Leslie's(US:LESL)2025-12-18 14:00Financial 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].