UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Commission File Number: 001-39667 LESLIE'S, INC. ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 3, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Delaware 20-8397425 (State or other jurisdiction of incorporation or organization) 2005 East Indian School Road Phoe ...

Financial Data and Key Metrics Changes - Net sales for Q1 2026 were $147.1 million, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and $1 million from closed stores [16][17] - Gross profit margin decreased to 18.4% from 27.2% in the prior year, with approximately 430 basis points of this decline due to a non-cash impairment charge on inventory from closed stores [18] - Net loss for Q1 2026 was $83 million, compared to a net loss of $44.6 million in Q1 2025, with an adjusted net loss of $48.7 million versus $40.7 million in the prior year [19][20] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [17] - The company closed 80 underperforming stores, which is expected to have an annual sales impact of approximately $25 million-$35 million but will yield an annualized net EBITDA improvement of $4 million-$10 million once fully completed [9][22] Market Data and Key Metrics Changes - The company is seeing positive comparable store sales momentum in January 2026, indicating a potential recovery as it approaches the pool season [4][39] - The pricing transformation initiative aims to improve customer pricing on key items, addressing previous misalignments with market pricing [4][5] Company Strategy and Development Direction - The company is committed to becoming America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][14] - A new integrated marketing campaign, "New Low Prices, Same Great Quality," is set to launch, aimed at driving traffic and increasing customer loyalty [5][28] - The restructuring of the field organization into a market leadership model is intended to enhance customer relationships and drive transaction growth [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the progress of transformation initiatives, reaffirming full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][25] - The company anticipates generating the majority of sales and earnings in the second half of the year due to the seasonal nature of the business [25] Other Important Information - Inventory at the end of Q1 2026 was $210 million, a 23% reduction year-over-year, due to inventory optimization initiatives and store closures [20][21] - The company is focused on disciplined inventory management and has implemented a SKU rationalization initiative to eliminate over 2,000 SKUs, expected to generate $4 million-$5 million in incremental EBITDA savings [12][24] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and transitioning to a more consistent pricing strategy centered around everyday value, which is expected to limit gross margin reductions [31][33] Question: Positive momentum in January and its implications - Management noted that while there is a healthier base, the positive comparable store sales in January are encouraging, and they are optimistic about the upcoming pool season [38][39] Question: Insights on basket-building during pricing pilot - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to the new pricing strategy [44][45] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center footprints to enhance service to pool owners, while also identifying opportunities for expansion in new markets [49][50]

Financial Data and Key Metrics Changes - Net sales for Q1 2026 were $147.1 million, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and a $1 million impact from closed stores [16][17] - Gross profit margin decreased to 18.4% from 27.2% year-over-year, with a significant portion of the decline due to a non-cash impairment charge related to closed stores and lower margins on core chemicals [18] - Net loss for Q1 2026 was $83 million, compared to a net loss of $44.6 million in Q1 2025, while adjusted net loss was $48.7 million, up from $40.7 million [19][20] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [17] - The company closed 80 underperforming stores, which is expected to have an annual sales impact of approximately $25 million-$35 million but will yield an annualized net EBITDA improvement of $4 million-$10 million once fully completed [9][23] Market Data and Key Metrics Changes - The company is seeing positive comparable store sales momentum in January 2026, indicating a potential recovery as it approaches the pool season [4][40] - The pricing transformation initiative aims to improve customer pricing on key items, addressing previous misalignments with market pricing [4][5] Company Strategy and Development Direction - The company is committed to becoming America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][14] - A comprehensive transformation plan is underway, including a pricing strategy aimed at driving traffic and increasing customer loyalty [5][12] - The company is optimizing its distribution network and has closed its Denver warehouse, which is expected to reduce costs while maintaining service levels [10][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the progress of transformation initiatives, reaffirming full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][26] - The company anticipates generating the majority of its sales and earnings in the second half of the year due to the seasonal nature of the business [26][27] Other Important Information - Inventory at the end of Q1 2026 was $210 million, a 23% reduction year-over-year, attributed to inventory optimization initiatives and store closures [20][21] - The company is focused on disciplined inventory management and has implemented a SKU rationalization initiative to eliminate over 2,000 SKUs, expected to generate $4 million-$5 million in incremental EBITDA savings [12][25] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and changing promotional strategies to enhance competitiveness and customer traffic [33][34] Question: Positive momentum in January and its implications - Management noted that while there is a healthier base post-store closures, January's positive sales momentum is encouraging ahead of the pool season [40] Question: Insights on basket-building during pricing pilot - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to new pricing strategies [45][46] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center locations to enhance service to pool owners, while also identifying opportunities for future expansion [49][51]

