Business Risks - The company faces significant risks related to achieving comparable sales growth, which could materially impact profitability and performance [105]. - Past growth may not be indicative of future growth, as various uncertainties could hinder market share gains and expansion efforts [106]. - Legal proceedings could have a material adverse effect on the company, with uncertainties surrounding insurance coverage for potential claims [113]. - Disruptions from natural or man-made disasters, public health issues, and geopolitical events could negatively impact demand for the company's products [114]. - The company competes in a highly fragmented market against various manufacturers, retailers, and service providers, which could affect market positioning [117]. - The company faces potential competition from new entrants in the swimming pool and spa supply retail market, particularly in high-demand states like Arizona, California, Florida, and Texas, which could significantly impact total sales [119]. - Economic conditions, including consumer discretionary spending, unemployment rates, and inflation, adversely affect demand for swimming pool and spa products, potentially leading to declines in sales during downturns [120]. - Access to consumer credit is critical for purchasing pools and related products; unfavorable economic conditions may tighten credit markets, negatively impacting sales [121]. Operational Challenges - The company is significantly dependent on its ability to meet labor needs, with competition for qualified personnel impacting operational success [112]. - The company may experience fluctuations in operating results due to seasonality and economic conditions, affecting financial performance [91]. - Product supply disruptions and rising raw material costs could adversely affect profitability and operating results [96]. - The company's sales are highly seasonal, with a greater percentage of revenues generated from April to September, making it susceptible to adverse events during peak months [123]. - Adverse weather conditions, such as unseasonably cool weather or significant rainfall, can reduce chemical consumption and consumer purchases, impacting total sales [128]. - The company relies on technology for e-commerce; failures in digital platforms could harm sales and growth in the e-commerce sector [132]. - The company must effectively manage product inventory to avoid adverse impacts on profitability [159]. Financial Condition - The company experienced a decline in sales and profitability between the Fiscal Year ending September 23, 2023, and the Fiscal Year ending September 28, 2024, indicating challenges in maintaining growth [143]. - The company faces substantial debt, which may impair its ability to satisfy obligations and obtain additional financing [180]. - A significant portion of cash flow from operations may be dedicated to debt payments, reducing funds available for operations and capital expenditures [180]. - The company is vulnerable to economic downturns and may have limited flexibility to react to changes in the business environment due to high debt levels [180]. - All debt under the Credit Facilities bears interest at variable rates, increasing risks if rates rise significantly [181]. - The company may need to refinance debt, sell assets, or raise additional capital if unable to generate sufficient cash flow [183]. - Restrictive covenants in the Credit Facilities may limit the company's ability to pursue business strategies and incur additional debt [184]. Compliance and Governance - The company has identified material weaknesses in internal control over financial reporting, which could impact results and investor confidence [103]. - Material weaknesses in internal control over financial reporting have been identified, particularly in inventory management and vendor agreements [205][206]. - The company is committed to remediating identified material weaknesses, but the timeline for completion remains uncertain [206][208]. - Compliance with evolving data privacy and cybersecurity laws may increase operational costs for the company [166]. - The company continues to incur increased costs due to public company responsibilities, including compliance with SEC regulations and corporate governance practices [204]. - Compliance with annual internal control report requirements will involve significant expenditures and complexity as the business grows [211]. Market and Environmental Factors - The demand for pool chemicals may be influenced by consumer attitudes towards environmental and safety concerns, impacting sales [91]. - Consumer attitudes towards environmental safety may affect demand for pool chemicals, and the company must adapt to emerging environmentally friendly alternatives [122]. - The company may experience increased operating costs due to compliance with stricter environmental, health, and safety regulations [169]. - Established ESG goals may expose the company to reputational risks if not achieved or reported accurately, potentially affecting financial performance [144]. - The company faces risks related to evolving ESG standards, which may impact its ability to meet investor expectations and could lead to reputational damage [146]. - The cost of raw materials, particularly granular chlorine compounds, is subject to fluctuations that could adversely affect the company's cost of goods sold and overall financial condition [155]. Legal and Regulatory Issues - The company is exposed to potential product liability claims, which could result in significant legal fees and impact financial performance [164]. - Product recalls or market withdrawals could significantly increase costs and damage the company's reputation [158]. - A class action complaint was filed against the company for alleged violations of federal securities laws, with claims of materially false and misleading statements regarding financial guidance and business operations [223]. Shareholder and Stock Information - As of November 26, 2024, the total borrowings under the Credit Facilities amount to $781.7 million [179]. - As of November 26, 2024, there are 184,969,296 shares of common stock outstanding, all eligible for resale in the public market [195]. - The company does not intend to pay dividends for the foreseeable future, relying on stock price appreciation for shareholder returns [198]. - Anti-takeover provisions in the company's charter may limit stockholder attempts to change management or control, potentially affecting stock price [200]. Infrastructure and Operations - The company has over 1,000 locations across 39 states, including 222 in Texas and 171 in California, with a total of 1,021 locations [221]. - The corporate office spans 92,669 square feet in Phoenix, Arizona, with a lease term through February 28, 2027, and two five-year renewal options [221]. - The company utilizes third-party logistics providers under short-term agreements to support its distribution needs [221]. - Cybersecurity risks are actively managed through a robust program overseen by the audit committee, with regular reviews and incident response plans in place [213][215]. - The company has not identified any material cybersecurity threats in the last fiscal year, but ongoing risks remain [218]. - The effectiveness of internal controls is critical for accurate financial reporting, and any failures could adversely affect investor confidence and stock price [209][210].

