Leslie's, Inc. (LESL) on Q2 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Second Quarter of Fiscal 2021 Conference Call for Leslie's Inc. At this time, all participants are in a listen-only mode. Following the prepared remarks, management will conduct a question-and-answer session. As a reminder, this conference call is being recorded and will be available for replay later today on the Company's website. I will now turn the call over to Caitlin Churchill, Investor Relations. Please go ahead. Caitlin Churchill: Thank you, and good afternoon. I would like to remind everyone that comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. These statements speak as of today and will not be updated in the future if circumstances change. Please review the cautionary statements and risk factors contained in the company's earnings press release and recent filings with the SEC. During the call today, management will refer to certain non-GAAP financial measures. A reconciliation between GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was furnished to the SEC today and posted to the Investor Relations section of Leslie's website at ir.lesliespool.com. On the call today from Leslie's Inc. is Mike Egeck, Chief Executive Officer; and Steve Weddell, Chief Financial Officer. With that, I will turn the call over to Mike. Mike Egeck: Thanks, Caitlin, and good afternoon, everyone. Thank you all for joining us today. I'm pleased to report that our performance in Q2 exceeded our internal expectations and produced record results for the quarter. Those results include sales of $192.4 million, a comp sales increase of 51.3% on a reported basis and 35.5% on a calendar adjusted basis. Comps accelerated each month of the quarter year-over-year and on a 2-year stack. This quarter represents our 8th straight quarter of sequential improvement and positive comps. Gross margin rate for the quarter expanded by 576 basis points, and adjusted EBITDA grew by $17.6 million. Our record sales and profit for the quarter continued to be driven by the three pillars that make our business so compelling. First, the predictable, recurring and nondiscretionary nature of demand in our industry. The industry was further advantaged in the second quarter by the continuation of several key macro trends. We saw consumers continue to focus time and investment on their homes, pursue healthy outdoor lifestyles, migrate to the suburbs and ex-surbs and have an elevated attention to safety and sanitization. The continuation of these macro trends resulted in elevated levels of pool usage, interest in pool ownership and pool ownership, new pool permits and pool construction backlogs. Second, the competitive advantage derived from our integrated system of physical and digital assets. In the quarter, we successfully completed our rollout of omnichannel capabilities, BOPIS, ship from store, ship to store and BORIS. These new capabilities significantly strengthen our ecosystem and enable our consumers to shop Leslie's whenever, wherever and however they choose. In the first six weeks since go-live, 30% of our Leslie's e-commerce transactions have been enabled by our new omnichannel capabilities. Steve Weddell: Thank you, Mike, and good afternoon, everyone. The strong start to our fiscal year continued in the second quarter as we remain focused on our growth initiatives and preparing for season. We generated record second quarter results that exceeded our expectations, and we're proud of all of our associates as they continue to deliver against our strategic priorities and generate the results we're reporting today. Today, we'll review our second quarter of fiscal 2021 performance and our upward revision to our full year fiscal 2021 guidance. Before I get started, just a reminder on the calendar this year. As a result of fiscal 2020 having 53 weeks, there are calendar shifts in fiscal 2021 that impact our quarterly comparisons on a year-over-year basis. In the second quarter of fiscal 2021, we replaced a lower volume week at the end of December with a higher volume week at the end of March. This shift impacted sales by approximately $15 million during the second quarter. So on to our second quarter results. Our second quarter included 13 weeks and ended on April 3, 2021. We delivered strong results for the second quarter, with momentum throughout our business and our P&L. Total sales for the 13-week period increased 52.3% to $192.4 million from $126.4 million in the second quarter of fiscal 2020. Our comparable sales on a reported or unshifted basis increased 51.3%. Due to the 53rd week in fiscal 2020, our comparable sales growth in 2021 is impacted by a 1-week shift. Using a realigned period in 2020 for comparability, our comparable sales on a shifted basis for the second quarter of 2021 increased 35.5%. This represents an acceleration of growth following the comparable sales growth of 25.7% that we reported on a shifted basis in the first quarter of fiscal 2021 and 23.3% increase that we reported in the fourth quarter of fiscal 2020. On a 2-year stack calendar basis, our comparable sales grew 49.1% during the second quarter of fiscal 2021. We generated strong results across consumer types, product categories, geographies, and as Mike mentioned, during each period in the quarter. We also continued to