Sign in
LI

Leslie's, Inc. (LESL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 sales fell 8.0% to $397.9M; adjusted EPS was $0.02 and adjusted EBITDA was $43.0M, as gross margin declined to 36.0% due to occupancy/distribution deleverage and a one-time ~$5M contractual warranty/rebate item .
  • PRO channel was resilient (down ~1%), while residential traffic and larger-ticket discretionary categories remained soft; SG&A fell 4% YoY, showing cost discipline .
  • Results missed prior Q3 guidance for Q4 (gross margin ~39% guided vs 36.0% actual; adjusted EBITDA $51–$65M guided vs $43.0M actual; adjusted EPS $0.06–$0.12 guided vs $0.02 actual). Ex the one-time contract item, GM would have been 37.3% (+20 bps YoY) but still short of guidance .
  • FY25 outlook withheld; company provided only Q1 FY25 guidance with sales $169–$176M, adjusted EBITDA $(29)–$(27)M, and adjusted diluted EPS loss of $(0.21)–$(0.20), while targeting ~$25M debt paydown in Q1 (capital allocation priority) .

What Went Well and What Went Wrong

  • What Went Well

    • PRO segment strength: Q4 PRO pool sales down ~1% vs residential down ~10%; management highlighted targeted flash sales, pricing competitiveness, and PRO Partner growth to ~4,400 (+14% YoY) .
    • Cost control: SG&A decreased 4% YoY to $116.8M, supporting future operating leverage when sales recover .
    • Strategic clarity under new CEO: focus on customer centricity, convenience, and asset utilization (localized inventory, “never outs,” leveraging Blue Yonder and first‑party data) to drive long‑term profitable growth. “We plan to leverage our competitive advantages to drive long-term profitable growth” .

  • What Went Wrong

    • Top-line and traffic: Comparable sales declined 8.3% (non-comp $1.5M), driven primarily by softer traffic; residential down ~10%, hot tub down ~5% .
    • Margin pressure: Gross margin fell 100 bps YoY to 36.0% from 37.0%, driven by occupancy/DC deleverage and a one-time ~$5M warranty/rebate item; operating income fell to $26.4M from $38.5M .
    • Earnings miss vs Q3 guidance: Q4 adjusted EBITDA of $43.0M and adjusted EPS of $0.02 missed guidance ranges ($51–$65M EBITDA; $0.06–$0.12 EPS); gross margin ~39% guided vs 36.0% actual (37.3% ex one‑time) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Sales ($USD Millions)$432.4 $569.6 $397.9
Gross Profit ($USD Millions)$160.2 $228.8 $143.2
Gross Margin (%)37.0% 40.2% 36.0%
SG&A ($USD Millions)$121.6 $131.1 $116.8
Operating Income ($USD Millions)$38.5 $97.7 $26.4
Interest Expense ($USD Millions)$17.2 $18.2 $17.0
Net Income ($USD Millions)$16.5 $60.7 $(9.9)
Diluted EPS ($USD)$0.09 $0.33 $(0.05)
Adjusted Net Income ($USD Millions)$25.7 $63.3 $4.4
Adjusted Diluted EPS ($USD)$0.14 $0.34 $0.02
Adjusted EBITDA ($USD Millions)$59.5 $109.5 $43.0

KPIs and Mix

KPIQ2 2024Q3 2024Q4 2024
Comparable Sales (%)(12.0)% (7.0)% (8.3)%
Non-Comparable Sales ($USD Millions)$1.5 $2.6 $1.5
Residential Pool Sales YoY (%)(12)% (8)% (10)%
PRO Pool Sales YoY (%)(9)% (2)% (1)%
Residential Hot Tub Sales YoY (%)(14)% (4)% (5)%
Gross Margin ex One-Time (%)N/AN/A37.3% (ex ~$5M contract item)
Diluted Weighted Avg Shares (Millions)~185 185 185 (guided for Q1’25)
PRO Partners (#)4,088 4,254 4,400
DIY Loyalty PenetrationN/AN/A“Over 8 out of 10 DIY” members