Group 1 - The core viewpoint is that Leslie's (NASDAQ: LESL) is recommended to hold due to uncertainty about demand outlook and potential to miss FY24 guidance if macro conditions do not improve [1] - The ideal investment is characterized by performing core business in a sector expected to grow structurally above GDP growth over the next 5-10 years, possessing sustainable competitive advantages, and being managed by ethical long-term thinkers [1] - The company should also be valued fairly to be considered an attractive investment opportunity [1]

Financial Data and Key Metrics Changes - For Q4 2024, total sales were $398 million, down 8% year-over-year, consistent with revised guidance [34][38] - Adjusted earnings per share were $0.02 for Q4, compared to $0.14 in the same period last year [45] - Adjusted EBITDA for Q4 was $43 million, down from $59 million year-over-year [44] - For the full year, total sales were $1.33 billion, also down 8% compared to the previous year [46] - Adjusted net income for the full year was a loss of $1 million, compared to income of $51 million in the prior year [50] Business Line Data and Key Metrics Changes - Residential pool sales declined 10% in Q4, while PRO pool sales decreased by 1% [40] - For the full year, residential pool sales were down 9%, PRO pool sales down 4%, and residential hot tub sales down 9% [47] - The PRO consumer group showed relative strength, with a low single-digit sales decline during the peak pool season [41] Market Data and Key Metrics Changes - The installed base of pools and spas in the U.S. is over 14 million, with a total addressable market of approximately $15 billion [14] - The company remains the only national large-scale omnichannel player in aftermarket pool and spa care [16] Company Strategy and Development Direction - The company plans to focus on three strategic themes: customer centricity, convenience, and asset utilization [19][33] - Emphasis on getting back to retail fundamentals to drive long-term profitable growth [15] - The company aims to leverage its competitive advantages, including proximity to customers and strong brand recognition [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment remains dynamic, impacting sales trends [36] - The company expects continued softness in larger ticket and discretionary categories in Q1 2025, with sales guidance of $169 million to $176 million [58][55] - Management is optimistic about improving customer service and leveraging strategic themes to drive growth [56][64] Other Important Information - The company ended Q4 with cash and cash equivalents of $109 million, up from $55 million in the previous year [53] - Inventory decreased by $78 million or 25% year-over-year, indicating improved operational efficiencies [53] Q&A Session Summary Question: Which strategic theme will have the largest impact in the near to medium term? - Management believes asset utilization will have the most significant impact, focusing on optimization and improving same-store sales [70][72] Question: Why is the PRO business showing relative strength? - The PRO business has benefited from targeted promotional activities and an increase in PRO partners, which are now 14% higher than last year [81] Question: Can you break down the negative comps between ticket and traffic? - The decline was primarily driven by traffic, which has been the main driver of comparable sales [86] Question: What is the long-term unit growth outlook? - The company aims to focus on debt paydown before engaging in new store builds or M&A activity, but still sees opportunities for growth in the future [89] Question: What strategies are in place to improve gross margins? - The focus will be on driving top-line growth to leverage fixed costs, rather than solely on cost reductions [95] Question: How is the company addressing inventory management? - There is still room to optimize inventory, particularly through a more precise allocation strategy [99][100] Question: Can you provide insights on the 1Q gross margin pressures? - The first quarter will see pressures from fixed rebates and occupancy costs, but product margins are expected to be slightly favorable [123]