see higher-than-expected retail price inflation primarily related to chemical products, channel management by major equipment manufacturers, higher input costs and less discounting across product categories. Operator: Our first question comes from Ryan Merkel of William Blair. Ryan Merkel: Congrats on another big quarter. First off, full year guidance still feels a little conservative to me. I realize the season is just starting. But where could there be some upside? Steve Weddell: Sure. Why don't I kick that off, Mike, and you can follow on. So when you think about guidance, similar kind of process we went through in the first quarter, Ryan. About 2/3 of the guidance raised was kind of flow-through from the second quarter outperformance, which means remaining 1/3 or about $25 million is related to kind of our current view on inflationary opportunities as well as just recent trends. And so when you think about the first quarter, we had a $10 million flow-through from internal expectations and another $10 million from kind of inflation as well. So we continue to be very optimistic about our opportunities. As you said, it still is kind of early from a season perspective. And based on current trends, we certainly have some opportunities to the upside, but I feel very confident in the guidance that we provided today in our release. Ryan Merkel: Okay. That's helpful. And then, Mike, you mentioned that 30% of transactions were enabled by omnichannel, I think. Can you just expand on this a little bit more? Mike Egeck: Yes. It means that through the fulfillment, right, it was either ship to store, ship from store, or BOPIS. And I think the other way to look at that is 13% of it was shipped from store. And the way we have the omnichannel filter set up, those are all incremental sales. So we're looking at it as a very encouraging start. It's scaling faster than we anticipated, and the ship from store or incremental part, is higher than we anticipated. But I need to wrap around all of that. It's very early days, right? We're really just six weeks into it. But working as design and scaling faster than we anticipated. So we're happy. Operator: Our next question comes from Peter Benedict of Baird. Peter Benedict: So maybe looking -- trying to think a little further down the road here. Can you give us any perspective on how retail prices tend to adjust in the sector as commodity costs come back down after steep run-up. Obviously, they're moving higher here. But what does history tell us about what happens when, inevitably, the commodity costs start to come down whenever that's going to be? Mike Egeck: Steve, do you want to take that one to start, or do you want me to? Steve Weddell: Sure, happy to. So look, I think time will tell, obviously. I think when you think about what's out there in the current public markets, the duration of the supply disruptions are going to continue for quite a while here with potentially some normalization as we get late into season next year. But again, too many unknowns to know at this point. I think when we look at pricing a little bit further back, I have not seen material reductions in pricing from a competitive position. But I do -- I think we believe that current pricing likely won't be sustained once full supply comes back online. But I think as we think about the opportunity in front of us today, it really is about our opportunity to engage with existing and new consumers. We're seeing, based on some of the recent news around shortages, that we're attracting a lot of first-time consumers to Leslie's and getting introduced to the experience and what we have to offer. So the durability of the opportunity for us is really wrapping our arms around those consumers and showing them more than just the supply of chlorine in the current season. Mike Egeck: Yes. I would just add, it's a tough question to answer because it's really an unprecedented disruption and run-up. The industry for years has not been very inflationary in chemicals. So we believe it will be somewhat sticky in terms of what the industry is able to hang on to. But to Steve's other point, it's still unclear when production levels for the industry will return to normal. So two big unknowns, the timing of production catch-up and also an unprecedented run-up and how consumers will react to that on a go-forward basis. Peter Benedict: Yes. No, I think everyone appreciates that, and that makes sense. So I appreciate the color you guys just gave there. My next -- my follow-up question would just be around the initial Pro affiliate customers that you're signing up here. Any color, information on them? How do they look, maybe relative to what you think your traditional Pro customers were? I mean, are they the same? And the 80% increase in spend, I mean, what is that on? How do the baskets look? Just any other color? I know it's early, but just wanted to see what you can share on that. Mike Egeck: Yes. Sure, Peter. Look, to your last comment, it's still really early, right? So we're not drawing conclusions. But similar to the omnichannel go-live implementation of Pro affiliate program, I mean, we're very pleased with the start. We have signed up about 20% of our goal for the year-to-date, so we're ahead of plan there. And the basket size is, well, much higher than they were