Core Insights - Leslie's, Inc. has launched a refreshed Pool Perks Rewards Program featuring loyalty tiers aimed at enhancing customer experience and engagement [1][2] - The program is designed to reward residential customers for their purchases while promoting customer centricity and convenience [2] Program Details - Members earn 1 point per dollar spent, qualify for free shipping, and can participate in local events and bonuses as they progress through the loyalty tiers [3] - Perks and Perks Elite members receive free shipping on orders over $75, with additional charges for oversized items and same-day delivery [4] - Members can start earning rewards by visiting local stores or signing up online [4] Membership Benefits - Perks Members earn a $1 reward for every 50 points, while Perks Elite Members earn a $5 bonus reward and a 25% off coupon upon becoming an Elite Member, earning $1 for every 33 points [6] - Perks MVP Members receive a $10 bonus reward and a 50% off coupon upon becoming an MVP Member, earning $1 for every 20 points [6] Company Overview - Founded in 1963, 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 over 1,000 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [5]

Financial Data and Key Metrics Changes - Sales for the second quarter were $177.1 million, down from $188.7 million in the prior year, reflecting a decline of 6% year over year [24] - Gross profit decreased to $43.9 million from $54.3 million, with gross margin dropping to 24.8% from 28.8% [24][25] - Adjusted EBITDA was reported at a loss of $36 million, aligning with guidance despite top-line softness [9][10] Business Line Data and Key Metrics Changes - Pro Pool sales were down 2%, while Residential Pool sales declined by 9%. Hot tub sales, however, increased by 4% year over year [8] - The conversion rate improved by 174 basis points year over year, with significant increases observed after water tests using proprietary technology [9][50] Market Data and Key Metrics Changes - The company experienced weaker foot traffic in February due to colder temperatures, impacting overall sales performance [8] - The introduction of Local Fulfillment Centers (LFCs) has begun to positively impact customer service and inventory management [10][11] Company Strategy and Development Direction - The company is focused on a transformation journey centered around customer centricity, convenience, and asset utilization, with a new pillar of cost optimization introduced [7][30] - Strategic initiatives include optimizing inventory, enhancing the Pro customer experience, and improving DIY omnichannel capabilities [10][14][15] - The launch of a new loyalty program, Pool Perks, aims to reward loyal customers and enhance engagement [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by weather conditions but expressed confidence in the team's ability to meet guidance for the remainder of the year [28][80] - The company is committed to reducing debt and improving working capital through inventory optimization and cost management strategies [26][30] Other Important Information - The company reduced inventory by 12% year over year, ending the quarter at $335.1 million [26] - A partnership with Uber for same-day delivery services is expected to enhance customer convenience and operational efficiency [22][75] Q&A Session Summary Question: Competitive landscape and comp sales performance - Management noted that weather impacted sales but expressed confidence in gaining market share, particularly in the Pro segment [35][39] Question: Pricing strategy related to tariffs - The company plans to implement pricing adjustments primarily to offset tariff impacts, which are estimated to be less than 1% of total sales [42][43] Question: Comp weakness and underlying fundamentals - Management indicated that weather was a significant factor in comp weakness, but improvements in conversion rates were encouraging [46][50] Question: Inventory purchases and defensive strategies - The company is focused on optimizing inventory while preparing for potential market challenges in the second half of 2025 [51][52] Question: Cost optimization and expense ratio - Management highlighted ongoing efforts to identify cost savings, particularly in indirect spend, while maintaining a focus on growth [56][58] Question: E-commerce and digitally initiated sales - The partnership with Uber was driven by customer demand for faster service, benefiting both Pro and DIY customers [72][74] Question: Top-line guidance and revenue seasonality - Management reiterated confidence in full-year sales outlook, emphasizing that a significant portion of sales is still expected in the upcoming months [79][81]

