Hayward Holdings (HAYW) Navigates Tariffs and Trade Winds with Innovation and Resilience

Hayward Holdings (HAYW) delivered a mixed yet encouraging performance in Q1 2025, balancing strong execution against headwinds from tariffs, trade uncertainty, and softening demand in discretionary markets. The company’s focus on innovation, cost discipline, and strategic shifts in supply chains offers a pathway to sustained growth, though risks remain elevated.

A Resilient Start Amidst Macro Challenges

Hayward’s Q1 results highlight its ability to navigate turbulent conditions. Net sales rose 8% to $229 million, driven by price hikes, volume growth, and the ChlorKing acquisition. Gross profit margins expanded to 49.5%, marking the ninth consecutive quarter of improvement—a testament to operational efficiency. Adjusted EBITDA hit $49 million, up 9%, while adjusted EPS surged 25% to $0.10.

Strategic Moves to Counter Tariffs and Trade Headwinds

The star of Hayward’s strategy is its OmniX IoT platform, targeting the 3.5 million non-automated in-ground pools in the U.S. This decentralized system promises to reduce costs and complexity compared to traditional centralized controls, aligning with the company’s push into high-margin software-enabled services. Meanwhile, Hayward is aggressively reducing reliance on Chinese imports, aiming to cut sourcing from 10% to 3% of COGS by year-end. This shift, paired with U.S. factory investments, aims to mitigate the $85 million annual tariff burden.

Risks and Mitigation in Action

The company faces significant hurdles. Tariffs and trade tensions remain the largest overhang, with a partial-year impact of $30 million in 2025. Hayward’s response includes two out-of-cycle price increases totaling 7%, which could risk customer pushback but are necessary to offset costs. Management also warned of a potential mid-to-high single-digit volume decline for the year, driven by softness in new construction and remodels.

Inventory management is another priority. Hayward is tightening controls to prevent channel overstocking ahead of price hikes, a move that could temporarily strain dealer relations but protect margins.

Guidance: Caution Meets Resilience

Guidance for 2025 is cautiously optimistic. Sales growth of 1%-5% ($1.06B–$1.1B) reflects cautious volume assumptions, while EBITDA targets ($280M–$290M) remain unchanged despite rising costs. A key caveat is the reduced cash flow forecast ($150M vs. prior guidance) due to higher CapEx for U.S. tooling and working capital needs.

The Bottom Line: A Company in Transition

Hayward’s Q1 results underscore its dual identity: a defensive play in the resilient pool aftermarket (80% of sales) and an aggressive innovator betting on IoT-enabled services. While tariffs and macro risks are material, the company’s actions—pricing discipline, supply chain reshoring, and R&D focus—position it to capitalize on its core strengths.

The stock’s valuation, however, requires scrutiny. With a forward P/E of ~25x (assuming $0.40 EPS for 2025), investors pay a premium for Hayward’s growth ambitions. Yet, the nine-quarter margin expansion streak and liquidity ($398M) provide a buffer against near-term volatility.

Final Analysis: A Buy with Eyes Wide Open

Hayward Holdings is a compelling story of adaptability in a challenging environment. Its aftermarket dominance, strategic investments, and margin discipline are positives, but investors must weigh the risks of tariff escalation, volume declines, and execution delays in U.S. manufacturing. For those willing to bet on Hayward’s long-term vision, the stock offers potential rewards—but only for those who can stomach the turbulence ahead.

In conclusion, Hayward’s Q1 results are a reminder that even in uncertainty, disciplined execution and innovation can pave the way for success. The company’s path forward hinges on balancing defensive strengths with bold bets on the future—a strategy that could pay off if its supply chain and pricing moves outweigh the headwinds.