spending with us pre joining the program. And I said it's about 80%. It is, as you might expect right now, driven by chemicals and equipment. They're in high demand. But we're just getting very variable, very favorable feedback from the affiliate members who are signing up. And we continue to add new partners at a good clip. So very early, but all good news there. Operator: Our next question comes from Jonathan Matuszewski of Jefferies. Jonathan Matuszewski: Great quarter. First one was just on the cadence throughout the quarter. You mentioned strengthening trends. Obviously, a unique quarter with the inclement weather in the South Central. Just curious if you could help us frame maybe how comps trended on a monthly basis. Steve Weddell: Yes. Thank you for the question. Certainly appreciate it, Jonathan. I'd characterize it as consistently improving, right? So it wasn't the -- it wasn't a midpoint in February, from a weather perspective, that we saw a spike. As Mike mentioned, about $10 million of incremental sales from the weather event, and that's on $190 million in overall sales. In addition, as we talked about kind of chemical inflation, chemical inflation was a few hundred basis points, which was kind of mid-single digits from millions dollars of increase. So the core driver of the performance for the quarter was really throughout our product categories, throughout our regions, throughout our businesses, that really drove the beat. So -- and again, very pleased on a -- both the current year as well as a 2-year stack basis to see that improvement in January, February and then in March. Jonathan Matuszewski: Got you. That's helpful. And then a follow-up question, just on kind of new customer acquisition, impressive numbers that you stated. Is there a way to frame how much of the new customers acquired were influenced by some better in-stock position than you had presumably relative to peers? And a second question, kind of related to that was, those customers who came in and maybe bought chlorine from you guys for the first time. Anything you've seen in terms of repeat purchases? Do you have kind of indications that they're kind of showing loyalty after their first purchase? Mike Egeck: Yes. Jonathan, I'll answer that in a couple of ways. First, I'd say I was a little surprised that we weren't adding more new customers strictly on chlorine. The chlorine purchases from new customers was very much in line with the balance of our file. So it was not the driver that we anticipated. It's really coming down to digital spend. As you said, I would say, better in-stock positions across our categories than some of our competitors. And also, we noted the loyalty program is growing at the same time, which we find very encouraging because, as you know, we're launching what we believe is a much improved program. So to get that kind of growth from the existing program, really driven by sign-ups in store, that, we consider a very positive trend. But it's -- when you think about the file growth that we had, it was led by new customers, but we had increases across new customers, reactivated customers and retained customers. So we're quite happy with that trifecta and the trends across those three portions of the file. Operator: Our next question comes from Peter Keith of Piper Sandler. Peter Keith: Great results, guys. One number that really jumped out to us was the inventory growth, because we do hear about all these shortages. In the context of chlorine shortages, do you guys feel like you're going to have enough to last the season, therefore, maybe enhancing your competitive position as we go forward? Or do you think everyone is going to start running out at some point? Mike Egeck: Yes. Well, we -- Peter, thanks for the question. We feel, like what I said in my remarks, we feel confident in our inventory levels. Now I will say this last week, we set an all-time record for chemical sales. As I'm sure everybody noticed, right, there was a number of news articles talking about a shortage, and that certainly spiked demand, really spike demand. We consider it kind of a temporary spike, if you will. And right now, though we're at a bit of a low point in chlorine, we have lots of supply in the pipeline. And we do think we're in an advantaged position versus competition. When we get further into the season, we'll find out. But we're very focused on using our in-stock positions across categories to continue to add new customers. Steve Weddell: And Peter, I'd add on to that. We have more chlorine this year than we had in prior years. So again, opportunistically going out and procuring supply from a global network has put us in a great position. That being said, with the overall industry shortages, certainly, we'll have a lot of attention on availability. I would like to remind you as well that when you talk about alternatives, whether it's salt chlorine generators or liquid bleach or other alternative sanitizers, we provide the total solution. And we can install equipment in the backyard when it comes to salt chlorine generators, and we sell alternative sanitizers in our stores every day. So chlorine is an important part of the sanitation products for the industry, but there's certainly a lot of alternatives that will continue to help consumers to keep clean safe pools. Peter