Segment detail: The company reports by consumer group rather than GAAP segments; detailed numeric revenue by segment not disclosed .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Sales YoY (%)Q4 2024Midpoint down ~7% YoY Down 8.0% YoY Lower (miss)
Gross Margin (%)Q4 2024~39% 36.0% (37.3% ex one-time) Lower (miss)
Adjusted EBITDA ($M)Q4 2024$51–$65 $43.0 Lower (miss)
Adjusted Diluted EPS ($)Q4 2024$0.06–$0.12 $0.02 Lower (miss)
Sales ($M)Q1 2025N/A$169–$176 New guidance
Gross Profit ($M)Q1 2025N/A$45–$48 New guidance
Net Loss ($M)Q1 2025N/A$(41)–$(39) New guidance
Adjusted Net Loss ($M)Q1 2025N/A$(39)–$(37) New guidance
Adjusted EBITDA ($M)Q1 2025N/A$(29)–$(27) New guidance
Adjusted Diluted EPS ($)Q1 2025N/A$(0.21)–$(0.20) New guidance
Debt Paydown Target ($M)Q1 2025N/A~$25 New capital allocation detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Customer Centricity & LoyaltyPool Perks loyalty outperformed; file stabilizing; AccuBlue Home gaining traction New CEO elevating customer focus; >80% DIY in loyalty; personalization using first‑party data Improving
Inventory & Supply ChainBlue Yonder tool, inventory down >20%; expensing capitalized DC costs; margin headwinds Precision/localized assortment; “never outs”; aim to reduce inventory adjustments/shrink Improving (execution)
PRO ChannelQ2: PRO down 9%; Q3: PRO down 2%; PRO Partner contracts 4,254 Q4 PRO down ~1%; PRO Partners ~4,400 (+14% YoY); targeted flash sales, pricing competitiveness Improving
Macro/WeatherQ2/Q3: slow season start, hurricanes; cautious consumer affects discretionary; equipment units back to 2019 base Post-storm cleanup buoyed early Q1; larger-ticket categories still soft; dynamic environment Mixed
Pricing & Gross MarginChemical price actions headwinds; occupancy deleverage; aim for ~39% GM in Q4 GM 36.0%; one-time ~$5M contractual rebate/warranty hit; ex one-time 37.3% (+20 bps YoY) Worsened vs guide; one-time resolved going forward
E-commerce/OmnichannelDigital share gains; marketplace pricing sharpness; proprietary site synergies Proprietary site positive; integrate app/site with stores; meet customers where they are Improving
Capital AllocationTarget leverage ≤3x; inventory/capex controls Pay down ~$25M debt in Q1; limit new stores (~3 in FY25) and M&A Deleveraging focus
Regulatory/Marketplace HygieneConcern over unregistered chlorine on marketplaces; Amazon cleanup improving No new regulatory headwinds disclosed; contract warranty/rebate issue fixed prospectively Stable/Improving

Management Commentary

  • Strategic roadmap: “It starts with 3 strategic themes: customer centricity, convenience and asset utilization… intended to deliver sustainable, profitable growth” .
  • Inventory and assortment: “New inventory segmentation… ‘never outs’… evolving focus towards localized assortment… precision inventory approach” .
  • Debt reduction focus: “Consistent with our primary capital allocation priority of reducing debt, we expect to pay down approximately $25 million… during the current quarter” .
  • Margin context: “Excluding this one-time item, gross margin would have been 37.3%, an increase of 20 basis points versus the prior year” .
  • CEO tone: “We believe Leslie’s is in an advantaged industry… differentiated omnichannel solutions and a great team… perform while we transform” .

Q&A Highlights

  • Comps driven by traffic, not ticket: Q4 comps (8.3)% primarily traffic-driven; initiatives laser-focused on driving top line .
  • PRO growth drivers: Flash sales/promo events, sharper pricing on key SKUs, PRO Partners +14% YoY to ~4,400 .
  • Gross margin path: Focus more on top-line leverage; one-time $5M warranty/rebate issue renegotiated (removed going forward) .
  • Inventory strategy: Precision/localized allocation; consolidate stuck inventory to DCs; invest in “never outs” .
  • Capital allocation: Limit new stores (~3 in FY25) and M&A to prioritize debt paydown; magnitude of further paydown to be updated in February .

Estimates Context

  • Consensus EPS and revenue estimates for Q4 2024 were not available due to S&P Global request limits at time of retrieval. As a result, quantitative comparisons to Wall Street consensus could not be provided based on S&P Global data at this time. Values would have been retrieved from S&P Global if available.

Key Takeaways for Investors

  • PRO resilience is the bright spot; targeted pricing/promo tactics and PRO Partner expansion suggest this channel can anchor near-term sales amid residential traffic softness .
  • Margin misses were primarily structural (occupancy/DC deleverage) and an identifiable one-time contract warranty/rebate charge (~$5M) that has been fixed prospectively; expect cleaner gross margin comparisons in FY25 .
  • Near-term setup: Management only guided Q1 FY25 with a loss and negative adjusted EBITDA; debt paydown of ~$25M is the near-term capital allocation catalyst .
  • Medium-term thesis: New CEO’s focus on customer centricity, convenience, and asset utilization—paired with precision inventory (“never outs”), localization, and omnichannel—can grow comps and improve leverage as traffic recovers .
  • Watch traffic and discretionary categories: Larger-ticket equipment/hot tubs remain cautious; equipment units normalized to 2019 base, implying potential stabilization from here as macro improves .
  • Liquidity and working capital execution improved: Cash $109M, inventories reduced to $234M (−25% YoY), operating cash flow $107.5M in FY2024, supporting debt reduction plans .
  • Near-term stock catalysts: February update on debt paydown trajectory; operational evidence of traffic recovery into pool season; updates on strategic roadmap execution and loyalty/e-commerce progress .
Note: All quantitative figures and statements are sourced from primary company documents and earnings call commentary as cited.

Citations: