Latham Group's Strategic Play in the Sand States: A Path to Pool Market Dominance

The U.S. inground pool market is on the cusp of a recovery, and Latham Group (LTMH) is positioning itself to capitalize on it. By focusing on the “Sand States”—Florida, Texas, Arizona, and California—the company aims to exploit underpenetrated fiberglass pool markets while addressing regional consumer preferences. With a strategic mix of dealer expansion, product customization, and cost management, Latham is setting the stage for a potential $750 million revenue milestone. But will its execution align with the market's rebound?

The Sand States Opportunity
These four states account for the majority of U.S. inground pool installations, yet fiberglass pools represent just a fraction of sales in these regions. Nationally, fiberglass pools claim 23% of the market, but in the Sand States, adoption lags further behind. This gap presents Latham with a clear growth runway. The company's goal is to replicate the 70% fiberglass pool penetration seen in Australia, a market where durability and low maintenance are prized—features central to Latham's product.

Strategic Execution: Four Pillars of Growth
1. Dealer Network Expansion: Latham is targeting pool builders in the Sand States who can sell and install its products effectively. In Florida, where backyard sizes are smaller, the company offers compact designs with features like tanning ledges. In Texas, it's marketing larger, free-form pools tailored to local preferences. Building a robust dealer network ensures both distribution reach and installation expertise.

1. Product Customization: Latham's strategy hinges on regional design adaptations. For instance, Arizona's desert climate demands pools with heat-resistant materials and water conservation features. By aligning designs with local needs, Latham can outcompete generic offerings and command premium pricing.

2. Consumer Awareness Campaigns: To boost demand, Latham is engaging communities directly. Sponsorships in master-planned neighborhoods and educational initiatives highlight fiberglass pools' benefits: faster installation, lower long-term costs, and minimal upkeep. This contrasts with traditional concrete pools, which require frequent chemical adjustments and repairs.

3. Supply Chain Resilience: To mitigate risks like tariffs and inflation, Latham is near-shoring production, pre-buying materials, and using value engineering to trim costs without sacrificing quality. These steps aim to preserve margins even as the market recovers.

Market Recovery Outlook
Latham's financial targets—$750 million in net sales and $160 million in EBITDA—depend on the pool market rebounding to 78,000 annual installations within 3–5 years, a step toward its long-term vision of 100,000. Historically, pool demand correlates with housing starts, home values, and consumer confidence. With mortgage rates stabilizing and housing markets showing signs of life, the timing could be favorable.

Risks and Challenges
The strategy isn't without hurdles. A prolonged economic slowdown or delayed housing recovery could stall demand. Competitors like Pentair (PNTR) and Pool Corporation (POOL) might undercut pricing, while supply chain disruptions could erode margins. Additionally, consumer preferences for traditional pools might persist, limiting fiberglass adoption.

Investment Thesis
Latham's Sand States strategy is a high-reward, high-risk bet. If executed well, the company could capture a disproportionate share of a rebounding market. The stock's valuation—currently trading at 12x projected 2026 EBITDA—suggests investors are pricing in some skepticism about execution. However, the addressable market's size and Latham's tailored approach argue for a “Buy” rating, provided the company can sustain dealer partnerships and product differentiation.

Investors should monitor two key metrics: dealer network growth in the Sand States and quarterly sales trends relative to housing data. A sustained rise in installations beyond 70,000 annually would validate Latham's thesis. Meanwhile, cost controls and margin expansion will determine whether the company can hit its EBITDA targets.

In a market where fiberglass pools are still undervalued, Latham's focus on regional customization could make it the pool industry's next disruptor—if it can execute without stumbling.

This article is for informational purposes only. Readers should consult with a licensed financial advisor before making investment decisions.