Financial Data and Key Metrics Changes - Sales for the second quarter were $177.1 million, down from $188.7 million in the prior year, reflecting a decline of 6% year over year [21][22] - Gross profit decreased to $43.9 million from $54.3 million, with gross margin dropping to 24.8% from 28.8% [21][22] - Adjusted EBITDA was reported at a loss of $36 million, consistent with guidance despite top-line softness [8][9] Business Line Data and Key Metrics Changes - Pro Pool sales were down 2%, while Residential Pool sales declined by 9%, and Hot Tub sales increased by 4% year over year [7] - Conversion rates improved by 174 basis points year over year, with significant increases observed after water tests using proprietary technology [8][46] Market Data and Key Metrics Changes - The company experienced weaker foot traffic in February due to colder temperatures, impacting overall sales performance [7][21] - The introduction of Local Fulfillment Centers (LFCs) has begun to positively impact customer service and inventory management [9][10] Company Strategy and Development Direction - The company is focused on a transformation journey centered around customer centricity, convenience, and asset utilization, with a new pillar of cost optimization introduced [6][14] - Strategic initiatives include optimizing inventory, enhancing the Pro customer experience, and improving DIY omnichannel capabilities [9][12][13] - The launch of a new loyalty program, Pool Perks, aims to reward loyal customers and enhance engagement [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by weather conditions but expressed confidence in the team's ability to meet guidance for the remainder of the year [25][29] - The company is committed to reducing debt and improving working capital through inventory optimization and cost management strategies [23][26] Other Important Information - The company reduced inventory by 12% year over year, ending the quarter at $335.1 million [23] - A partnership with Uber for same-day delivery services is set to launch, enhancing customer convenience [19][20] Q&A Session Summary Question: Competitive landscape and comp sales performance - Management noted that weather impacted sales but expressed confidence in gaining market share, particularly in the Pro segment [31][34] Question: Pricing strategy related to tariffs - The company plans to implement pricing increases only to offset tariff impacts, which are estimated to be less than 1% of total sales [39][40] Question: Comp weakness in Q2 - Management attributed comp weakness primarily to weather, but highlighted improvements in conversion rates as a positive sign for future performance [43][45] Question: Inventory purchases and defensive strategies - The company is focused on optimizing inventory while preparing for potential market challenges in the second half of 2025 [48][49] Question: Cost optimization and expense ratio - Management is identifying areas for cost savings, particularly in indirect procurement, and is focused on optimizing the entire asset base [53][56] Question: E-commerce and digitally initiated sales - The partnership with Uber for same-day delivery is aimed at enhancing customer convenience and reducing fulfillment costs [69][70]

Group 1 - Leslie's, Inc. reported a quarterly loss of $0.25 per share, slightly worse than the Zacks Consensus Estimate of a loss of $0.24, and a decline from a loss of $0.17 per share a year ago, indicating an earnings surprise of -4.17% [1] - The company posted revenues of $177.13 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.03%, and down from $188.66 million in the same quarter last year [2] - Leslie's shares have declined approximately 68.8% since the beginning of the year, contrasting with the S&P 500's decline of -4.3% [3] Group 2 - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The trend of estimate revisions for Leslie's is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the shares are expected to perform in line with the market in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $0.36 on revenues of $570.02 million, and for the current fiscal year, it is $0.03 on revenues of $1.34 billion [7] Group 3 - The outlook for the Consumer Products - Staples industry, where Leslie's operates, is currently in the bottom 28% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Financial Data and Key Metrics Changes - Sales for Q2 2025 were $177.1 million, down from $188.7 million in Q2 2024, reflecting a decline of 6% year over year due to weaker foot traffic [24] - Gross profit decreased to $43.9 million from $54.3 million, with gross margin dropping to 24.8% from 28.8% in the prior year [24][25] - Adjusted EBITDA was reported at a loss of $36 million, aligning with guidance despite top-line softness [9][10] Business Line Data and Key Metrics Changes - Pro Pool sales were down 