8-K: Leslie's to Close 80-90 Stores Amid Q4 Loss, Strategic Overhaul

Leslie's, Inc. announced a significant net loss for Q4 and FY25, alongside a strategic plan to close 80-90 underperforming stores and one distribution center to improve long-term profitability.

Summary

• Leslie's, Inc. reported a net loss of $(162.8) million for Q4 2025, significantly wider than $(9.9) million in the prior year.
• For the full fiscal year 2025, the company posted a net loss of $(237.0) million, compared to $(23.4) million in the prior year.
• The company plans to close approximately 80-90 underperforming U.S. stores and one distribution center, with closures expected by the end of the first fiscal quarter of 2026.
• These closures are expected to result in pre-tax charges of $12.0 million to $17.0 million in Q1 2026, primarily from $8.0 million in long-lived asset impairment and $4.0 million to $9.0 million in inventory write-offs.
• Q4 2025 sales decreased by (2.2)% to $389.2 million, with comparable sales down (6.5)%.
• FY25 sales decreased by (6.6)% to $1,242.0 million, with comparable sales down (8.1)%.
• The company incurred $183.8 million in impairment charges in Q4 and FY25, including $180.7 million for goodwill.
• Adjusted EBITDA for Q4 2025 increased to $45.2 million from $43.0 million in the prior year, exceeding the high end of guidance.
• Adjusted EBITDA for FY25 decreased to $61.4 million from $108.7 million in the prior year.
• Available liquidity stands at approximately $168 million with no borrowings under its ABL facility.
• Inventory efficiency improved with an 11.2% year-over-year reduction, totaling $208.0 million as of October 4, 2025.
• The company expects FY26 sales between $1,100 million and $1,250 million, and Adjusted EBITDA between $55 million and $75 million.

Sentiment

Score: 3

Explanation: The company reported substantial net losses for both the quarter and the full fiscal year, driven by significant impairment charges and declining sales. While Q4 adjusted EBITDA exceeded guidance, the overall financial health has deteriorated, necessitating a major restructuring plan involving numerous store closures and cost reductions. The future outlook, while providing a path to recovery, still projects lower sales and adjusted EBITDA for FY26 compared to FY25.

Positives

• Fourth quarter sales and adjusted EBITDA exceeded the high end of previously established guidance range.
• Adjusted EBITDA for Q4 2025 increased to $45.2 million compared to $43.0 million in the prior year period.
• Gross profit for Q4 2025 increased by 4.8% to $150.1 million, with gross margin improving to 38.6% from 36.0% in the prior year.
• Available liquidity is approximately $168 million with no borrowings under the ABL facility.
• Improved inventory efficiency with an 11.2% year-over-year reduction, totaling $208.0 million as of October 4, 2025.
• Interest expense for FY25 decreased by $7.5 million to $62.9 million compared to $70.4 million in the prior year.
• Capital expenditures for FY25 decreased to $25.5 million from $47.2 million in the prior year.
• The strategic plan to close underperforming stores and a distribution center is expected to yield immediate EBITDA improvement for FY26.
• Direct cost reductions of $7-$12 million are planned, which will be reinvested into the customer price value proposition.

Negatives

• Net loss for Q4 2025 was $(162.8) million, a significant increase from $(9.9) million in the prior year.
• Net loss for FY25 was $(237.0) million, a significant increase from $(23.4) million in the prior year.
• Diluted loss per share for Q4 2025 was $(17.54), compared to $(1.07) in the prior year.
• Diluted loss per share for FY25 was $(25.51), compared to $(2.53) in the prior year.
• Adjusted net income for Q4 2025 decreased to $0.8 million from $4.4 million in the prior year.
• Adjusted net loss for FY25 was $(43.7) million, compared to $(1.1) million in the prior year.
• Adjusted diluted earnings per share for Q4 2025 decreased to $0.09 from $0.47 in the prior year.
• Adjusted diluted loss per share for FY25 was $(4.70), compared to $(0.12) in the prior year.
• Sales for Q4 2025 decreased by (2.2)% to $389.2 million.
• Comparable sales for Q4 2025 decreased by (6.5)%.
• Sales for FY25 decreased by (6.6)% to $1,242.0 million.
• Comparable sales for FY25 decreased by (8.1)%.
• Gross profit for FY25 decreased by (7.8)% to $439.6 million, with gross margin decreasing to 35.4% from 35.8% in the prior year.
• Selling, general and administrative expenses (SG&A) for FY25 increased by $6.0 million to $425.7 million.
• Incurred substantial impairment charges of $183.8 million in Q4 and FY25, including $180.7 million for goodwill and $3.1 million for asset write-offs.
• Cash and cash equivalents decreased by $44.2 million to $64.3 million as of October 4, 2025.
• The company plans to close 80-90 underperforming stores and one distribution center, indicating significant operational challenges.
• Expected pre-tax charges of $12.0 million to $17.0 million in Q1 2026 related to store closures.