Keith: Okay. That sounds interesting. And on the inventory availability, if I could pivot away from chlorine and maybe towards pool equipment, pool parts. There is chatter that there's also some inventory constraints in these areas because of the demand surge in Texas. Are these -- I guess, are these rumors true? How do you guys feel about your competitive positioning in the pool parts categories? Mike Egeck: Yes. I would characterize it as a tight supply situation. I think that's correct. As you know, the major equipment suppliers are reporting or starting to report, and they're purporting really strong numbers. And that's not unexpected from us because we know what we're buying from them. And what we feel good about is we, very early in the year, in pre-season, got aggressive with forward-looking projections for equipment and chemicals. And we -- our sales with the major vendors are outpacing their sales. So we feel good in that sense that we're getting increased market share, if you would, of their production, and that should treat us well as we get further in the season. Operator: Our next question comes from Steven Forbes of Guggenheim Securities. Steven Forbes: I wanted to follow up on the Pro. So Mike or Steve, can you discuss how Pro sales growth compared to the average during the quarter? Any sort of context, right ratio or however you want to reference it. And then in regards to the pipeline, right, both in terms of new stores and the conversions, how far out are you sort of planning the pipeline as we think back to sort of just the expectation on an annual basis for the number of openings? Has that changed given the strength that you're seeing? Mike Egeck: Yes. I will say that in terms of our -- the wholesale business growth, it grew about twice our average -- price of the company total, I should say. So really strong growth there. The converted stores, we're very pleased with theinitial results. Again, it's early days there, eight weeks. We have a second tranche of stores identified. It's about 25. But we are going to wait to see how the stores perform as we get deeper in the season before we start any additional conversions. Steven Forbes: Helpful. And then maybe just a quick follow-up since you mentioned the closing of the acquisition and then the new LOI. Curious if you could just comment, in general, as it pertains to the M&A pipeline and the general appetite for deals in the marketplace, given the supply challenges that are out there, if the supply challenges have sort of created this elongated pipeline for you guys? Mike Egeck: Yes. I think it's a combination of having to deal with the pandemic and having to deal with tight supply and, of course, they're related. I mean there's just a dynamic in the industry where a lot of smaller operators are looking to monetize and looking to exit. It's been a very arduous, if you would, 14, 15 months now, and that's driving some of the pipeline for sure. And most of our pipeline, as we've mentioned before, it's really incoming. And we're seeing a lot of interest. Steve Weddell: From an inventory perspective, I'd just make the comment that, look, these are tuck-in acquisitions we've done. And so it can handle from an inventory flow perspective. And in other cases we certainly are making sure we have conversations with the supplier base in connection with the discussions around M&A. So I think you're right to be focused on it and one that we don't think will be an inhibitor for our ability to close on deals. Operator: Our next question comes from Elizabeth Suzuki of Bank of America. Elizabeth Lane: Are you seeing anything in Southern markets, in particular, where pools may be opening up that would indicate an earlier start to the season than last year, particularly given some more favorable weather this year? Mike Egeck: Yes. Just one comment on weather to start, Liz, is the -- outside of Texas, weather wasn't actually stable this quarter. Now there were pockets of favorable weather. But to your earlier question about pool openings, we're running about 20%, 30% ahead of last year. So it is true that people are looking to get their pools open earlier and start enjoying. Elizabeth Lane: Great. And are there any industry stats you can point to in terms of the sustainability of demand for new pools, like permit applications and the backlog. I know that, that has been running pretty hot. I mean is that still the case? Or as markets are opening up and people can divert money towards travel and things away from the home, are you starting to see that tailing off at all? Mike Egeck: No. Actually, the data we're seeing is that projections of increased permit activity, closer to last year's level and this year's level through 2025 now. Now those are forecasts, but their industry forecast. And we certainly haven't seen anything in terms of velocity or interest or demand that would tell us different. Steve Weddell: Yes, it's a great tailwind. There's been others who have reported, Liz, and they've talked about the supply and the backlog, going well through the end of this season into next season as well at new pool builds, at higher levels than we talked about in the past. So certainly feels like there's continued momentum in those slowdown. And as we've talked about, that's a great leading indicator as