2%, while Residential Pool sales declined by 9%, and Hot Tub sales increased by 4% year over year [8] - Conversion rates improved by 174 basis points year over year, with significant increases observed after water tests using proprietary technology [9][48] Market Data and Key Metrics Changes - The company experienced weaker foot traffic in February due to colder temperatures, impacting overall sales performance [8] - The introduction of Local Fulfillment Centers (LFCs) has begun to positively impact customer service and inventory management [10][11] Company Strategy and Development Direction - The company is focused on a transformation journey centered around customer centricity, convenience, and asset utilization, with a new pillar of cost optimization introduced [6][29] - Strategic initiatives include optimizing inventory, enhancing the Pro customer segment, and improving DIY omnichannel capabilities [10][12][14] - The launch of a new loyalty program, Pool Perks, aims to increase customer engagement and retention [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by weather conditions but expressed confidence in the team's ability to meet guidance for the remainder of the year [28][31] - The company is committed to reducing debt and improving working capital through inventory optimization and cost-saving measures [26][29] Other Important Information - The company has reduced borrowings on its secured term loan by $27 million, with plans to repay its revolving credit facility in full during Q3 [27] - The introduction of same-day delivery services in partnership with Uber is expected to enhance customer convenience and operational efficiency [21][22] Q&A Session Summary Question: Competitive landscape and comp sales performance - Management noted that weather impacted sales but expressed confidence in gaining market share, particularly in the Pro segment [33][35][36] Question: Underlying fundamentals related to comp weakness - Management indicated that weather was a significant factor, but improvements in conversion rates were promising [45][46][48] Question: Inventory purchases and defensive strategies - Management emphasized a focus on working capital and inventory optimization to mitigate risks and improve cash flow [51][53] Question: Cost optimization and expense ratio - Management discussed ongoing efforts to identify cost savings and optimize the expense ratio through indirect spend and asset utilization [56][59] Question: E-commerce and digitally initiated sales - Management highlighted the importance of speed and convenience in meeting customer needs, which led to the partnership with Uber for same-day delivery [72][74] Question: Top-line guidance and revenue seasonality - Management reiterated confidence in full-year sales outlook, noting that a significant portion of sales is still expected in the peak season [78][80]

Market Position and Operations - The company holds a market-leading share of approximately 15% in the $15 billion U.S. pool and spa care industry as of 2023[81]. - The company operates over 1,000 locations across 39 states, with a mix of owned and leased properties[90]. - More than 80% of the company's product assortment consists of non-discretionary items essential for pool and spa maintenance[82]. - The company evaluates new market opportunities based on the number of pools and spas, competition, and real estate costs[90]. Financial Performance - Sales for the three months ended March 29, 2025 were $177.1 million, a decrease of $11.5 million, or 6.1%, compared to $188.7 million in the prior year period[111]. - Gross profit for the three months ended March 29, 2025 was $43.9 million, a decrease of $10.4 million, or 19.1%, with a gross margin of 24.8% compared to 28.8% in the prior year[114]. - SG&A expenses for the three months ended March 29, 2025 were $92.3 million, an increase of $7.5 million, or 8.8%, primarily due to increased compensation expenses[116]. - Net loss for the three months ended March 29, 2025 was $51.3 million, an increase of $16.8 million compared to $34.6 million in the prior year period[121]. - Adjusted net loss for the three months ended March 29, 2025 was $46.5 million, an increase of $14.5 million compared to $32.0 million in the prior year period[123]. - Comparable sales growth for the three months ended March 29, 2025 was down 6.7% compared to the prior year period[112]. - Adjusted EBITDA for the three months ended March 29, 2025 was $(36.1) million, a decrease of $16.8 million from $(19.3) million in the prior year period[124]. - Adjusted EBITDA for the six months ended March 29, 2025 was $(65.4) million, a decrease of $21.7 million from $(43.7) million in the prior year period[124]. Cash Flow and Liquidity - Net cash used in operating activities