Leslie's(LESL) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $175 million, an increase of 0.7$29 million, at the bottom end of guidance, compared to a loss of $24 million in the same period last year [11][52] - Gross profit was$48 million, down from $50 million year-over-year, with a gross margin rate decrease of 180 basis points to 27.2$41 million, compared to a loss of $37 million in the same period last year, with adjusted diluted loss per share at$0.22 [53] Business Line Data and Key Metrics Changes - Pro Pool sales increased by 9%, while residential pool sales declined by 1% and residential hot tub sales declined by 5% [11][49] - Core chemical sales were up approximately 4%, driven by improved in-stock positions and supply chain focus [50][51] - Equipment sales stabilized, down 4% compared to a decline of 18% a year ago [17] Market Data and Key Metrics Changes - Traffic improved to flat compared to a decline in mid-single digits a year ago [13] - Conversion rate increased by over 160 basis points year-over-year, attributed to improved customer service [14] Company Strategy and Development Direction - The company is focused on three strategic themes: customer centricity, convenience, and asset utilization [22][43] - Initiatives include establishing local fulfillment centers (LFCs) to improve inventory management and customer service [24][30] - The company aims to leverage its national omnichannel capabilities to drive same-store sales growth [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pool and spa industry's future potential and emphasized the importance of inventory reliability [9][80] - The company expects to see the benefits of its initiatives more prominently during the peak pool season in Q3 and Q4 [77][84] - The financial focus remains on executing strategic initiatives to support sustainable revenue growth and margin expansion [62] Other Important Information - The company paid down $27 million of debt in the quarter and ended with cash and cash equivalents of$12 million [54] - Inventory levels decreased by $63 million or 19% year-over-year, while in-stock positions improved significantly [16][55] Q&A Session Summary Question: Early signs of progress from transformation initiatives - Management noted improvements in asset utilization and inventory efficiency, particularly with local fulfillment centers [70][75] Question: Size of out-of-stock issues - Management emphasized the importance of inventory reliability and mentioned that LFCs would help maintain necessary stock levels [80][82] Question: Revenue outlook assumptions - Management provided context on Q2 being a smaller quarter and discussed the cautious approach to forecasting due to the timing of initiatives [88][90] Question: Impact of tariffs on chemicals - Management indicated minimal exposure to tariffs due to domestic sourcing [94] Question: Gross margin outlook - Management acknowledged the challenges in gross margins but expressed optimism for improvement in the second half of the year [101][102] Question: Breakdown of pro business growth - The growth in pro business was primarily driven by an increase in transactions, with a focus on improving inventory availability [120] Question: Transformational expenses impact - Management indicated that transformational expenses would dissipate in the back half of the year, setting a new normal for future EBITDA [123][125] Question: Wage growth considerations - Management noted moderate wage growth and the impact of minimum wage increases in certain states [131] Question: Store closure considerations - Management has not considered a store closure program but is monitoring underperforming locations [132]