Technically, the calendar still says we're in winter, though many of us here in the South would never know it by the relatively balmy temperatures that have settled over us lately. It seems we've been reduced to two seasons: summer, and then a cool snap for a week or so in early January. While the apparent onset of global warming is depressing to cold-weather fans like me, the sweltering heat that is right around the corner can do nothing but boost the sales of swimming pools. One company that will ride that wave to profitability is SCP Pool
Back in April, the company had just dove off the 2004 springboard and appeared headed for its 11th straight year of record sales and earnings. This morning, it now has its sights set on 12. For the year, earnings advanced 31% to $1.19 ($66.9 million) on sales that climbed 13% to $1.31 billion. The company has not once missed a step since the days when it was just a tiny, one-store operation back in 1993. Of course, swallowing around a couple dozen competitors along the way doesn't hurt either.
As the number of potential takeover candidates dwindles, SCP Pool's most heady growth days may be in the past. However, the company's existing store base isn't exactly floating along the lazy river track; base business revenues grew by $116 million last year -- a double-digit increase. That may sound like a lot of chlorine and filters, but the company actually supplies a broad assortment of more than 90,000 different products from a network of 200 service centers spread throughout North America.
Acquisitions have typically allowed the company to establish a foothold in new markets, where it can quickly expand its presence. But with the overall pool supply distribution business growing around only 4%-5% annually over the past couple decades, SCP Pool is working to enhance its organic growth opportunities. With that in mind, the company is branching out into complementary products -- a $5 billion annual industry that incorporates anything from pool toys and furniture to backyard ponds and waterfalls. Sales of these products jumped 27% last year and are expected to represent 10% of this year's total sales.
The company does benefit from new pool construction, but the bulk of revenues (more than three-fourths) are generated by routine maintenance of existing pools. According to Investor's Business Daily, there are around 7 million swimming pools already installed, and about 200,000 more are built every year. Still, according to estimates, only about 10% of the overall domestic market has been tapped. During this morning's conference call, CEO Manny Perez laid out his belief that swimming pools could become "progressively more of a staple" over the next 20 years. Few homeowners relish the idea of having a murky swamp in their backyards, so each new pool represents a recurring stream of future, nondiscretionary revenues.
SCP Pool controls 45% of the market and has no large-scale national rivals -- though, like many, the company does have to contend with the likes of Wal-Mart
Fool contributor Nathan Slaughter owns none of the companies mentioned.