was $154.3 million for the six months ended March 29, 2025, an increase of $39.2 million from $115.1 million in the prior year period[139]. - Cash and cash equivalents totaled $17.3 million as of March 29, 2025, down from $108.5 million as of September 28, 2024[132]. - Net cash used in investing activities was $11.1 million for the six months ended March 29, 2025, a decrease of $12.9 million from $24.0 million in the prior year period[140]. - Net cash provided by financing activities was $74.2 million for the six months ended March 29, 2025, a decrease of $17.9 million from $92.1 million in the prior year period[141]. - As of March 29, 2025, outstanding standby letters of credit totaled $11.9 million, with $136.6 million of available borrowing capacity under the Revolving Credit Facility[136]. - The company expects its cash and cash equivalents position, net cash provided by operating activities, and borrowing availability will be adequate to finance working capital requirements and planned capital expenditures over the next 12 months[135]. Challenges and Market Conditions - The company has faced macroeconomic challenges, including inflation and supply chain disruptions, impacting financial performance[102]. - The company’s revenue may fluctuate due to consumer purchasing patterns, particularly related to stockpiling of chemicals[103]. - The company’s gross margin is influenced by merchandise costs, pricing strategies, and service costs, which are expected to rise with growth[92]. - The company typically experiences a build-up of inventory and accounts payable during the first and second fiscal quarters in anticipation of the peak swimming pool supply selling season[127]. - The effective income tax rate for the three months ended March 29, 2025 was 20.2%, compared to 29.0% for the same period in the prior year[120]. - Interest expense for the three months ended March 29, 2025 was $15.9 million, a decrease of $2.3 million compared to $18.2 million in the prior year period[118]. - The company received downgraded credit ratings from S&P Global Ratings (B from B+) and Moody's (Caa1 from B2) during the quarter ended March 29, 2025[137]. Strategic Initiatives - The company has pioneered in-store water testing services, enhancing consumer engagement and loyalty[82]. - The company’s sales growth is primarily driven by comparable sales growth and the expansion of locations in new markets[86].

Financial Performance - Sales for the second quarter of fiscal 2025 were $177.1 million, a decrease of 6.1% compared to $188.7 million in the prior year period[4] - Gross profit was $43.9 million, down 19.1% from $54.3 million in the prior year, with a gross margin of 24.8% compared to 28.8% in the prior year[4] - The operating loss for the quarter was $48.4 million, compared to a loss of $30.5 million in the prior year period[4] - Net loss was $51.3 million, an increase from a loss of $34.6 million in the prior year[4] - Adjusted EBITDA was $(36.1) million, compared to $(19.3) million in the prior year[4] - Sales for the three months ended March 29, 2025, were $177.134 million, a decrease of 6.9% compared to $188.664 million for the same period in 2024[22] - Gross profit for the six months ended March 29, 2025, was $91.663 million, down 12.5% from $104.736 million in the prior year[22] - The net loss for the three months ended March 29, 2025, was $51.320 million, compared to a net loss of $34.553 million for the same period in 2024, representing a 48.5% increase in losses[22] - Adjusted EBITDA for the six months ended March 29, 2025, was $(65.379) million, worsening from $(43.698) million in the same period of 2024[24] - The company reported an adjusted net loss of $46.525 million for the three months ended March 29, 2025, compared to $31.998 million for the same period in 2024[24] - Basic earnings per share for the three months ended March 29, 2025, were $(0.28), compared to $(0.19) for the same period in 2024[22] Cash and Liquidity - Cash and cash equivalents totaled $17.3 million as of March 29, 2025, an increase of $8.9 million from $8.4 million as of March 30, 2024[4] - Cash and cash equivalents decreased to $17.252 million as of March 29, 2025, from $108.505 million at the end of September 2024[26] Inventory and Liabilities - Inventories decreased by $44.0 million or 11.6% to $335.1 million as of March 29, 2025, compared to $379.1 million as of March 30, 2024[4] - Total liabilities increased to $1.312 billion as of March 29, 2025, compared to $1.227 billion as of March 30, 2024[26] Guidance and Outlook - The company reiterated its full year fiscal 2025 sales outlook of $1,304 million to $1,370 million[5] - Adjusted EBITDA guidance for the full year is projected to be between $96 million and $116 million[5] Strategic