Leslie's(US:LESL)2024-05-11 17:13Financial Data and Key Metrics Changes - Total sales for the second quarter were $189 million, down 11% year over year, impacted by approximately 440 basis points from chemical price actions and a calendar shift [8][56] - Gross profit was $54 million compared to $71 million in the same quarter last year, with gross margin declining 464 basis points to 28.8% [57] - Adjusted EBITDA for the quarter was negative $19 million, and adjusted diluted earnings per share were negative $0.17 [33][58] - SG&A expenses decreased by 12% year over year to $85 million, primarily due to lower merchant fees and payroll costs [58] Business Line Data and Key Metrics Changes - Residential pool sales were down 12%, PRO pool sales down 9%, and residential hot tub sales down 14% compared to the prior year [36] - Discretionary product sales decreased by 13%, while equipment sales were down 10%, showing an improvement of 800 basis points from Q1 [32][36] - Average revenue per customer decreased by 8%, with loyalty customers performing better at a decline of 4% [34] Market Data and Key Metrics Changes - Pool openings were down 19% year over year due to unfavorable weather conditions, impacting sales significantly [31] - The company reported that specialty pool sales were down in 8 of the last 10 quarters, but they have grown faster than the industry by an average of approximately 380 basis points over that period [52] - The company experienced a 200 basis point increase in online market share despite overall underperformance compared to the industry [99] Company Strategy and Development Direction - The company remains focused on executing strategic growth initiatives to drive long-term sustainable growth and profitability [17] - Plans to open 15 new stores in fiscal 2024 and convert 6 residential stores to PRO format [59] - The AccuBlue Home smart tech water testing device and membership program is gaining traction, with positive customer feedback [54] Management's Comments on Operating Environment and Future Outlook - Management noted that the weather significantly impacted traffic and transactions, but they expect improved trends as the season progresses [84][126] - The company anticipates meaningful margin expansion in the back half of the fiscal year as they cycle past the June 2023 chemical price decreases [37][104] - Management expressed confidence in long-term growth prospects despite current challenges, emphasizing strong customer service and inventory management [40][60] Other Important Information - The company ended the quarter with $786 million outstanding on its secured term loan facility, a decrease of $83 million year over year [19] - Cash and cash equivalents were $8 million at the end of the quarter, compared to $9 million for the same period last year [38] Q&A Session Summary Question: Can you provide insight on market share and pricing strategies? - Management acknowledged underperformance relative to the industry but noted a 200 basis point increase in online market share, attributing challenges to weather and traffic [99] Question: What are the trends in equipment sales? - Equipment sales were down 10%, with improvements noted in heaters and variable-speed pumps, while automatic pool cleaners faced challenges [66][91] Question: How is the customer file performing? - The customer file showed a decline of 3% quarter over quarter, but management expects stabilization and growth in the second half of the year [103] Question: What is the outlook for gross margins? - Management expects gross margin expansion in the back half of the year as they cycle past previous pricing actions and improve promotional strategies [104][111]