LESL Q1 Earnings Call: Weather-Driven Sales Miss, Strategic Initiatives Take Center Stage
Pool products retailer Leslie's (NASDAQ:LESL) fell short of the market's revenue expectations in Q1 CY2025, with sales falling 6.1% year on year to $177.1 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $1.34 billion at the midpoint. Its non-GAAP loss of $0.25 per share was 4.6% below analysts' consensus estimates.
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Revenue: $177.1 million vs analyst estimates of $184.5 million (6.1% year-on-year decline, 4% miss)
Adjusted EPS: -$0.25 vs analyst expectations of -$0.24 (4.6% miss)
Adjusted EBITDA: -$36.06 million vs analyst estimates of -$35.14 million (-20.4% margin, 2.6% miss)
Adjusted EPS guidance for the full year is $0.03 at the midpoint, beating analyst estimates by 11.1%
EBITDA guidance for the full year is $106 million at the midpoint, above analyst estimates of $105 million
Operating Margin: -27.3%, down from -16.2% in the same quarter last year
Free Cash Flow was -$55.76 million compared to -$56.48 million in the same quarter last year
Locations: 1,020 at quarter end, up from 1,010 in the same quarter last year
Same-Store Sales fell 6.7% year on year (-12.1% in the same quarter last year)
Market Capitalization: $129.7 million
Leslie's first quarter results reflected the impact of unusually cold weather, which management cited as the main factor behind reduced foot traffic and weaker sales performance. CEO Jason McDonald pointed specifically to February as a period of significant disruption, while highlighting steady progress in conversion rates and inventory optimization. The company reported that improved in-stock levels and enhanced store team expertise contributed to higher conversion, but these gains were not enough to offset the top-line softness caused by weather-related headwinds.
Looking ahead, Leslie's leadership reaffirmed its full-year outlook, attributing its confidence to ongoing transformation initiatives. Management emphasized the expected benefits from recent investments in local fulfillment centers, enhanced loyalty programs, and cost optimization. Interim CFO Tony Iskander noted that strategic pricing actions and reduced capital expenditures are expected to help offset tariff impacts and support debt reduction. While acknowledging that some initiatives will take time to yield visible results, management maintained that continued execution on its strategic priorities positions the company for improved performance through the rest of the year.
Despite a challenging quarter shaped by external and internal factors, Leslie's management outlined several operational and strategic actions that underpinned both the reported results and the company's outlook.
Weather-driven sales impact: Management attributed the sales decline primarily to colder-than-usual weather in February, which led to reduced store traffic and lower demand for pool-related products, especially in residential categories.
Inventory and fulfillment upgrades: The rollout of 26 local fulfillment centers (LFCs) was completed ahead of schedule and under budget. These centers are already supporting improved inventory availability and higher in-stock rates, which management believes contributed to a notable increase in customer conversion rates.
Pro customer focus: Leslie's saw relative strength in its Pro segment (serving pool service professionals), where targeted efforts such as new partner contracts and strategic communications are helping to gain market share. Management noted that all 1,000+ stores are now focused on professional customers, not just historically designated Pro locations.
Loyalty and digital enhancements: The company introduced a revamped Pool Perks loyalty program—including new tier structures and greater personalization—alongside website and mobile app enhancements. These digital upgrades have improved service scheduling and shopping experiences, with early signs of increased engagement.
Cost optimization initiatives: Leslie's has identified $5 to $10 million in annualized cost savings, primarily within indirect procurement. The company is also leveraging improved analytics to reduce inventory and working capital, with the goal of accelerating EBITDA growth and supporting debt reduction.
Management's outlook for the remainder of the year centers on executing transformation initiatives to drive operational efficiency, customer engagement, and financial improvement, while remaining cautious about external risks and evolving customer behavior.
Peak season execution: The company expects that improvements in inventory management, fulfillment speed, and enhanced loyalty programs will support higher sales and profitability during the critical summer pool season.
Cost discipline and margin recovery: Strategic pricing actions are intended to offset tariff-related cost pressures, while cost optimization efforts and lower capital expenditures should help improve margins and free cash flow.
Uncertainties in consumer demand: Management acknowledged that weather variability and lingering softness in residential demand present ongoing risks to sales growth, but believes that investments in customer experience and omnichannel capabilities can help mitigate these risks.
Jonathan Matuszewski (Jefferies): Asked about Leslie's competitive positioning and market share trends versus peers. CEO Jason McDonald said Pro sales are gaining share, while residential remains an area of focus for improvement.
Jonathan Matuszewski (Jefferies): Inquired about the scope and rationale of upcoming pricing actions. Interim CFO Tony Iskander clarified that price increases will only be used to offset tariff impacts, which represent less than 1% of sales.
Lauren Ng (Morgan Stanley): Probed whether comp weakness was driven by factors besides weather. Management pointed to data showing conversion rate improvements and emphasized that weather was the main driver of the sales decline.
David Bellinger (Mizuho): Asked if improved in-stock levels would translate to better sales in future quarters. Jason McDonald stated that higher conversion rates should benefit sales, particularly as LFCs become fully operational during peak season.
Steve Forbes (Guggenheim): Sought clarity on the cost optimization pillar and long-term expense ratio improvement. Tony Iskander outlined initial savings in indirect spend and emphasized ongoing evaluation of asset utilization and organizational efficiency.
Looking ahead, the StockStory team will be monitoring (1) the impact of Leslie's local fulfillment centers and improved in-stock rates on both conversion and sales during peak pool season, (2) initial customer response and incremental sales from the enhanced Pool Perks loyalty program and digital experience upgrades, and (3) tangible progress in cost optimization and debt reduction efforts. The effectiveness of these initiatives in offsetting external pressures, such as tariffs and variable weather, will be key to the company's trajectory.
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