Latham Group, Inc. (SWIM): 5 FORCES Analysis [Nov-2025 Updated]

You're assessing Latham Group, Inc. right now, and the picture is complex: they are pushing for margin expansion, guiding for $550 million in net sales for 2025, all while the U.S. new pool market feels decidedly soft. Honestly, even as the number one player in every subcategory, you have to watch the forces pushing back, like the high bargaining power of customers making big, discretionary purchases, and the price swings in key raw materials like resin. Still, their fiberglass dominance is chipping away at the primary substitute, concrete pools, and their manufacturing footprint creates a serious barrier to new competition. I've mapped out the full five forces analysis below so you can see precisely where the near-term risks and advantages lie for Latham Group, Inc. as they aim for that $95 million Adjusted EBITDA midpoint.

Latham Group, Inc. (SWIM) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the supplier side of the equation for Latham Group, Inc. (SWIM), and honestly, raw material costs are always a key lever for manufacturers. The primary input, resin, is a commodity, so you know its price is subject to volatility and supply chain hiccups. Still, Latham Group has taken concrete steps to keep supplier power in check, which you can see reflected in their recent margin performance.

The company has actively worked to limit exposure to any single source. For instance, in the context of trade policy impacts, management noted they have 'completely diversified our supplier base' over the years. Also, they rely on proactive inventory management to buffer against sudden price spikes or shortages.

Here's a quick look at how they manage the import risk associated with raw materials:

• Imports account for about 15% to 20% of total raw materials used.
• This relatively low percentage limits the overall impact of tariff uncertainty.
• Mitigation includes strategic pre-purchasing and operational adjustments.
• One specific tariff exposure of about $20 million was noted, with $10 million covered by operational shifts and the other $10 million by price increases.

The success of these operational and procurement strategies is clearly visible in the income statement. Lean manufacturing and value engineering initiatives have been major drivers in offsetting input cost pressures. For the nine months ended September 27, 2025, this focus translated directly to the bottom line.

The financial impact of these internal efficiencies is quite clear when you look at the gross margin:

You can see that the 320-basis point gross margin expansion for the first nine months of 2025 was directly attributed to production efficiencies from their lean manufacturing and value engineering initiatives, alongside higher volumes. This margin improvement helped cover cost increases, including tariff-related inflation; for example, a June price increase was implemented to cover an estimated $10 million in tariff exposure. Finance: draft 13-week cash view by Friday.

Latham Group, Inc. (SWIM) - Porter's Five Forces: Bargaining power of customers

You're analyzing the customer side of the equation for Latham Group, Inc. (SWIM), and the reality is that the end-user holds significant sway because a new pool installation is a major, highly discretionary consumer purchase. This means consumers can easily defer the decision when economic uncertainty rises.

The overall U.S. new pool market environment in late 2025 suggests this discretionary spending is being tested. We see this in the market outlook, which is not exactly booming right now. Here are the market conditions Latham is navigating:

• U.S. new pool starts for 2025 are expected to be flat to slightly down compared to 2024.
• The total U.S. swimming pool construction market size is valued at $16.5 billion in 2025.
• Latham Group is guiding for approximately 60,000 new pool installations in the US for 2025.

The power of the customer is further shaped by the product choice, particularly the shift toward fiberglass, which is a key area where Latham is trying to gain leverage. Fiberglass pools represent about 75% of Latham Group's in-ground pool sales for the full year 2025. This preference is driven by the total cost of ownership, as fiberglass offers lower long-term costs compared to traditional concrete options.

Here's a quick look at the cost comparison that influences customer choice:

Still, the customer's ability to switch is somewhat constrained by the distribution channel itself. Latham Group's extensive, committed dealer network creates high switching costs for those dealers, which indirectly stabilizes the supply chain and limits the immediate options for a consumer looking to switch manufacturers mid-process. As of 2023, Latham had approximately 300 fiberglass grand dealers who sold at least 5 pools. This network strength, built through commitment and proprietary tools like the Measure by Latham system, helps Latham maintain its position even when the end-consumer market is flat.