we get to take care of those pools and the maintenance needs for the next 30 years. Operator: Our next question comes from Dana Telsey of Telsey Advisory Group. Dana Telsey: Congratulations on the terrific report. Just digging more into loyalty, given that loyalty was up around 10%. What is the profile of these new customers? And how is the sales penetration of those loyalty members year-over-year? And then I have a follow-up. Mike Egeck: Yes. The loyalty members that are coming in are predominantly the same demographic profiles as the existing loyalty base. And we're not seeing anything there that would be a dramatic shift in age or income or even geography. So it's a little bit -- the story there is a little bit more of the same. We are seeing increased penetration of loyalty into our total sales base. It had been running about 70%. And last quarter, it ticked up to nearly 80%. So we consider that a good sign. And again, really looking forward to launching the new loyalty program, and we think we can accelerate the growth from what we saw last quarter for sure. Dana Telsey: Got it. And then when you think about the Pro program, on the Pro affiliate program, a tongue twister. The Pro affiliate's spending 80% more after joining the program. What are you noticing there? What are they spending on? Is that a flywheel to attracting more Pros? Mike Egeck: Yes, we believe it is. We knew we had a lot of Pro customers, we had talked about that before. What we had was very small share of wallet from them. So we anticipated -- and actually, our agreement with them has to spend minimums in it. But they're going through those minimums pretty quickly. And we just feel really good about what is wallet share that we're taking from. And it's working for the reasons we laid out when we started, right? The most important one is convenience. These are smaller Pros. And they're sole operators in a lot of instances. Their time is literally their money. And they're at a pool with a customer and needs something, and our stores are almost always, by definition, the closest stores. That convenience, plus the pricing we give them, plus an increased assortment of Pro-specific products and then the referrals, that's just -- that's proving to be a very powerful combination in attracting Pros into the affiliate program and then increasing the wallet share that we're achieving from them. Operator: Our next question comes from David Bellinger of Wolfe Research. David Bellinger: Great quarter here. First one, just on the southern markets being elevated following the Texas storms. Is that tailwind expected to continue into Q3? Are there any historical precedents you can reference in terms of just how long these protracted sales gains last? And also, any comments on how much stronger the south was in Q2 versus other parts of the country? Mike Egeck: Yes. I'll address that first part. We are seeing continued high levels of demand from Texas and the South Central region into Q3 to date. There's a lot of, I'm going to say, different forecasts and speculation on how long this will last. But I know that the equipment manufacturers and parts manufacturers, in particular, are producing product as fast as they can, and it's being absorbed into the markets. There was a lot of repair work done early on in the freeze that was not complete, meaning there was a lot of workarounds due to parts or equipment shortage. And so a lot of that work has, I think, been done. But now there's going to be a second wave where people are going to want to go in and add in the new parts that may not have been available earlier. Steve Weddell: I'd add on to that. On the timing of when that occurred in February, not a core pool season. And so as water temperatures heat up, that market is going to experience significant issues with respect to algaes and other blooms. And so to Mike's point, we may have had some workarounds early on, but we'll need the full solution on the equipment pad there as we kind of get in the season here. So I think the only thing I'd point to, from a parallel perspective, and we talked a lot about this being a significant weather event kind of like a hurricane, where you have a little bit of a slowdown during the actual event as people focus on their safety. And then they quickly return to take care of their property, and it can last for quarters. So certainly, as we stated, had an impact in Q2 and anticipate that to continue through Q3 and likely through the rest of the year. David Bellinger: And then just on -- sorry, go ahead, Mike. Mike Egeck: Yes. David, I'll give you just a couple of points on that. We -- when we saw what was going on, we increased our service team personnel by 70% in Texas. And we transferred about that equivalency and additional inventory into the area. And we're still sitting on a backlog of service requests 5x normal. So at this moment, we continue to see a lot of demand. David Bellinger: Got it. Thanks for all the detail there. And then just separately, on the outlook for gross margins in the back half of the year. So how sustainable is the margin expansion that you saw here in Q2 on the heels of another nice improvement, just coming off of in Q1? How much of that can continue into the back half? Steve Weddell: Yes. As we look at the back half of the year, and