Conflicting Signals: Analyzing Tariff Effects, Inventory Trends, and Gross Margin Projections in 2025

Record Profitability and Margin Expansion:
- Hayward Holdings reported a 5% increase in net sales to approximately $300 million, with gross profit margins increasing to a record 52.7% and adjusted EBITDA margin increasing to 29.5%.
- This performance was driven by strong operational and commercial team performance, along with effective working capital management.

Tariff Management and Mitigation:
- The company reduced its estimated annualized tariff impact to approximately $30 million, down from $85 million due to a reduction in tariffs from 145% to 30% for China.
- Hayward is aggressively executing mitigation plans, including reducing direct sourcing from China to less than 3% of cost of goods sold by year-end.

ChlorKing Acquisition Success:
- The ChlorKing acquisition contributed 3% to North American net sales, with commercial sales in North America doubling year-to-date.
- The integration of ChlorKing has been successful, providing key building blocks for the expansion of Hayward's commercial pool business.

Strong Free Cash Flow and Capital Allocation:
- Hayward generated free cash flow of $175 million in the first half of the year, supporting strategic investments in automation and manufacturing assets.
- The company's strong cash profile supports ongoing capital allocation efforts, including repurchase authorization to return $450 million to shareholders over 3 years.

North American Sales and Market Performance:
- Net sales in North America increased by 6%, fueled by a 6% net price realization, 3% lower volume, and 3% contributions from the ChlorKing acquisition.
- The growth was supported by seasonal demand and strong performance in the commercial pool business.