SWIM Q3 Deep Dive: Market Share Gains Amid Flat U.S. Pool Demand

Residential swimming pool manufacturer Latham (NASDAQ:SWIM) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 7.6% year on year to $161.9 million. Its GAAP profit of $0.07 per share was 29.7% below analysts’ consensus estimates.

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StockStory’s Take

Latham’s third quarter results showed year-on-year revenue growth despite a flat U.S. in-ground pool market, with management crediting strong demand for fiberglass pools, pool covers, and liners as the main drivers. CEO Scott Rajeski noted, “all 3 of our product lines experienced year-on-year growth,” highlighting that the company’s investments in product innovation and marketing have outpaced broader industry trends. Latham’s ability to mitigate tariff impacts and capture share in key geographies, particularly the Sand States, contributed to its margin expansion and competitive positioning.

Looking ahead, Latham’s guidance is anchored by expectations for continued outperformance in fiberglass pools and automatic covers, even as industry-wide new pool starts remain subdued. Management emphasized that expansion into new master-planned communities and strategic partnerships with homebuilders in growth regions like Florida should support future sales. CFO Oliver Gloe stated, “We are confident that increased fiberglass pool and auto cover adoption will enable Latham to continue to outperform the in-ground pool market,” while also highlighting ongoing productivity initiatives and disciplined capital allocation as pillars for margin sustainability.

Key Insights from Management’s Remarks

Management attributed quarterly growth to share gains in core product lines, successful price increases to offset tariffs, and operational improvements. The company’s efforts to expand in growth regions and leverage proprietary tools were also key factors.

• Fiberglass pool momentum: Latham saw continued growth in fiberglass pool sales, driven by increasing dealer conversions and consumer interest in faster installation and lower maintenance compared to concrete pools. Management estimates fiberglass will account for 75% of Latham’s in-ground pool sales this year, as adoption accelerates in target regions like the Sand States.
• Auto cover adoption rising: Pool cover sales rose sharply, aided by organic growth and synergies from recent Coverstar acquisitions. Strong consumer demand for safety and efficiency features, as well as regulatory changes allowing auto covers in place of traditional fencing in 16 states, helped boost this segment.
• Proprietary technology drives liner sales: The introduction and rebranding of Latham’s AI-powered Measure Pro and Measure Go tools streamlined liner and cover measurement, reducing installer time and improving quote accuracy. Twenty-five percent of tool purchasers in the quarter were new to Latham, supporting share gains in liners and winter safety covers.
• Sand States expansion progress: Latham made notable inroads in Florida, partnering with custom homebuilders and entering master-planned communities. These efforts, aimed at converting concrete pool installers and increasing brand presence, led to high single-digit sales growth in the region despite broader market challenges.
• Margin expansion from operational initiatives: Gross margin rose due to lean manufacturing, value engineering, and benefits from acquisitions. CFO Oliver Gloe highlighted that structural cost improvements, including facility debottlenecking and volume leverage, contributed to sustainable margin gains.

Drivers of Future Performance

Management expects future growth to hinge on fiberglass pool adoption, expansion in growth regions, and operational efficiencies, while remaining cautious about flat industry pool starts.

• Fiberglass and auto cover growth: Management believes ongoing dealer conversions and consumer education about the benefits of fiberglass pools and auto covers will drive long-term outperformance versus the broader pool market, even if overall new pool starts remain flat.
• Geographic expansion and partnerships: Strategic entry into the Sand States, particularly Florida, through partnerships with homebuilders and increased presence in master-planned communities is expected to support sales momentum and market share gains.
• Productivity and disciplined investment: Continued focus on lean manufacturing, value engineering, and targeted capital expenditures in production facilities are viewed as key to maintaining margin expansion and funding organic and acquisition-driven growth. Management cautioned that tariff and interest rate uncertainties remain external risks.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) whether Latham’s fiberglass pool and auto cover adoption rates continue to outpace broader industry trends, (2) the company’s execution on expanding dealer and builder partnerships in the Sand States and other growth regions, and (3) progress on productivity initiatives and cost control to sustain margin gains. Regulatory developments and macroeconomic factors like tariffs and interest rates will also be monitored for their potential impact on demand.

Latham currently trades at $7.20, in line with $7.20 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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