again, we don't provide specific guidance on gross margins, but we're confident that our margins are going to be higher from a growth rate perspective than our long-term growth algorithm, right? We talked about flat to 25 basis points up on a year-in year-out basis. It will certainly be elevated from there. As you think about the 567 basis points, fairly fixed occupancy when you think about current fleet, current footprint. And so we did see quite a bit of leverage coming through from occupancy in Q2. And obviously, as you get the 50% beat plus on the top line, you're going to see some very strong leverage. So certainly expect a moderation, but overall, a very positive story as we continue to see leverage throughout the -- most aspects of our business. Operator: Our next question comes from Garik Shmois of Loop Capital. Garik Shmois: Congratulations on the quarter. Just wanted to follow up on the topic of alternatives to chlorine. You touched on this a little bit. But are you actually starting to see pool owners aggressively seeking out these alternatives? I guess if so, would there be any impact, whether it's a sales or margin, just from a shift in mix at all? Mike Egeck: Yes, Garik, it's a very interesting question. We are seeing an increase in sales of salt cells in the neighborhood of 30%. All alternative sanitizers combined, other than salt cells, are actually flat. So we have not seen a big shift, and we're prepared for it. The margin profiles are similar. We can be very agnostic as to what chemicals or what methods one of our consumers wants to use to sanitize their pools. But we have not seen a big shift yet. Garik Shmois: Great. That's helpful. My follow-up question is just around the back half outlook. You've stated in the past about 45% of your full year sales are in 3Q, about 35% in 4Q. Obviously, it's going to be a little bit skewed this year just given how strong the first half has been. But just kind of wondering if there's anything from a high level to call out regarding the cadence in the second half of the year relative to your guidance. Steve Weddell: Yes. It's good question, Garik. And when you think about -- historically, it's been kind of 10% to 12% for each of the first and second quarters, kind of got us to about 20% for the first half. And when you look at the back half of the year, based on the guidance, we've effectively said that about 26% of total sales will be in the back half of the year. So definitely skewed more, a little higher percentage in the back half of the year for -- or sorry, 26% in the first half of this year. So about 74% will come in the back half of the year. A little skewed more towards the front half of the year, just given the growth rates. But I think as you think about Q3 versus Q4, I don't have any reason to believe that the flow or trend should be different between the two quarters in the second half. Operator: Our next question comes from Alex Maroccia of Berenberg. Alex Maroccia: My first question is on the Pro store rollout. What have you learned operationally with these first use store openings? And how can it improve some of the new greenfield or converted locations going forward? Mike Egeck: Yes. Learned a couple of things. One is the increased assortment is driving about 1/3 of the lift that we're seeing. Extended store hours are driving close to another 1/3. And then the other 1/3, I think, is, I'm going to say, stores that now say Leslie's Pros and the Pro affiliate program, just lifting the awareness of our Pro program in the trading region. Alex Maroccia: Okay. Understood. And then secondly, I'm sure your team wasn't anticipating a chlorine shortage during the AccuBlue Home rollout. Could a wider rollout be impacted at all by pricing pressures or inventory constraints? Mike Egeck: Well, we've said that we're going to limit this initial version 1.0 in a pretty significant way. In some ways, it's like a broader beta test. And we're going to focus it on our loyalty customers. And in terms of our modeling for the supply that AccuBlue Home customers will need, we'll be in good shape. We'll be fine. Version 2.0, which we anticipate we will be scaling to a more significant volume, is scheduled for the second half of next year. And as near as we can tell at this moment, chlorine supply should be more normalized at that point. Operator: This concludes today's question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Mike Egeck: I'd like to thank everybody for joining us today. It was a good quarter, and we look forward to presenting Q3 and Q4 when we get to those points. Thank you very much. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Mizuho Slashes Leslie’s Price Target to $1, Shares Drops 4%
Mizuho lowered its price target on Leslie's (NASDAQ:LESL) to $1 from $3 while maintaining a Neutral rating, citing persistent top-line headwinds and deteriorating margins that have prompted downward revisions to earnings forecasts. As a result, the company’s shares fell over 4% intra-day today.
The analysts reduced Leslie’s 2025 adjusted EBITDA estimate to $98 million from $108 million, aligning it closer to company guidance of $96–$116 million. For 2026, the estimate was cut sharply to $122 million from $167 million, reflecting heightened concerns about the company’s ability to regain momentum.
