Peter Arvan
President and Chief Executive Officer at Pool
Thank you, Melanie, and good morning to everyone on the call. For the full year 2023, we generated over $5.5 billion in revenue, the second largest in company history, and over $2 billion higher than 2019, a year with a similar number of new pools constructed and the last year and before the pandemic. We generated $747 million in operating income, more than double our operating income in 2019, an operating margin of 13.5%, a 280 basis point expansion above 2019 operating margin.
These results highlight the larger installed base available for us to serve post pandemic and our ability to fulfill our customers maintenance, remodel, and renovation and new construction product needs. Even in a challenging environment our customer service outshined our competitors through our powerful distribution network, the largest, most integrated in the pool industry, and we continue to make wise investments to promote our future growth. We were up against tremendous comps throughout most of the year, yet the team at all levels worked extremely hard to deliver very solid results.
The year began with us lapping 33% sales growth in the first quarter of 2022 over 2021. Sales declined 15% in the first quarter of 2023 compared to 2022 amidst unusually poor weather conditions in key year round markets. Delayed pool openings in many of our seasonal markets followed, and higher than normal inventory levels across the industry contributed to an abnormal selling environment during the first half of the year. Macroeconomic constraints and uncertainties, primarily in the form of elevated and escalating interest rates and recent inflation, resulted in new pool units declining from 98,000 units in 2022 to an estimated 70,000 to 75,000 units in 2023, or 25% to 30% decline.
These evolving external factors made it extremely difficult to forecast underlying demand at the start of the year. As 2023 progressed, clarity around the market improved and we adapted accordingly. We focused on specific customer needs and opportunities, particularly those related to maintaining the ever growing 5.4 million swimming pools in the installed base. Given our broad reach, unmatched capabilities, it is in situations like this that our team shines. We continue to invest in expanding our footprint and in technology tools that improve our customers ability to grow their business and be more productive.
We continued our focus on customer experience and being the best channel to market for our suppliers. These efforts combined allowed us to continue growing our share and outperforming the industry. Our disciplined execution enabled us to generate $888 million in operating cash flow in 2023, a company record. This result positively demonstrates our working capital management capabilities, capital capacity, and insightful and opportune investments in inventory. Now I'd like to recap our full year and fourth quarter results.
Total sales for the year came in at $5.5 billion, which was down 10% from the record of 2022 and in line with our third quarter guidance. For the fourth quarter of 2023, total sales came in at $1 billion, compared to $1.1 billion in the fourth quarter of 2022, or down 8%. Geographically, the sales declines were fairly consistent in three of our major markets and improved sequentially as the year progressed. For the full year and the fourth quarter, we saw sales in California come in at -12% and 8% respectively. In Texas, sales were consistent and down 10% in both periods. Arizona experienced similar results as we recorded sales down 9% for the full year and down 8% for the quarter. Florida performed a bit better for the full year at down -5% but declined 12% in the fourth quarter of 2023 against very strong comps of 20% to 22%[phonetic] growth in the fourth quarter of 2022.
For the full year and the fourth quarter, our sales declined 9% and 10% in our year round markets and 13% and 7% in our seasonal markets, showing improvement in the season and most of our year round markets as the year progressed. For perspective, in 2022 our seasonal markets were up 8% for the year and up 15% in our year round markets. I will now provide some color on our key product category sales compared to the full year and fourth quarter of last year. Chemical sales were down 1.5% for the year but up 1% for the fourth quarter. Considering the significant trichlor deflation that hit during the 2023 pool season and the softer start to the year in the first quarter, driven by excess inventory in the channel and the challenging weather pattern, we considered the full year results of down only 1.5% a clear indication of us further expanding our share in this critical maintenance category.
We believe the significant price volatility exhibited from 2021 to 2023 will be behind us after we pass the first quarter of 2024 and that excess channel inventory has normalized. As it relates to our chemical supply initiatives. We made great progress on expanding our usage of Suncoast chemical packaging facility that we acquired as part of the Porpoise acquisition. In 2023, our teams more than tripled the amount of chemicals produced and sourced from this strategic and very capable facility compared to 2022. These actions not only improve our surety of supply, but also improve our profitability.
