Leslie's(LESL) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales for Q2 2025 were $177.1 million, down from $188.7 million in Q2 2024, reflecting a decline of 6% year over year due to weaker foot traffic [24] - Gross profit decreased to $43.9 million from $54.3 million, with gross margin dropping to 24.8% from 28.8% in the prior year [24][25] - Adjusted EBITDA was reported at a loss of $36 million, aligning with guidance despite top-line softness [9][10] Business Line Data and Key Metrics Changes - Pro Pool sales were down 2%, while Residential Pool sales declined by 9%, and Hot Tub sales increased by 4% year over year [8] - Conversion rates improved by 174 basis points year over year, with significant increases observed after water tests using proprietary technology [9][48] Market Data and Key Metrics Changes - The company experienced weaker foot traffic in February due to colder temperatures, impacting overall sales performance [8] - The introduction of Local Fulfillment Centers (LFCs) has begun to positively impact customer service and inventory management [10][11] Company Strategy and Development Direction - The company is focused on a transformation journey centered around customer centricity, convenience, and asset utilization, with a new pillar of cost optimization introduced [6][29] - Strategic initiatives include optimizing inventory, enhancing the Pro customer segment, and improving DIY omnichannel capabilities [10][12][14] - The launch of a new loyalty program, Pool Perks, aims to increase customer engagement and retention [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by weather conditions but expressed confidence in the team's ability to meet guidance for the remainder of the year [28][31] - The company is committed to reducing debt and improving working capital through inventory optimization and cost-saving measures [26][29] Other Important Information - The company has reduced borrowings on its secured term loan by $27 million, with plans to repay its revolving credit facility in full during Q3 [27] - The introduction of same-day delivery services in partnership with Uber is expected to enhance customer convenience and operational efficiency [21][22] Q&A Session Summary Question: Competitive landscape and comp sales performance - Management noted that weather impacted sales but expressed confidence in gaining market share, particularly in the Pro segment [33][35][36] Question: Underlying fundamentals related to comp weakness - Management indicated that weather was a significant factor, but improvements in conversion rates were promising [45][46][48] Question: Inventory purchases and defensive strategies - Management emphasized a focus on working capital and inventory optimization to mitigate risks and improve cash flow [51][53] Question: Cost optimization and expense ratio - Management discussed ongoing efforts to identify cost savings and optimize the expense ratio through indirect spend and asset utilization [56][59] Question: E-commerce and digitally initiated sales - Management highlighted the importance of speed and convenience in meeting customer needs, which led to the partnership with Uber for same-day delivery [72][74] Question: Top-line guidance and revenue seasonality - Management reiterated confidence in full-year sales outlook, noting that a significant portion of sales is still expected in the peak season [78][80]