Focus - The company is focused on strategic themes including customer centricity, convenience, and asset utilization to drive long-term value[3] Other Financial Information - The company incurred interest expenses of $15.897 million for the three months ended March 29, 2025, down from $18.153 million in the same period of 2024[22] - The weighted average shares outstanding for the three months ended March 29, 2025, were 185.256 million, slightly up from 184.625 million in the same period of 2024[22] - The company incurred costs related to senior executive transitions and severance due to corporate restructuring activities[33] - Non-cash changes in valuation allowance for deferred taxes were reported, which management does not consider indicative of ongoing operations[34] - The tax effect of total adjustments was based on combined U.S. federal and state statutory tax rates, impacting income tax benefit[34]

Core Viewpoint - Leslie's, Inc. reported a decrease in sales and significant net losses for the second quarter of fiscal 2025, while emphasizing a commitment to strategic transformation and operational improvements [2][4][5]. Financial Results - Sales for the second quarter were $177.1 million, down 6.1% from $188.7 million in the same period last year [5]. - Comparable sales decreased by 6.7%, with new stores contributing $0.9 million [5]. - Gross profit was $43.9 million, a decrease of 19.1% compared to $54.3 million in the prior year, resulting in a gross margin of 24.8% [5]. - Selling, general and administrative expenses increased to $92.3 million from $84.9 million [5]. - The operating loss was $48.4 million, compared to a loss of $30.5 million in the prior year [5]. - Net loss for the quarter was $51.3 million, compared to a loss of $34.6 million in the prior year [5]. - Adjusted EBITDA was $(36.1) million, worsening from $(19.3) million in the prior year [5]. Full Year Fiscal 2025 Outlook - The company reiterated its full-year fiscal 2025 outlook, projecting sales between $1,304 million and $1,370 million, and adjusted EBITDA between $96 million and $116 million [4]. - Expected adjusted net loss ranges from $(2) million to $13 million, with adjusted diluted loss per share between $(0.01) and $0.07 [4]. Cash and Inventory Management - Cash and cash equivalents increased to $17.3 million as of March 29, 2025, from $8.4 million a year earlier [5]. - Inventories decreased by 11.6% to $335.1 million compared to $379.1 million as of March 30, 2024 [5]. Strategic Focus - The CEO highlighted a focus on customer centricity, convenience, and asset utilization, with early indicators of progress being observed [2]. - The company is committed to maximizing cash flow, reducing leverage, and driving long-term value for stakeholders [2].

Core Insights - Leslie's, Inc. is set to release its fiscal 2025 second quarter financial results on May 8, 2025, after market close [1] - A conference call will be held on the same day at 5:30 p.m. Eastern time to discuss the financial results and the company's strategic transformation initiatives [2] Company Overview - Founded in 1963, 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 [3] - The company offers a wide range of essential pool and spa care products through over 1,000 physical locations and a robust digital platform, catering to the aftermarket needs of its consumers [3] - Leslie's employs a dedicated team of associates and experts to empower consumers with the knowledge and solutions necessary for pool and spa maintenance [3]

Core Viewpoint - Leslie's, Inc. is undergoing a transformation with significant leadership changes aimed at enhancing long-term value creation and operational efficiency [1][3]. Leadership Changes - Tony Iskander has been appointed as Interim Chief Financial Officer (CFO) and Treasurer, effective March 14, 2025, bringing nearly 30 years of experience in corporate finance and operational leadership [2][5]. - Scott Bowman, the previous CFO since 2023, has left the company concurrently with Iskander's appointment, with no reported disagreements regarding company operations [3][4]. - Naomi Cramer has been promoted to Chief Retail Operations and Talent Officer, leveraging her 28 years of retail experience, including significant roles at Target [4][6]. Strategic Focus - The company emphasizes a commitment to debt reduction and balance sheet optimization as part of its strategic plan, with Iskander playing a critical role in these efforts [3][4]. - The leadership changes are intended to enhance retail execution fundamentals and drive long-term growth [4][6]. Company Background - Founded in 1963, 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 [10]. - The company operates over 1,000 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [10].