Building material sales declined 9% for the full year and 8% in the fourth quarter. Considering that new pool construction was down an estimated 25% to 30% and that renovation and remodel was down around 12%, we are quite pleased with how the team performed in this highly profitable product group. Our proprietary NPT branded products, expanded building material offering and convenient nationwide sales center and design center network remain the go to source for discerning pool owners and our outstanding dealer base. No one has a more complete product offering or more capable team that caters to the best builders and remodelers in the industry.
We look towards the equipment pad. Equipment sales decreased 9% for both the year and for the fourth quarter, demonstrating the resilience of the maintenance related equipment demand and our best in class customer service despite lower new pool construction activity in 2023. Demand for heaters and cleaners, the most discretionary product within the equipment category, saw continued headwinds as we cycled through the demand that was pulled forward during the pandemic and cautious consumer spending on more discretionary pool item purchases. We remain confident that the ever increasing install base of the pools and the need to modernize the older equipment pads and the desire to move towards the connected backyard will present many years of incremental growth opportunities going forward.
Turning to end markets our commercial business continued to grow at 9% for the full year and 5% for the fourth quarter. The growth in 2023 is on top of 27% growth for both the full year and the fourth quarter of 2020. We continue to invest in resources to expand our reach in the commercial pool market. In 2023 this investment included acquiring a commercial products wholesale distribution company, furthering our competitive efforts to serve the commercial pool market's new construction and install base equipment needs and utilize our expansive distribution infrastructure to service commercial pool operators.
We continue gaining wholesale distribution market share in this growing specialty area of the pool industry. Sales to our independent retail customers declined 11% for the full year and 8% in the fourth quarter. Unfavorable weather resulting in less chemical and maintenance needs and supply normalization affected our sales to independent retailers in the first half of 2023. We have a high concentration of retailers that operate in seasonal markets that were adversely impacted by the late start to the year. Additionally, this category is heavily impacted by products like cleaners, above-ground pools, and spas, which are all returning to pre pandemic levels.
Keep in mind this represents the sell to the retail channel. Retail sales by our independent Pinch A Penny retail stores, which are highly concentrated in Florida and Texas and represent sell through the retail channel, increased 3% for the full year in 2023 compared to 2022 and declined 4% in the fourth quarter. We are pleased with this result given the dynamic market and the tough comps we had. For reference, Pinch A Penny grew 17% in both the fourth quarter and the full year of 2022. Turning to Europe, as we previously reported, following record results, in 2021, Europe sales declined 15% in 2022 under the backdrop of the war affecting Eastern Europe, resulting in rapidly escalating energy costs and an economic slowdown in customer or consumer caution.
In 2023, European sales declined 11% in local currency for the full year and 7% in the fourth quarter. We began to see some signs of inflection towards the end of the swimming pool season and believe our long term growth opportunity in Europe remained strong. Keep in mind, this market makes up about 4% of our total revenue. For horizon net sales declined 4% through both the full year and the fourth quarter throughout 2023, stronger sales from commercial irrigation projects buffered weaker residential market sales. We continue to focus on expanding our reach, primarily through the Sunbelt and through greenfield expansion in growing markets, and on leveraging our distribution operating model to support the long term growth opportunities within the irrigation landscape and equipment needs.
Now, let me talk a little about gross margins. Our gross margins finished at 30% for the full year, consistent with our recent guidance and long term expectations. We are proud of this accomplishment, which highlights our capabilities on supply chain optimization, our growing portfolio of private label products and value-added pricing initiatives. For the fourth quarter of 2023, our gross margins improved 50 basis points to 29.3% compared to the fourth quarter of 2022. Melanie will provide more details on gross margins in her prepared remarks. Operating expenses reflected a 0.6% increase in 2023 in line with our previous guidance.