Risks

• Ability to execute on growth strategies.
• Supply disruptions or increased costs, including from trade policies.
• Ability to maintain favorable relationships with suppliers and manufacturers.
• Competition from mass merchants and specialty retailers.
• Impacts on business from sensitivity to weather conditions.
• Changes in the economy, including high interest rates, recession fears, inflationary pressures, and changes in trade policies.
• Impacts from geopolitical events or conflicts.
• Impacts from the housing market.
• Disruptions in the operations of distribution centers.
• Ability to implement technology initiatives without disrupting operations.
• Ability to execute on management transition plans and to attract and retain senior management and other qualified personnel.
• Regulatory changes and developments affecting current and future products, including evolving legal standards, regulations, and stakeholder expectations concerning sustainability matters.
• Ability to obtain additional capital to finance operations.
• Commodity price inflation and deflation.
• Impacts on business from epidemics, pandemics, or natural disasters.
• Impacts on business from cyber incidents and other security threats or disruptions.
• Ability to regain and maintain compliance with Nasdaq listing standards.
• Ability to remediate material weaknesses or other deficiencies in internal control over financial reporting or to maintain effective disclosure controls and procedures and internal control over financial reporting.

Future Outlook

The company anticipates generating the majority of its sales and earnings during the second half of fiscal year 2026 due to the seasonal nature of the industry. For FY26, sales are projected to be between $1,100 million and $1,250 million, with Adjusted EBITDA expected to range from $55 million to $75 million. Capital expenditures are guided to be $20 million to $25 million. This outlook includes the impact of the planned store and distribution center closures and associated costs, which are part of a strategic transformation plan focused on strengthening the balance sheet, optimizing the cost structure, and rebuilding stakeholder confidence.

Management Comments

• "We delivered fourth quarter sales and adjusted EBITDA above the high end of our previously established guidance range and are today announcing the closure of 80-90 underperforming stores and one distribution center as we work with speed and urgency to improve Leslie's operations and establish a clear path to financial recovery." Jason McDonell, CEO.
• "In addition, we will continue to focus diligently on rightsizing the cost base of our business by reducing inventory 10% year over year and delivering direct cost reductions of $7-$12 million which we will invest back into our customer price value proposition." Jason McDonell, CEO.
• "These initiatives represent the next phase of our strategic transformation plan, focused on strengthening our balance sheet, optimizing our cost structure, and rebuilding stakeholder confidence." Jason McDonell, CEO.
• "We remain committed to executing this strategic transformation with urgency and delivering the results our customers, employees, and investors expect." Jason McDonell, CEO.

Industry Context

Leslie's operates in the U.S. pool and spa care industry, serving both residential and professional customers. The industry is seasonal, with the majority of sales and earnings typically generated in the second half of the fiscal year. The company's strategic transformation, including store closures and cost reductions, suggests a challenging market environment, potentially impacted by broader economic factors like high interest rates and housing market conditions, as well as competition from mass merchants and specialty retailers. The focus on optimizing cost structure and inventory efficiency indicates a response to competitive pressures and a need to improve profitability in a potentially contracting or stagnant market.

Stakeholder Impact

• Shareholders: Significant negative impact due to substantial net losses, diluted loss per share, and impairment charges. The strategic transformation aims to rebuild confidence but involves short-term costs and uncertainty.
• Employees: Employees at the 80-90 closing stores and one distribution center will be impacted by job losses or relocation.
• Customers: Potential impact on customer access and service in areas where stores are closing, though the company aims to reinvest cost savings into the customer value proposition.
• Suppliers: Potential impact from reduced inventory levels and store footprint, though the company aims to maintain favorable relationships.
• Creditors: The company has $168 million in available liquidity and no ABL borrowings, but the significant losses and restructuring indicate financial stress that could concern creditors.

Next Steps

• Substantially complete the closure of 80-90 underperforming U.S. stores and one distribution center by the end of the first fiscal quarter of 2026.
• Incur pre-tax charges of approximately $12.0 million to $17.0 million in Q1 2026 related to the operational streamlining plan.
• Continue to focus on rightsizing the cost base of the business by reducing inventory and delivering direct cost reductions of $7-$12 million.
• Invest direct cost reductions back into the customer price value proposition.
• Execute the strategic transformation plan focused on strengthening the balance sheet, optimizing the cost structure, and rebuilding stakeholder confidence.
• Host a conference call on December 2, 2025, at 5:00 p.m. Eastern time to discuss financial results and strategic transformation initiatives.

Key Dates

Recommendation

The company reported a massive net loss for the fiscal year, driven by significant impairment charges, and declining sales and comparable sales. While Q4 adjusted EBITDA beat guidance, the overall trend is negative, and the announcement of 80-90 store closures and a distribution center closure signals deep operational issues and a challenging path to recovery. The projected FY26 sales and adjusted EBITDA guidance are lower than prior year results, indicating continued headwinds. The substantial write-downs and restructuring costs suggest that the company is in a difficult position, and while the strategic plan aims for long-term improvement, the immediate outlook is highly unfavorable for investors.

Keywords

Pool and spa care, Retail, Store closures, Financial results, Q4 2025, Fiscal Year 2025, Adjusted EBITDA, Net loss, Impairment, Strategic transformation, Cost reduction, Inventory management, LESL, Nasdaq