Financial Data and Key Metrics Changes - The company reported net sales of $147.1 million for Q1 2026, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and approximately $1 million from closed stores [14][15] - Gross profit margin decreased to 18.4% from 27.2% in the prior year, with a significant portion of the decline due to a non-cash impairment charge related to closed stores and lower margins on core chemicals [15][16] - The net loss for Q1 was $83 million, compared to a net loss of $44.6 million in the same period last year, while adjusted net loss was $48.7 million, up from $40.7 million [17][18] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [15] - The company experienced a net loss of 160,000 residential customers in the previous fiscal year, primarily due to customer churn [4][6] Market Data and Key Metrics Changes - The company is implementing a pricing transformation initiative to improve pricing competitiveness, which is expected to drive traffic and increase conversion rates [4][5] - The company is focusing on re-engaging lapsed customers as a significant growth opportunity [6][7] Company Strategy and Development Direction - The company aims to become America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][12] - A comprehensive transformation plan is underway, including store optimization, pricing strategy adjustments, and enhanced marketing efforts [3][10][12] - The company plans to close 80 underperforming stores, which is expected to yield an annualized net EBITDA improvement of $4 million-$10 million [8][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the upcoming pool season, supported by positive comparable store sales in January and a strategic pricing initiative [4][26] - The company reaffirmed its full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][24] Other Important Information - The company has streamlined its distribution network, closing a warehouse to reduce costs and improve service levels [9][10] - A significant SKU rationalization initiative is in progress, aiming to eliminate over 2,000 SKUs to enhance inventory efficiency [11][23] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and transitioning to a more consistent pricing strategy focused on everyday value, which is expected to limit gross margin reductions [30][31] Question: Positive momentum in January and February - Management noted that while January showed positive comparable store sales, February's performance was mixed, with optimism for the upcoming pool season due to new pricing strategies [36][37] Question: Insights on basket-building and customer recapture - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to the new pricing strategies [42][43] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center locations to enhance service speed and convenience, while also identifying opportunities for future expansion [46][48]

Core Insights - Leslie's, Inc. reported financial results for the fiscal first quarter 2026, with sales of $147.1 million, a decrease of 16.0% from $175.2 million in the prior year period, and a net loss of $83.0 million compared to a net loss of $44.6 million in the prior year [2][6][26]. Financial Performance - Sales decreased by 16.0% year-over-year to $147.1 million, with comparable sales down 15.5% [6][26]. - Gross profit fell to $27.1 million, a decrease of 43.3% from $47.7 million in the prior year, leading to a gross margin decline to 18.4% from 27.2% [6][26]. - The company incurred a non-cash impairment charge of $10.1 million related to the closure of 80 underperforming stores and one distribution center [6][26]. - Adjusted EBITDA decreased to $(40.3) million compared to $(29.3) million in the prior year [6][28]. Strategic Initiatives - The CEO highlighted a strategic pricing transformation aimed at value pricing, supported by a new marketing campaign launching for the pool season [3]. - The company is focused on four strategic pillars: customer centricity, convenience, asset utilization, and cost optimization to drive future growth [3]. Operational Changes - The company closed 80 underperforming stores during Q1 2026 to optimize its operations [1][6]. - Inventory efficiency improved with a reduction of approximately 23% year-over-year, totaling $210.0 million as of January 3, 2026 [6][28]. Future Outlook - Leslie's reiterated its full-year guidance for fiscal 2026, expecting sales between $1,100 million and $1,250 million and adjusted EBITDA between $55 million and $75 million [8][9]. - The company anticipates generating the majority of its sales and earnings during the second half of the year due to the seasonal nature of the pool care industry [8].

