Leslie's(US:LESL)2022-08-06 00:21Financial Data and Key Metrics Changes - Sales for Q3 2022 increased 13% to $674 million, with comparable sales up 7% [9][27] - Gross profit reached a record $304 million, but margin rate decreased by 250 basis points to 45.1% [10][29] - Adjusted EBITDA was a record $183 million for the quarter, with adjusted net income increasing to $125.7 million [10][34] - Year-to-date sales for fiscal 2022 reached $1.1 billion, a 16.3% increase compared to the prior year [35] Business Line Data and Key Metrics Changes - Residential pool sales grew 7%, PRO pool sales increased 17%, and residential hot tub sales surged 94% [9][27] - Comparable sales growth on a two-year stack basis was 26.9% for the quarter [27] - The PRO affiliate program saw partner sales grow 38% in the quarter [21] Market Data and Key Metrics Changes - The pool and hot tub industry continued to benefit from strong consumer demand, driven by trends such as home investment and outdoor lifestyle preferences [11] - Product cost inflation was approximately 8% in Q3, with expectations for high single-digit inflation in Q4 [11] Company Strategy and Development Direction - The company is focused on six strategic growth initiatives, including enhancing consumer relationships and expanding the PRO store format [18][21] - Plans to implement a seven-day-a-week, two-shift operating model for distribution centers to improve capacity and efficiency [15][48] - The company is actively pursuing M&A opportunities, having closed acquisitions of Spring Dance and Texsun, with more in the pipeline [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged execution challenges in the New Jersey distribution center, which impacted sales and margins [12][14] - Despite challenges, management expressed confidence in the company's ability to grow profitably in a challenging macroeconomic environment [18][49] - The company revised its full-year fiscal 2022 outlook, expecting Q4 sales growth of 13% to 18% and comparable sales growth of 6% to 9% [41][98] Other Important Information - The company ended Q3 2022 with cash and cash equivalents of $193 million, down from $307 million a year prior, primarily due to share repurchases and higher M&A activity [37] - Inventory increased by 61% year-over-year to $361 million, mainly in equipment and chemicals [38] Q&A Session Summary Question: Increased promotional activity and pricing stickiness - Management noted that increased promotions were a response to a more price-sensitive consumer environment, not related to distressed inventory [53][54] Question: Future Trichlor inflation levels - Management expects continued cost pressure on Trichlor, with no significant decrease in retail prices anticipated [58][59] Question: Impact of distribution center issues on sales - The New Jersey DC issues resulted in a $35 million sales miss and approximately 700 basis points of comp impact in the residential business [14][78] Question: Customer mix and DIY maintenance trends - Past economic slowdowns have seen an uptick in DIY maintenance, but the PRO business remains strong without signs of slowdown [86] Question: Fourth quarter sales outlook and macroeconomic concerns - Management expressed cautious optimism, maintaining a conservative outlook due to macroeconomic uncertainties despite positive July performance [98][100]