Given Leslie’s elevated leverage of around 6x net debt/EBITDA at the end of Q2, Mizuho switched its valuation methodology from an EPS-based multiple to EV/EBITDA, setting the new $1 price target at around 8x 2026 adjusted EBITDA. This multiple mirrors forward valuations seen among struggling retail peers such as Target, Albertsons, and Best Buy.
Mizuho’s cautious stance reflects skepticism over Leslie’s ability to navigate current challenges, warning that prolonged sales and margin pressures could weigh heavily on both earnings and balance sheet flexibility.
Leslie's, Inc. (NASDAQ: LESL) Earnings Miss Amidst Competitive Pressures
- Leslie's, Inc. (NASDAQ:LESL) reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11, marking a significant downturn in performance.
- Despite the earnings miss, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million but still reflecting challenges in maintaining growth.
- The company's financial metrics, including a negative price-to-earnings (P/E) ratio of -27.76 and a debt-to-equity ratio of -1.58, highlight ongoing financial challenges.
Leslie's, Inc. (NASDAQ:LESL) is a prominent player in the U.S. pool and spa care industry, known for its direct-to-consumer approach. The company offers a wide range of products and services, catering to pool owners and professionals. Despite its strong market presence, LESL faces competition from other consumer product companies within the Zacks Consumer Products - Staples industry.
On November 25, 2024, LESL reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11. This represents a significant earnings miss, as highlighted by Zacks, with a negative surprise of 81.82%. The company had previously reported a positive earnings surprise of 6.25% in the prior quarter, indicating a downturn in performance.
Despite the earnings shortfall, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million. However, this revenue figure still fell short of the Zacks Consensus Estimate by 1.81%. Compared to the same period last year, revenue decreased from $432.37 million, reflecting challenges in maintaining growth.
The company's financial metrics reveal its current struggles. LESL has a negative price-to-earnings (P/E) ratio of -27.76, indicating ongoing losses. The price-to-sales ratio of 0.49 suggests the stock is valued at less than half of its sales per share. Additionally, the enterprise value to sales ratio is 0.62, reflecting the company's total valuation relative to its sales.
LESL's liquidity position appears stable, with a current ratio of 1.71, indicating the ability to cover short-term obligations. However, the debt-to-equity ratio of -1.58 suggests more liabilities than equity, highlighting financial challenges. Despite these hurdles, CEO Jason McDonell noted strong performance in the Pro segment, although store traffic and larger-ticket categories remain soft.
Leslie's, Inc. (NASDAQ: LESL) Earnings Miss Amidst Competitive Pressures
- Leslie's, Inc. (NASDAQ:LESL) reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11, marking a significant downturn in performance.
- Despite the earnings miss, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million but still reflecting challenges in maintaining growth.
- The company's financial metrics, including a negative price-to-earnings (P/E) ratio of -27.76 and a debt-to-equity ratio of -1.58, highlight ongoing financial challenges.
Leslie's, Inc. (NASDAQ:LESL) is a prominent player in the U.S. pool and spa care industry, known for its direct-to-consumer approach. The company offers a wide range of products and services, catering to pool owners and professionals. Despite its strong market presence, LESL faces competition from other consumer product companies within the Zacks Consumer Products - Staples industry.
On November 25, 2024, LESL reported an earnings per share (EPS) of -$0.05, missing the estimated EPS of $0.11. This represents a significant earnings miss, as highlighted by Zacks, with a negative surprise of 81.82%. The company had previously reported a positive earnings surprise of 6.25% in the prior quarter, indicating a downturn in performance.
Despite the earnings shortfall, LESL generated a revenue of approximately $397.9 million, surpassing the estimated $178.6 million. However, this revenue figure still fell short of the Zacks Consensus Estimate by 1.81%. Compared to the same period last year, revenue decreased from $432.37 million, reflecting challenges in maintaining growth.
The company's financial metrics reveal its current struggles. LESL has a negative price-to-earnings (P/E) ratio of -27.76, indicating ongoing losses. The price-to-sales ratio of 0.49 suggests the stock is valued at less than half of its sales per share. Additionally, the enterprise value to sales ratio is 0.62, reflecting the company's total valuation relative to its sales.