Despite the cyclical sales trends, we continued investing in our talent and on our employer of choice initiatives to make sure that we retained the best team in the industry and continued to separate ourselves from the competition. Additionally, we continued opening new locations, conducting customer facing events and training, and expanded capacity at our chemical packaging facility. In 2023, we opened 14 new locations and added five locations through acquisition, bringing our total count to almost 440 sales centers. We also expanded our Pinch A Penny distribution capabilities. Our Pinch A Penny franchise network added 15 new stores, over two times the number of stores added to the franchise network last year, which is the most stores that the franchise has ever added in a year.
Taking advantage of our synergies, we now serve the Pinch A Penny Texas stores through our localized distribution network. Our wide footprint and integrated distribution network opened the door for us to expand quickly throughout the Sunbelt. While we continue to invest in growth driven initiatives, we applied intense focus to controllable and variable expenses without compromising customer experience or service. Orders processed through our B2B POOL360 platform continued to grow in total lines, increasing 3% in 2023, growing from 11% of total lines in 2022% to 14% of total lines in 2023 or a nearly 30% increase in total lines.
We also increased total revenue dollars through the tool by 1% in 2023, showing sales through our digital tool growing faster -- growing at a rate faster than our overall net sales. These results demonstrate significant progress, particularly in this year's environment and the customers' benefit it provides. We have put significant time and effort into improving this critical user feature like products search, product information, and the overall user experience. With a renewed innovative approach to our customer facing solutions, we marched towards transforming POOL360 from a B2B tool to a complete customer facing digital ecosystem. Last year, we revamped the POOL360 ordering platform in 2023 building on our next generation POOL360 application, we launched our POOL360 water solution software and just last week launched our POOL360 service platform.
These are all incredible tools for our customers that will continue to gain traction for years to come. POOL360 Water provides best in class instore and mobile water analysis and offers solutions that help us grow our private label chemical products and improve brand awareness. Water testing from a variety of methods from liquid titration to digital are all fed into the tool, delivering a proprietary diagnosis and chemical dosage recommendation that will ensure a safe and healthy swimming pool. POOL360 Water allows all of our dealers to offer consistent, accurate advice to pool owners and operators while creating demand for our tremendous chemical offering.
This tool also has embedded in it a CRM that will help the stores provide an unparalleled customer experience. POOL360 Service designed for our service customers large and small, includes a CRM and applications to better manage their business through facilitating daily routes, quoting and securing one-time service requests, automating, invoicing and collections, enhancing electronic ordering and integrating procurement with their already established POOL360 account. Over the next few years, we plan to add more phases to this digital ecosystem to further add productivity and help our customers grow their business more quickly.
For all three platforms, customers can leverage our proprietary best in class digital marketing resources that will help them drive profitable growth for their business. Recognize we are in the early stages of customer adoption, but we see tremendous opportunity to help our retail and service customers expand their offering, provide unique professional services, and connect directly and easily to our products. Moving on, let me comment on our operating income performance. We recorded $747 million in operating income in 2023, down from a record $1 billion in 2022, but up $405 million from 2019. For the quarter, we recorded $79 million in operating income, a 26% decline from 2022 but over three times the operating income of the fourth quarter of 2019.
Operating margins for the full year of 2023 was 13.5% compared to a record 16.6% in 2022 and expanded 280 basis points from 2019, demonstrating our ability to leverage fixed costs and effectively manage variable expenses, generating enhanced operating margins while making growth oriented investments in our business. With 2023 behind us, let me comment on the future. I remain excited and very confident in the long term growth potential for our industry and specifically Pool corp. The growing and aging installed base drives 85% of our revenue through continual maintenance and periodic renovation and upgrading needs.
We will continue to do what we do best in serving the non discretionary maintenance needs which made up over 60% of our business in 2023. We expect slight growth from our maintenance product components in 2024 assuming normal weather conditions. Further, no one is better positioned to serve the pool professional considering our scale, industry leading talent, and digital platform and tools. For the DIY market we have added considerable capabilities to enhance our independent retail products and service offering and will continue to expand Pinch A Penny network to grow share in this important aftermarket and maintenance and repair category.