Core Viewpoint - Leslie's, Inc. reported quarterly earnings of $0.02 per share, missing the Zacks Consensus Estimate of $0.11 per share, representing an earnings surprise of -81.82% [1][2] Financial Performance - The company posted revenues of $397.86 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.81%, compared to year-ago revenues of $432.37 million [2] - Over the last four quarters, Leslie's has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Stock Performance - Leslie's shares have lost approximately 53.8% since the beginning of the year, contrasting with the S&P 500's gain of 25.2% [4] - The current consensus EPS estimate for the upcoming quarter is -$0.19 on revenues of $179.36 million, and for the current fiscal year, it is $0.19 on revenues of $1.39 billion [8] Industry Outlook - The Consumer Products - Staples industry, to which Leslie's belongs, is currently in the bottom 43% of over 250 Zacks industries, indicating potential challenges ahead [9] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the outlook for the industry can significantly impact stock performance [6][9] Future Expectations - The estimate revisions trend for Leslie's is currently favorable, translating into a Zacks Rank 2 (Buy) for the stock, indicating expectations of outperforming the market in the near future [7] - It will be important to monitor how estimates for the coming quarters and the current fiscal year change following the recent earnings report [5][8]

Core Insights - Leslie's, Inc. reported a net loss of $9.9 million in Q4 and $23.4 million for fiscal 2024, with sales decreasing by 8.0% in Q4 and 8.3% for the fiscal year [1][4][3] - The company experienced a decline in gross profit and adjusted EBITDA, primarily due to lower sales volume and increased costs [3][5] Financial Performance - Q4 sales were $397.9 million, down from $432.4 million year-over-year, with comparable sales decreasing by 8.3% [3] - Fiscal 2024 sales totaled $1,330.1 million, a decrease from $1,451.2 million in the previous year [4] - Gross profit for Q4 was $143.2 million, a decline of 10.6% compared to the prior year, resulting in a gross margin of 36.0% [3] - For fiscal 2024, gross profit decreased by 13.0% to $476.8 million, with a gross margin of 35.8% [4][5] Profitability Metrics - Adjusted EBITDA for Q4 was $43.0 million, down from $59.5 million in the prior year [3] - Fiscal 2024 adjusted EBITDA was $108.7 million, compared to $168.1 million in the previous year [5] - Diluted earnings per share for Q4 were $(0.05), compared to $0.09 in the prior year [3] - Adjusted diluted earnings per share for Q4 were $0.02, down from $0.14 in the previous year [3] Operational Highlights - Selling, general and administrative expenses (SG&A) decreased by 4.0% in Q4 to $116.8 million [3] - For fiscal 2024, SG&A expenses decreased by $26.4 million to $419.7 million [5] - The company established a valuation allowance of approximately $11 million against deferred tax assets [3] Balance Sheet and Cash Flow - Cash and cash equivalents increased to $108.5 million as of September 28, 2024, from $55.4 million a year earlier [7] - Inventories decreased by 24.9% to $234.3 million [7] - Funded debt was $783.7 million, slightly down from $789.8 million [7] Future Outlook - The company anticipates a dynamic environment but sees opportunities for growth and plans to detail its strategic roadmap in upcoming quarters [2]

