.1% of target and other named executive officers (NEOs) averaging 68.7% of target.
• Performance-based restricted stock awards for the 2023 PS-2 (EPS CAGR) were not earned for the performance period ended December 31, 2025, and 2024 EPS-performance-based awards are not expected to vest.
• Stockholders showed strong support for the executive compensation program at the 2025 annual meeting, with 96.0% approval.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with caution due to significant underperformance in short-to-medium term financial metrics and TSR, despite strong long-term growth history and robust corporate governance practices.

Positives

• Stockholder support for the executive compensation program remains strong, with 96.0% approval at the 2025 annual meeting and 93.8% in 2024.
• The company announced its 20th annual dividend increase, demonstrating a compound annual growth rate of approximately 15% since the dividend program's inception in 2004.
• Returned $531.2 million to stockholders in 2025 through dividends ($184.9 million) and share repurchases ($346.3 million).
• Cash provided by operations was 106.9% of net income in 2025, excluding deferred federal tax payments.
• Gross margin improved 20 basis points in 2025, excluding a reversal of import taxes in 2024, reflecting positive impacts from price increases and disciplined supply chain management.
• Maintained annual sales above $5.0 billion for the fifth consecutive year and sustained a double-digit operating margin, showcasing adaptability and long-term value creation.
• The ten-year compound annual growth rates (CAGR) for net sales (8%), operating income (10%), and diluted EPS (14%) demonstrate sustained long-term growth.
• The Board is committed to refreshment, with the average tenure of independent directors decreasing to 7.1 years in 2026 from 13.7 years in 2018.
• The company maintains a separation of the Chairman and CEO roles, which has been effective since 2001 in providing independent Board leadership and oversight.
• All current named executive officers and directors are in compliance with stock ownership guidelines.
• The executive compensation program incorporates sound governance practices, including clawback policies and a prohibition on hedging, pledging, or monetization transactions involving company stock.

Negatives

• Operating income declined 6% to $580.2 million in 2025.
• Earnings per share (EPS) decreased 4% to $10.85 in 2025 compared to $11.30 in 2024.
• One-year, three-year, and five-year Total Stockholder Return (TSR) CAGRs significantly underperformed the peer group median and the S&P 500 Index, with 2025 TSR at (31.8)% (vs. peer 5.0% and S&P 17.9%).
• Annual cash incentive plan payouts for 2025 were below target for all named executive officers (CEO at 81.1% and other NEOs averaging 68.7%).
• Performance-based restricted stock awards for the 2023 PS-2 (based on diluted EPS CAGR) were not earned for the performance period ended December 31, 2025.
• Performance-based restricted stock awards granted in 2024, with a baseline of $13.18, are not expected to vest by the end of their performance period on December 31, 2026.
• Market conditions in 2025 were challenged by elevated consumer interest rates, product cost, and labor inflation, leading to consumer hesitancy on discretionary spending and cyclical suppression of demand.
• Operating expenses rose 4% to $992.3 million in 2025, primarily due to investments in technology initiatives, expansion of the sales center network, and inflationary pressures on base wages and facility costs.

Risks

• Market conditions, including elevated consumer interest rates, product cost, and labor inflation, may continue to lead to consumer hesitancy on discretionary spending and cyclical suppression of demand.
• New pool construction and remodeling projects may continue to be adversely impacted by challenging market conditions.
• Actual events and results may differ materially from forward-looking statements due to various factors, including those disclosed in other SEC filings.
• General strategic, financial, regulatory, cybersecurity, compensation, and operational risks are overseen by the Board and its committees.
• While the Compensation and Human Capital Management Committee assesses risks related to compensation programs, there is an inherent risk in any compensation policy, though the Committee believes current policies are not reasonably likely to have a material adverse effect.

Future Outlook

The company expects consumers to continue investing in outdoor living spaces as lower housing turnover encourages home renovation. It believes it is well-positioned to benefit from inherent long-term growth opportunities in the industry, fueled by favorable population migration trends, product developments, and technological advancements, particularly as consumers seek more sustainable and energy-efficient solutions. The 2025 EPS CAGR target for performance-based awards was set based on expectations of low single-digit growth in 2025, mid single-digit growth in 2026, and double-digit growth in 2027, consistent with its long-term outlook.

Management Comments

• "I am pleased to invite you to attend our 2026 annual meeting of stockholders... Your vote is important to us... We value your investment in Pool Corporation, and we look forward to your participation in the Annual Meeting."
• "As lower housing turnover encourages homeowners to renovate their existing homes, we expect that consumers will continue to invest in outdoor living spaces as they consider backyards an extension of their home space."
• "We believe that we are well positioned to benefit from the inherent long-term growth opportunities in our industry fueled by favorable population migration trends, product developments and technological advancements as consumers increasingly seek more sustainable and energy-efficient solutions."
• "Our ten-year performance demonstrates our ability to deliver sustained growth, while our one-, three-, and five-year TSR CAGRs reflect recent industry headwinds."
• "Following that surge, as industry activity moderated, we maintained annual sales above $5.0 billion, delivered 2025 EPS of $10.85, and sustained a double-digit operating margin, underscoring our adaptability and long-term value creation."
• "We believe it is important to evaluate our 2025 performance not only in comparison with the previous year but with a longer view to include the full scope of the effects of the COVID-inspired industry surge and the ensuing industry stabilization and return to a more historical cadence."
• "By maintaining our focus on long-term growth and profitability, we believe we are well positioned for future success."