Company Overview - Leslie's, Inc. is the largest and most trusted direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals nationwide [3] - Founded in 1963, the company operates over 1,000 physical locations and a robust digital platform, providing an extensive and largely exclusive assortment of essential pool and spa care products [3] - Leslie's aims to empower consumers with knowledge, products, and solutions necessary for maintaining and enjoying their pools and spas [3] Financial Results Announcement - The company will release its first quarter 2026 financial results after market close on February 17, 2026 [1] - A conference call will be held at 5:00 p.m. Eastern time on the same day to discuss the financial results and progress on strategic transformation initiatives [2] - A live webcast of the conference call will be available online, with a replay accessible for 180 days on the company's Investor Relations website [2]

Core Insights - Leslie's, Inc. has appointed John Hartmann as an independent director to its Board of Directors, effective January 7, 2026 [1] - The Board will expand from eight to nine members with Hartmann's addition, and he will stand for election at the Company's 2026 Annual Meeting of the Shareholders [2] Company Overview - Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [5] - The company operates approximately 950 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [5] Leadership Experience - John Hartmann brings nearly 25 years of retail leadership experience, having successfully executed turnarounds as a C-suite executive in various industries [2][3] - His previous roles include CEO of Ascend Wellness Holdings, COO of Bed Bath & Beyond, and CEO of True Value, among others [3][4] Board Contributions - Hartmann's expertise in leading large-scale transformations and modernization initiatives is expected to be a valuable asset to Leslie's Board and management team [3] - He currently serves on the board of Boyd Group Services and has held positions on several other boards, enhancing his governance experience [4]

Financial Performance - The company experienced a decline in sales and profitability starting from the fiscal year ending September 30, 2023, through the fiscal year ending October 4, 2025[133]. - For the year ended October 4, 2025, Leslie's, Inc. reported a net loss of $236.97 million, compared to a net income of $27.24 million for the year ended September 30, 2023[346]. - Sales for the year ended October 4, 2025, were $1.24 billion, down from $1.33 billion in the prior year, representing a decline of about 6.6%[340]. - The company recorded an impairment loss of $180.7 million in the fourth quarter, significantly impacting the operating income, which resulted in an operating loss of $169.9 million for the year[340]. - The stockholders' deficit increased to $408 million as of October 4, 2025, compared to $177.1 million the previous year, reflecting a worsening financial position[337]. - Net cash provided by operating activities decreased significantly to $8.82 million from $107.47 million in the previous year[346]. - The company incurred impairments totaling $183.83 million during the fiscal year, indicating potential asset value concerns[346]. Market and Economic Risks - The company faces significant risks related to achieving comparable sales growth, which could materially impact profitability and performance[94]. - Macroeconomic and geopolitical developments, including public health crises and supply chain disruptions, may adversely affect financial and operating performance[79]. - Economic conditions, including consumer discretionary spending, unemployment rates, and access to credit, directly affect demand for pool and spa products[110]. - The company faces risks from potential tightening of credit markets, which could limit consumer financing for pool and spa projects, negatively affecting sales[111]. - Recent changes in U.S. trade policies, including tariff exchanges with China, have disrupted supply chains and increased costs, potentially affecting customer spending patterns[145]. - Disruptions from natural disasters, geopolitical events, and economic crises could negatively impact demand for products and disrupt supply chains[104]. Competition and Market Position - The company operates in a highly competitive and fragmented aftermarket pool and spa care industry, facing significant competition from online platforms, mass merchants, and independent retailers[105]. - Competition from mass-market retailers like Walmart and Costco, as well as online retailers like Amazon, poses a significant threat to the company's market share[108]. - The company must manage competitive pressures and pricing strategies to maintain operating margins amid economic uncertainties[94]. Operational Challenges - Inventory management is critical; misalignment with consumer demand could lead to excess inventory or lost sales, adversely affecting financial performance[98]. - The company faces risks related to the cost of raw materials, particularly granular chlorine compounds, which could increase the cost of goods sold and negatively impact financial results[146]. - The company may incur significant costs associated with the closure of underperforming locations, including impairment charges and inventory write-offs[135]. - The company may face challenges in effectively managing product inventory, which could harm profitability and long-term growth prospects[150]. - The company relies on a network of suppliers for product inventory, and disruptions in supply could adversely affect profitability and operating results[144]. Human Resources and Compliance - The company is significantly dependent on attracting and retaining qualified personnel to maintain operations and customer service quality[101]. - Legal proceedings may pose material risks, with potential liabilities that could impact financial results[103]. - The company faces risks related to compliance with various governmental regulations, which could increase operating costs and divert management's attention[157]. - The company may incur significant legal fees and expenses due to product liability claims, which could adversely affect its financial condition[155]. Financial Management and Debt - The company has total borrowings of $756.7 million under its Credit Facilities as of December 5, 2025[168]. - The company's credit rating has been downgraded, impacting its ability to access capital markets and increasing borrowing costs[169]. - The company’s ability to generate sufficient cash flow to service its debt obligations is uncertain, which may require refinancing or asset sales[171]. - The company has pledged substantially all of its assets as collateral to secure its Credit Facilities, which could limit operational flexibility[175]. Seasonal and Environmental Factors - Seasonal fluctuations significantly impact sales, with a greater percentage of revenues generated during the warm months of April through September[114]. - The company is susceptible to adverse weather conditions, which can reduce chemical consumption and consumer purchases during peak sales seasons[117]. - The demand for pool chemicals may decline if consumer attitudes shift towards environmental or safety concerns, impacting sales[113]. - Changes in consumer preferences, particularly a shift from DIY to DIFM (Do It For Me) services, could impact demand for pool and spa care products[132]. Internal Controls and Governance - The company has identified material weaknesses in its internal control over financial reporting, which could affect the accuracy and timeliness of financial results[199]. - Remediation of identified material weaknesses is ongoing, but completion does not guarantee continued effectiveness of controls[203]. - The company may incur increased costs due to compliance with public company responsibilities and corporate governance practices[196]. - The company has faced potential delisting from Nasdaq due to non-compliance with the minimum bid price requirement, but has regained compliance[197][198]. Asset Management - As of October 4, 2025, Leslie's, Inc. reported total assets of $741.5 million, a decrease from $1.05 billion as of September 28, 2024, reflecting a decline of approximately 29.4%[337]. - The company recorded a goodwill impairment of $180.7 million during fiscal 2025, with no impairments in fiscal 2024 and 2023[382]. - The company has 9,290,311 shares of common stock outstanding, all eligible for resale, which could impact stock price if significant stockholders sell[185]. - The company executed a reverse stock split at a ratio of 1-for-20, effective September 29, 2025, to adjust its share structure[350].