Latham Group, Inc. (SWIM) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for Latham Group, Inc. (SWIM) as of late 2025, and the rivalry force is definitely showing some friction. Honestly, the industry environment is what's driving the intensity here; management noted they expect 2025 new U.S. pool starts to be flat to slightly down compared to 2024. This soft demand backdrop means that even though Latham Group is guiding for 7% year-over-year net sales growth at the midpoint for FY 2025, reaching $540 million to $550 million in net sales, it's an outperformance against a sluggish market.

The pressure is real because major players like Pentair and Pool Corporation operate in the same space. In a downturn, you have to assume these large competitors have the scale to aggressively undercut pricing to maintain volume, which puts direct pressure on Latham Group's margins, even with their recent success in mitigating tariffs. Still, Latham Group is projecting strong profitability growth despite this, guiding for an Adjusted EBITDA range of $92 million to $98 million for FY 2025, a refinement from the initial $90 million to $100 million range. The midpoint of that initial guidance was $95 million. To give you a sense of current momentum, Q3 2025 Adjusted EBITDA hit $38.3 million, achieving a 23.7% margin for that quarter.

Here's a quick look at how Latham Group's guidance stacks up against the broader market expectation, which helps frame the competitive fight they are winning:

Latham Group's defense against this rivalry centers on its dominant position, which is a significant barrier to entry for others. They are not just participating; they are leading across the board, which is a powerful negotiating tool when demand softens.

• Latham Group holds the #1 market position in North America in every product category it competes in.
• Fiberglass pools are expected to account for approximately 24% of total U.S. in-ground pool sales in 2025.
• Fiberglass pools represented approximately 75% of Latham's in-ground pool sales in 2024.
• Covers and Liners sales growth in Q3 2025 was up 15% and 13% year-on-year, respectively.
• Top ten dealer/distributor relationships accounted for 42.8% of net sales in 2024.

The company is betting that its leadership in faster-growing segments, like fiberglass pools, allows it to take share even when the overall market isn't expanding. That's the core of their strategy to manage this intense rivalry. Finance: finalize the competitive pricing analysis against Pentair's latest product catalog by next Wednesday.

Latham Group, Inc. (SWIM) - Porter's Five Forces: Threat of substitutes

Concrete (gunite) pools remain the primary substitute for the in-ground pool market where Latham Group, Inc. (SWIM) focuses its fiberglass offerings. However, the trend clearly favors fiberglass due to its installation efficiency. Fiberglass pool installation is significantly faster, often completed in just 2-3 weeks or a few weeks total, compared to the 3-5 months or longer required for concrete pools, which are highly susceptible to weather-related construction delays. This faster, less labor-intensive installation process is a major driver of share shift.

The market data reflects this shift in consumer preference toward faster installation and lower long-term commitment. Nationally, management estimates suggest fiberglass pools captured 23% of the total U.S. in-ground pool market in 2024, up from 22% in 2023. Latham Group, Inc. itself is leaning heavily into this, with fiberglass pools tracking to account for approximately 75% of its full-year 2025 in-ground pool sales, and the company projects fiberglass will reach 24% of total U.S. in-ground pool sales in 2025. To put Latham's performance in context, their in-ground pool sales only increased modestly, up just under 1% year-over-year in Q3 2025, while U.S. in-ground pool starts were down approximately 15% in 2024, showing Latham is gaining share against concrete starts.

The value proposition for fiberglass against concrete is cemented by lower long-term maintenance costs. While concrete offers superior customization, the ongoing expense and labor associated with its porous surface create a significant financial drag over the pool's life. Here's the quick math on the total ownership cost difference over a decade:

The difference in required upkeep is stark. Concrete pools demand regular professional attention, including acid washing every 3-5 years and eventual resurfacing. Fiberglass pools, with their smooth, non-porous gel coat, resist algae and require far less hands-on work. The average annual maintenance cost for a fiberglass pool is cited around $400.