Core Viewpoint - The article highlights the stock Leslies (LESL) as a strong value investment opportunity, supported by various financial metrics indicating it is undervalued compared to its industry peers [4][8]. Financial Metrics - Leslies (LESL) has a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [4]. - The stock's P/E ratio is 14.99, significantly lower than the industry average of 20.89, suggesting it is undervalued [4]. - LESL's Forward P/E has fluctuated between 7.49 and 34.62 over the past year, with a median of 15.48 [4]. - The PEG ratio for LESL is 1.40, compared to the industry average of 1.99, indicating favorable growth expectations relative to its valuation [5]. - The P/S ratio for LESL is 0.37, which is lower than the industry average of 0.74, further supporting its undervaluation [6]. - LESL's P/CF ratio stands at 13.93, well below the industry average of 30.92, highlighting its attractive cash flow position [7]. Investment Outlook - The combination of favorable financial metrics and a strong earnings outlook positions Leslies as an impressive value stock in the current market [8].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Leslies (LESL) as a strong value stock currently being undervalued in the market [2][8]. Company Analysis - Leslies (LESL) holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The stock has a Forward P/E ratio of 14.06, significantly lower than its industry's average Forward P/E of 18.37, suggesting it is undervalued [4]. - Over the past year, LESL's Forward P/E has fluctuated between 34.62 and 7.49, with a median of 15.17, indicating volatility but also potential for recovery [4]. Valuation Metrics - LESL has a PEG ratio of 1.61, which is lower than the industry average PEG of 2.03, indicating favorable growth expectations relative to its price [5]. - The stock's P/S ratio is 0.36, compared to the industry's average P/S of 0.69, further supporting the notion of undervaluation [6]. - LESL's P/CF ratio stands at 12.82, which is attractive compared to the industry's average P/CF of 21.13, highlighting strong cash flow relative to its price [7]. Investment Outlook - The combination of favorable valuation metrics and a strong earnings outlook positions LESL as an impressive value stock at present [8].

Core Points - Jason McDonell has been appointed as the new CEO of Leslie's, effective September 9, 2024, and will also join the Board of Directors at that time [1][3] - John Strain, the Chairman of the Board, will serve as Interim CEO until McDonell's arrival, following the departure of Michael Egeck [2][4] - The company has reaffirmed its fiscal 2024 outlook, consistent with previous guidance provided on August 7, 2024 [4] Company Overview - Leslie's, Inc. is the largest direct-to-consumer brand in the U.S. pool and spa care industry, founded in 1963 [5] - The company operates over 1,000 physical locations and a robust digital platform, catering to both residential and professional consumers [5] - Leslie's offers an extensive assortment of essential pool and spa care products, supported by a dedicated team of experts [5] Leadership Background - Jason McDonell brings nearly 30 years of experience in retail and consumer products, previously serving as Executive Vice President at Advance Auto Parts, managing a $11 billion portfolio [3] - His prior experience includes 21 years at PepsiCo, culminating in his role as Canada President for a $2.5 billion business [3] - McDonell has a strong background in brand management, having started his career at Procter & Gamble, and holds a bachelor's degree in Business Administration [3]

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Leslie's, Inc. due to a class action complaint alleging breaches of fiduciary duties by the board of directors during a specified class period [1] Group 1: Allegations and Class Action Details - The class action alleges that Leslie's misled investors by failing to disclose that its growth was driven by customers over-purchasing products, which inflated revenues and earnings without indicating sustainable demand [2] - It is claimed that the company prolonged inflated customer demand by warning customers about potential future shortages of chemicals, and that any sales slowdown was due to prior excess stockpiling rather than normal seasonal trends [2] Group 2: Financial Impact and Stock Performance - On July 13, 2023, Leslie's announced disappointing preliminary results for its fiscal third quarter, reporting a 9% year-over-year sales decline and a reduction in fiscal 2023 guidance, which shocked analysts and led to multiple downgrades [3] - Following the announcement, Leslie's stock price fell over 29%, from $9.52 per share on July 13, 2023, to $6.70 per share on July 14, 2023, and continued to decline by another $1.24 per share, or over 18%, closing at $5.46 per share on July 17, 2023 [3]

Financial Performance - Sales for the third quarter of 2024 were $570 million, which includes a negative impact of 230 basis points from June 2023 chemical price actions[10] - The company's gross profit was $229 million, but the gross margin rate contracted by 101 basis points compared to the same quarter last year[10] - Adjusted EBITDA was $109 million, a decrease of $20 million compared to the prior year quarter[10] - Adjusted EPS was $034, compared to $041 a year ago[10] Sales Trends - Overall sales decreased by 7%, with comparable sales also down by 7%[10] - PRO Pool sales decreased by 2%, while Residential Pool sales decreased by 8% and Residential Hot Tub sales decreased by 4%[10] - Chemical sales decreased by 1% for the quarter but increased by 5% in June[9] - Non-discretionary sales decreased by 6%, while discretionary sales decreased by 10%[10] Inventory and Customer Metrics - Inventory was reduced by 31%, a decrease of $134 million year-over-year[9, 10] - The customer file remained flat year-over-year[14] - Average revenue per customer decreased by 7%, although loyalty members outperformed with a decrease of 4%[14] Guidance - The company reaffirmed its fiscal year 2024 sales guidance of $1321 million to $1347 million[22]