8-K: Leslie's Inc. Reports Fourth Quarter and Fiscal Year 2024 Results; Provides Q1 2025 Outlook

Leslie's Inc. announced its fourth quarter and fiscal year 2024 financial results, showing a decrease in sales and a net loss, while also providing a first quarter fiscal 2025 outlook.

Summary

• Leslie's Inc. reported a fourth-quarter sales of $397.9 million, an 8% decrease compared to the prior year, and full-year sales of $1,330.1 million, an 8.3% decrease year-over-year.
• The company experienced a net loss of $9.9 million in the fourth quarter and $23.4 million for the full fiscal year.
• Adjusted EBITDA was $43.0 million for the fourth quarter and $108.7 million for the full year.
• Diluted earnings per share were $(0.05) for the quarter and $(0.13) for the full year, while adjusted diluted earnings per share were $0.02 for the quarter and $(0.01) for the full year.
• Comparable sales decreased by 8.3% in the fourth quarter and 8.8% for the full year.
• Gross profit decreased by 10.6% in the fourth quarter to $143.2 million and by 13.0% for the full year to $476.8 million.
• The company's cash and cash equivalents increased to $108.5 million, and inventories decreased to $234.3 million.
• For the first quarter of fiscal 2025, the company anticipates sales between $169 million and $176 million, a net loss between $(41) million and $(39) million, and adjusted EBITDA between $(29) million and $(27) million.

Sentiment

Score: 4

Explanation: The sentiment is negative due to decreased sales, net losses, and a weak outlook, although there are some positives such as reduced SG&A and improved cash flow. The overall tone is cautious.

Positives

• SG&A expenses decreased by 4.0% in the fourth quarter and $26.4 million for the full year.
• Cash and cash equivalents increased by $53.1 million to $108.5 million.
• Inventories decreased by $77.5 million, indicating better inventory management.
• Net cash provided by operating activities was $107.5 million for fiscal 2024, a significant improvement from $6.5 million in the prior year.
• The company saw strong performance in its Pro segment.

Negatives

• Sales decreased by 8.0% in the fourth quarter and 8.3% for the full year.
• The company experienced a net loss of $9.9 million in the fourth quarter and $23.4 million for the full year.
• Gross profit decreased by 10.6% in the fourth quarter and 13.0% for the full year.
• Gross margin decreased to 36.0% in the fourth quarter and 35.8% for the full year.
• Adjusted EBITDA decreased to $43.0 million in the fourth quarter and $108.7 million for the full year.
• Diluted earnings per share were $(0.05) for the quarter and $(0.13) for the full year.
• The company expects a net loss between $(41) million and $(39) million for the first quarter of fiscal 2025.
• There was softness in store traffic and larger-ticket and discretionary categories.

Risks

• The company's performance is sensitive to weather conditions, economic changes, and the housing market.
• There are risks associated with supply disruptions and maintaining relationships with suppliers.
• The company faces competition from mass merchants and specialty retailers.
• The company's ability to implement technology initiatives and attract and retain qualified personnel poses a risk.
• Regulatory changes and evolving legal standards, including ESG matters, could impact the business.
• The company's ability to obtain additional capital to finance operations is a risk.
• Commodity price inflation and deflation could affect the company's profitability.
• Cyber incidents and other security threats pose a risk to the business.
• The company's ability to remediate material weaknesses in internal controls is a risk.

Future Outlook

The company expects first-quarter fiscal 2025 sales to be between $169 million and $176 million, with a net loss between $(41) million and $(39) million, and adjusted EBITDA between $(29) million and $(27) million.

Management Comments

• Our fourth quarter results were in line with our revised expectations on the top-line, and we saw strong performance in our Pro segment with some continued softness in store traffic and larger-ticket and discretionary categories.
• Profitability was affected by deleverage from the sales decline and a one-time contract item, though we have remained disciplined on SG&A expenses.
• While we continue to operate in a dynamic environment, which has been felt acutely across the pool industry for the last two years, I see a bright future and compelling opportunities for Leslies.
• Since joining Leslies in September, Ive been in the market talking with customers, vendors, and associates and its clear that Leslies is a trusted brand with a rich legacy and a strong market leadership position.
• With the customer as our north star, we are developing and beginning to execute on the strategy and initiatives to drive long-term profitable growth.

Industry Context

The company acknowledges the dynamic environment and challenges faced by the pool industry over the past two years, indicating that these results are not isolated to Leslie's but are part of a broader industry trend. The company is focusing on customer-centric strategies to enhance its competitive position.

Comparison to Industry Standards

• Leslie's performance is being impacted by similar headwinds as other retailers in the discretionary spending sector, such as reduced consumer spending on non-essential items.
• The decrease in comparable sales is a concern, as it indicates a decline in customer traffic and spending, which is a key metric for retail businesses.
• The company's gross margin decline is similar to what other retailers are experiencing due to increased costs and promotional activities.
• The decrease in inventory is a positive sign, as it indicates better inventory management and reduced risk of obsolescence, which is a common challenge in the retail industry.
• The company's focus on customer-centric strategies is a common approach in the retail industry to improve customer loyalty and drive sales.

Stakeholder Impact

• Shareholders will be negatively impacted by the net loss and decreased earnings per share.
• Employees may be affected by the company's restructuring activities and cost-cutting measures.
• Customers may experience changes in product availability and pricing due to supply chain and economic factors.
• Suppliers may be impacted by changes in the company's purchasing patterns and inventory management.
• Creditors may be concerned about the company's financial performance and ability to repay debt.

Next Steps

• The company plans to detail its strategic roadmap in the coming quarters.
• The company will continue to execute on its customer-centric strategy and initiatives to drive long-term profitable growth.

Key Dates

Keywords

pool supplies, spa care, retail, financial results, EBITDA, sales, net loss, earnings per share, comparable sales, gross margin