Industry Context

StockSavvy.ai notes that Pool Corporation's 2025 performance was significantly impacted by broader industry headwinds, including elevated consumer interest rates, product cost, and labor inflation, which led to consumer hesitancy and a cyclical suppression of demand, particularly affecting new pool construction and remodeling. While the company experienced exceptional demand during the COVID-19 pandemic (2019-2022), the subsequent moderation and stabilization of industry activity have presented challenges. Despite these short-term pressures, the company anticipates long-term growth opportunities driven by favorable population migration trends and increasing consumer demand for sustainable and energy-efficient outdoor living solutions.

Comparison to Industry Standards

• The company's one-year Total Stockholder Return (TSR) of (31.8)% significantly underperformed its peer group median of 5.0% and the S&P 500 Index TSR of 17.9% as of December 31, 2025.
• The three-year TSR of (7.6)% also lagged the peer group median of 6.8% and the S&P 500 Index TSR of 23.0%.
• The five-year TSR of (8.0)% was below the peer group median of 10.0% and the S&P 500 Index TSR of 14.6%.
• The company's revenue of $5,368 million (as of October 14, 2024) was below its peer group median revenue of $6,893 million, while its market capitalization of $14,091 million was significantly higher than the peer group median of $6,604 million, suggesting a premium valuation despite lower sales volume compared to its peers.
• The company's time-based restricted stock awards cliff vest after three years, which is more restrictive than the majority of its peer companies (including Applied Industrial Technologies, Inc., GMS Inc., Beacon Roofing Supply, Inc., and Fastenal Company) that typically offer three-year ratable vesting schedules.
• Post-employment payment levels for named executive officers are generally below the practice among comparable companies, indicating a conservative approach to severance benefits.

Management Changes

Corporate Governance

Related Party Transactions

• The Audit Committee was not requested to, and did not approve, any related party transactions in fiscal year 2025.

Stakeholder Impact

• Shareholders: Experience negative short-to-medium term Total Stockholder Returns, but benefit from consistent dividend increases and share repurchase programs. Executive compensation is directly linked to performance, reflecting recent underperformance.
• Employees: Benefit from compensation programs designed to attract, motivate, reward, and retain talent, including 401(k) and Nonqualified Deferred Compensation Plans. The company is investing in technology initiatives and expanding its sales center network, potentially creating new opportunities.
• Customers: The company maintains its focus on expanding its footprint and enhancing technology services, aiming to improve customer experience and service delivery.
• Management: Executive compensation, particularly annual cash incentives and performance-based equity awards, is directly impacted by financial performance, with payouts below target and some awards not vesting due to underperformance.

Next Steps

• Stockholders will elect nine director nominees at the 2026 Annual Meeting on April 29, 2026.
• Stockholders will ratify the retention of Ernst & Young LLP as the independent registered public accounting firm for fiscal year 2026.
• Stockholders will cast a non-binding advisory vote to approve the compensation of named executive officers.
• The company will host an Investor Day in May 2026, where senior management will present long-term strategic goals and the current year outlook.
• Kenneth G. St. Romain will retire from his Senior Vice President position at an unspecified date later in 2026.
• Stockholder proposals for inclusion in the proxy materials for the 2027 annual meeting must be received by November 26, 2026.
• Stockholders wishing to nominate a director or present a proposal (not for inclusion in proxy materials) at the 2027 annual meeting must notify the corporate secretary between June 29, 2026, and November 26, 2026.

Key Dates

Recommendation

The company's recent financial performance, including a 6% decline in operating income and a 4% decrease in EPS in 2025, coupled with significantly negative one-, three-, and five-year Total Stockholder Returns that drastically underperformed both peers and the S&P 500, indicates substantial headwinds. While long-term growth metrics are positive, the immediate outlook and recent performance suggest a challenging period. The failure of certain performance-based executive equity awards to vest further underscores the operational difficulties. Despite strong corporate governance and a commitment to shareholder returns through dividends, the current trajectory warrants a cautious stance, suggesting a "sell" recommendation for investors seeking near-term capital appreciation or concerned about continued underperformance relative to the broader market and industry.

Keywords

Pool Corporation, Proxy Statement, Executive Compensation, Corporate Governance, Annual Meeting, Financial Performance, Shareholder Return, Dividends, Share Repurchases, Director Election, Risk Management, Distribution Industry, Outdoor Living