LESL's liquidity position appears stable, with a current ratio of 1.71, indicating the ability to cover short-term obligations. However, the debt-to-equity ratio of -1.58 suggests more liabilities than equity, highlighting financial challenges. Despite these hurdles, CEO Jason McDonell noted strong performance in the Pro segment, although store traffic and larger-ticket categories remain soft.
Loop Capital Cuts Leslie’s Price Target to $3 Amid Negative Q3 Pre-Announcement, Shares Plunge 30%
Loop Capital analysts reduced the price target on Leslie's (NASDAQ:LESL) to $3 from $6 while keeping a Hold rating on the stock.
The analysts remarked that Leslie's issued a negative pre-announcement ahead of its third-quarter 2024 results, primarily attributing the downturn to poor weather and ongoing softness in big-ticket repairs and replacements (R&R) sales. As a result, shares plunged more than 30% yesterday.
The analysts noted that Pool Corporation had similarly pre-announced negative results about three weeks prior, and channel checks earlier in the quarter had indicated ongoing challenges, making it reasonable to expect a pre-announcement from Leslie's as well. However, the extent of the guidance reduction for both the quarter and the full year was more severe than anticipated.
The company's implied fourth-quarter guidance suggests that sales softness will continue, regardless of weather conditions, and there will be limited gross margin recovery despite the favorable comparison to the previous year's inventory de-stocking period. The analysts pointed out that visibility into a return to normal growth remains limited due to persistent underlying challenges following the pandemic's substantial pull-forward effects. Additionally, Leslie's faces an unusually high leverage ratio.
Loop Capital Cuts Leslie’s Price Target to $3 Amid Negative Q3 Pre-Announcement, Shares Plunge 30%
Loop Capital analysts reduced the price target on Leslie's (NASDAQ:LESL) to $3 from $6 while keeping a Hold rating on the stock.
The analysts remarked that Leslie's issued a negative pre-announcement ahead of its third-quarter 2024 results, primarily attributing the downturn to poor weather and ongoing softness in big-ticket repairs and replacements (R&R) sales. As a result, shares plunged more than 30% yesterday.
The analysts noted that Pool Corporation had similarly pre-announced negative results about three weeks prior, and channel checks earlier in the quarter had indicated ongoing challenges, making it reasonable to expect a pre-announcement from Leslie's as well. However, the extent of the guidance reduction for both the quarter and the full year was more severe than anticipated.
The company's implied fourth-quarter guidance suggests that sales softness will continue, regardless of weather conditions, and there will be limited gross margin recovery despite the favorable comparison to the previous year's inventory de-stocking period. The analysts pointed out that visibility into a return to normal growth remains limited due to persistent underlying challenges following the pandemic's substantial pull-forward effects. Additionally, Leslie's faces an unusually high leverage ratio.
Leslie's, Inc. Upgraded to Buy From Hold at Berenberg Bank
Berenberg Bank upgraded Leslie's, Inc. (NASDAQ:LESL) to buy from hold and increased its price target on the company’s shares to $30 from $28, as it believes the recent pullback in the company’s stock price since early May presents a strong buying opportunity.
According to the analysts at Berenberg Bank, margin pressures and a recently announced secondary offering boosted the investors’ concerns, but they think industry tailwinds and the positive effect of the company’s growth strategies will allow it to strongly take advantage of industry tailwinds. While they previously rated the company a Hold as they were having difficulties to find valuation upside, they now think the shares offer an attractive entry point.
Leslie's, Inc. Upgraded to Buy From Hold at Berenberg Bank
Berenberg Bank upgraded Leslie's, Inc. (NASDAQ:LESL) to buy from hold and increased its price target on the company’s shares to $30 from $28, as it believes the recent pullback in the company’s stock price since early May presents a strong buying opportunity.
According to the analysts at Berenberg Bank, margin pressures and a recently announced secondary offering boosted the investors’ concerns, but they think industry tailwinds and the positive effect of the company’s growth strategies will allow it to strongly take advantage of industry tailwinds. While they previously rated the company a Hold as they were having difficulties to find valuation upside, they now think the shares offer an attractive entry point.