We expect inflationary increases to benefit our consolidated business again in 2024 with an estimated 2% to 3% added to our overall top line. We believe chemical pricing to have largely stabilized. Equipment pricing remains solid as expected and that we will see some fluctuations on commodities that make up a very small portion of our sales. New pool construction represented just under 15% of our business in 2023. Currently, we expect that new pool construction in units could be flattened down 10%. Although likely to reflect higher pool values, the number could vary broadly by market and geography. While the full impact of the interest rate hikes over the past couple of years and timing of future interest rate cuts remain uncertain, the long term outlook for outdoor living products growth remains strong.
As higher borrowing rates and recent inflation have increased the cost of building a swimming pool to approximately $80,000. We expect budget conscious consumers will likely stay on the sidelines and more affluent consumers seeking pools with enhanced features and products content will drive the mix of new pools towards the higher end again in 2024. Millennials are outpacing other generations seeking homes, and with the slowdown of existing home sales, new construction is making up for the housing shortage, creating new available backyards for swimming pools in the future, but at a slower rate than we have seen for the last several years.
We carefully watch this trend and consider it as part of our expansion strategy to ensure that we are located to effectively serve where the new pools will be. Automation and connected products remain a high priority for all and particularly for this generation, driving how we work with our vendor partners to provide the most efficient channel to market for introducing new technology enabled products. Renovation and remodel activity should be stable in most markets, with about 10% of the installed base contemplating a renovation on an annual basis. Surfaces wear out or in need of a more modern look. Equipment gets outdated and becomes uneconomical to operate, maintain, or repair. As we have discussed, we consider this market to be semi-discretionary, so larger R and R sales could potentially be flat to down 10% if higher interest rates persist, but this too will cycle with the economy and borrowing costs.
We consider this not an if market but a when market as all pools will need renovation periodically during their normal lifecycle. Considering these sales variables, we are estimating an EPS range for 2024 to be $13.10 to $14.10 on a per share basis, including an estimated $0.10 benefit from ASU. Melanie will provide additional comments on gross margin and expenses in her comments that will help you understand our view. We expect that cash flow from operating activities will be in line with net income and our capital allocation priorities remain unchanged. We will use our robust cash flow to invest in our operations, growth, and expansion. We will fund strategic acquisitions and with the approval of our board, continue to pay dividends and consider share repurchases while maintaining a prudent debt structure, ultimately providing exceptional returns to our shareholders.
Our competitive position has never been stronger. We remain approximately five times larger than our nearest competitor and have a history of being relentlessly focused on execution. This execution focus is further enhanced by a new spirit of innovation that will allow us to provide unmatched customer value and support which will enable us to continue gaining share. No doubt the rate of new pool construction has slowed. Consumers are more cautious today than in the last few years, but there is a desirability of pool ownership and outdoor living is strong and will get even stronger. It is imperative that we continue investing, that we continue our focus on the customer and on investments in the future to ensure we get stronger.
The demand environment will change as the economy changes and monetary policy evolves, but that impacts only the smaller portion of our business, which is one of the most unique things about the industry. Don't lose sight of the fact that this industry continuously grows upon itself and no other company is better positioned to weather the cycles and continuously improve. Like Pool corp. I am proud of the continued progress. I am proud of our continued progress as the clear leader of our industry and confident in our superior value proposition of which each of our 6000 plus employees work hard to improve each and every day.
In closing, I want to say thank you to the Pool corp team. As I reflect on this year, it has been a tough one, but because of you, we are a better and stronger company than ever. I also want to thank our supplier partners and most importantly, our customers for helping millions of people enjoy the benefits of healthy outdoor living and making the memories of lifetime. I will now turn the call over to Melanie Hart, our vice president of finance and chief financial officer for her detailed commentary.