Core Viewpoint - Leslie's, Inc. reported mixed financial results for the fourth quarter, with earnings significantly below analyst expectations but sales exceeding estimates [1][2]. Financial Performance - The company reported quarterly earnings of $0.09 per share, compared to the analyst consensus estimate of $1.29 per share [1]. - Quarterly sales reached $389.206 million, surpassing the analyst consensus estimate of $370.635 million [1]. Future Outlook - Leslie's projects FY2026 sales between $1.100 billion and $1.250 billion, which is below market estimates of $1.219 billion [1]. Operational Changes - The CEO announced the closure of 80-90 underperforming stores and one distribution center to improve operations and financial recovery [2]. - The company aims to reduce inventory by 10% year over year and achieve direct cost reductions of $7 million to $12 million, which will be reinvested into customer value [2]. Stock Performance - Following the earnings announcement, Leslie's shares fell by 14.3%, trading at $3.07 [2]. Analyst Ratings - Baird analyst Peter Benedict maintained a Neutral rating on Leslie's and lowered the price target from $6.50 to $3 [5]. - Mizuho analyst David Bellinger also maintained a Neutral rating, cutting the price target from $5 to $4 [5].

Core Insights - Leslie's, Inc. reported mixed fourth-quarter financial results, with earnings of $0.09 per share, significantly below the analyst consensus estimate of $1.29 per share, while quarterly sales of $389.206 million exceeded the consensus estimate of $370.635 million [1] - The company anticipates FY2026 sales between $1.100 billion and $1.250 billion, which is lower than market estimates of $1.219 billion [1] Financial Performance - Fourth-quarter sales and adjusted EBITDA were above the high end of previously established guidance [2] - The company plans to close 80-90 underperforming stores and one distribution center to improve operations and financial recovery [2] - Leslie's aims to reduce inventory by 10% year over year and achieve direct cost reductions of $7 million to $12 million, which will be reinvested into customer price value [2] Market Reaction - Following the earnings announcement, Leslie's shares fell by 14.3%, trading at $3.07 [2] - Analysts have adjusted their price targets for Leslie's stock, with Baird lowering it from $6.5 to $3 and Mizuho from $5 to $4, both maintaining a Neutral rating [5]