Leslie's(LESL)2025-05-08 21:05Market 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].