Beyond direct pool competition, Latham Group, Inc. must contend with the broader consumer capital allocation decisions within the home improvement and leisure sectors. Homeowners are choosing between a new pool and other large discretionary projects. For 2025, annual U.S. expenditures for improvements and maintenance to owner-occupied homes are projected to grow by a modest 1.2%, reaching a total market size of $509 billion. This pool of capital is finite, and it competes with other leisure spending, though the home improvement sector is still substantial compared to its pre-pandemic levels, having topped out at $490 billion in Q3 2023. It's important to note that the top 20% of income earners account for roughly 50% of all home improvement spending, meaning the target demographic for a high-cost item like an in-ground pool is concentrated among higher-income households.

A significantly lower-cost substitute option comes from above-ground pools, which compete for budget-conscious consumers or those seeking a quicker, less permanent solution. The market for these substitutes is also growing, projected to reach $3.12 billion in 2025 from $2.97 billion in 2024, showing a 5.0% Compound Annual Growth Rate (CAGR).

• Above-ground pool average cost: typically ranges from $1,500 to $5,000.
• Above-ground pool market size 2025 projection: $3.12 billion.
• Above-ground pool market CAGR (2024-2025): 5.0%.
• Steel pools remain the largest segment by market share due to durability and cost-effectiveness.
• The primary driver for this segment is the demand for affordable leisure options.

Still, the growth in the above-ground market is fueled by the same trends Latham targets: DIY home improvement and the desire for outdoor recreational space. If onboarding takes 14+ days, churn risk rises, and this principle applies to the entire pool installation process, which is why fiberglass's speed is so critical against both concrete and the low-cost above-ground options.

Latham Group, Inc. (SWIM) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Latham Group, Inc. remains low, primarily because the industry demands significant upfront investment and established infrastructure to compete effectively.

The capital required for manufacturing and logistics acts as a substantial barrier. For instance, Latham Group revised its capital expenditure estimate for fiscal year 2025 to a range of $22-$24 million to support its operations and growth initiatives. This level of sustained capital deployment for manufacturing capacity, technology, and ERP infrastructure is not easily matched by a startup. To put this in perspective, this 2025 CapEx guidance translates to approximately 4.2% of expected sales for the year.

Latham Group possesses the industry's largest manufacturing footprint, which is a clear advantage in scale and distribution reach. The company operates a coast-to-coast platform consisting of approximately 30 facilities. This physical presence spans key markets, as Latham Group is the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand.

The established, extensive dealer and contractor network presents another significant hurdle for any potential new entrant. Latham Group leverages this network to drive sales and adoption of its products. The acquisition of Coverstar Central in August 2024, for example, provided immediate access to over 400 pool builders and dealers within that specific network. A new company would need years to cultivate a comparable level of trust and distribution depth across various regions.

Proprietary technology creates a competitive moat, making it difficult for new players to match the efficiency Latham Group offers its partners. The Measure by Latham Pools system, an AI-powered measurement tool, is a prime example. This system, which utilizes HD camera and LiDAR laser technology, allows a single technician to measure an entire pool perimeter and features in under 30 minutes. This speed is up to 3x faster than traditional methods, streamlining the quoting and ordering process for dealers through the Builder Management Portal.

Here is a snapshot of the scale and investment that new entrants would need to consider:

The technological advantage is further cemented by the system's continuous improvement capabilities, as Measure is equipped with over-air firmware updates to enhance features over time. New entrants would face the challenge of developing comparable, integrated digital solutions while simultaneously building physical capacity.

Key barriers to entry for new competitors include:

• High initial capital outlay for manufacturing.
• Need to establish a large, multi-national manufacturing footprint.
• Time required to build a deep, trusted dealer/contractor network.
• Cost and time to develop proprietary, efficiency-driving technology like Measure.