8-K: Leslie's Reports Steep Q3 Sales Decline, Withdraws Full-Year Guidance Amid Challenging Weather

Leslie's, Inc. announced preliminary third-quarter fiscal 2025 financial results showing a significant sales decline and withdrew its full-year guidance due to challenging market conditions and unfavorable weather.

Summary

• Preliminary net sales for the fiscal third quarter ended June 28, 2025, were approximately $500 million, representing a decline of approximately 12% compared to the prior year quarter.
• Preliminary net income for the quarter was estimated to be between $20 million and $22 million.
• Preliminary Adjusted net income for the quarter was estimated to be between $35 million and $38 million.
• Preliminary Adjusted EBITDA for the quarter was estimated to be between $79 million and $82 million.
• Preliminary diluted earnings per share were estimated at $0.11 to $0.12.
• Preliminary Adjusted diluted earnings per share were estimated at $0.19 to $0.21.
• The company has withdrawn its previously provided fiscal year 2025 guidance.
• An update for the balance of year expectations will be provided when the company reports its fiscal third quarter 2025 results on August 6, 2025.

Sentiment

Score: 3

Explanation: The preliminary financial results show a significant decline in sales and profitability, leading to the withdrawal of full-year guidance. While management expresses confidence in transformation initiatives and liquidity, the immediate operational challenges and negative financial performance indicate a poor quarter.

Positives

• Maintains ample liquidity, with approximately $43 million in cash at the end of the fiscal third quarter.
• Paid off $20 million outstanding on its revolving credit facility subsequent to quarter-end.
• Actively engaged in a strategic and operational review of the business to drive improved sales and profitability.
• Expressed confidence in the ability to execute transformation initiatives.

Negatives

• Net sales declined approximately 12% year-over-year, reaching approximately $500 million.
• Withdrawal of previously provided fiscal year 2025 guidance indicates a significant downgrade in full-year expectations.
• Experienced significant challenges in the third quarter due to extremely wet and unseasonably cooler temperatures across top geographies, disrupting peak pool season.
• Unfavorable weather trends impacted customer traffic, leading to delayed pool openings.

Risks

• Ability to execute on growth strategies.
• Supply disruptions or increased costs, including as a result of 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), geopolitical events or conflicts, and the housing market.
• Disruptions in the operations of distribution centers.
• Ability to implement technology initiatives that deliver anticipated benefits 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 environmental, social, and governance (ESG) 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 timely implement the proposed reverse stock split and the anticipated effects of the proposed reverse stock split on the price of shares of common stock.
• 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.
• Actual results could differ materially from preliminary estimated results due to new information affecting accounting estimates, management judgment, or valuation methodologies, and the completion of financial closing procedures.

Future Outlook

The company is withdrawing its fiscal year 2025 guidance and plans to provide an update for the balance of year expectations during its fiscal third quarter 2025 earnings call on August 6, 2025. Management is conducting a strategic and operational review to drive improved sales and profitability, focusing on performance across stores, online, distribution centers, cost structure, and initiatives for working capital and profitability improvements. The company is working with external resources to accelerate its return to long-term profitable growth.

Management Comments

• "While we continue to make progress against the key pillars of our transformation initiatives, our business has faced significant challenges in our third quarter."
• "The extremely wet and unseasonably cooler temperatures across our top geographies disrupted peak pool season."
• "The unfavorable weather trends impacted traffic as many customers delayed pool openings."
• "Through detailed consumer work over the past few months, we believe that we have identified additional opportunities that we look forward to discussing on our upcoming conference call."
• "In the quarter, we continued the strategic and operational review of our business to drive improved sales and profitability."
• "We recognize the urgency with which we must take action and with the support of external resources we have engaged, we are working to accelerate Leslies return to long-term profitable growth."
• "We remain confident in our ability to execute our transformation and have ample liquidity to enable it, including cash at the end of the quarter of approximately $43 million."

Industry Context

The pool and spa care industry is highly seasonal and significantly influenced by weather patterns. Leslie's preliminary results underscore this sensitivity, as unseasonably cool and wet temperatures directly impacted peak season sales by delaying pool openings and reducing customer traffic. This highlights a common vulnerability for businesses in this sector, where climate variability can lead to substantial operational and financial challenges.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or industry benchmarks to assess the results against. The preliminary financial performance is presented in isolation, making direct comparisons to industry standards challenging without additional context.

Stakeholder Impact

• Shareholders: Likely to experience negative impact due to significant decline in sales and profitability, withdrawal of guidance, and potential for reduced share price.
• Customers: Experienced delayed pool openings due to weather, but the company is working to identify additional opportunities and improve service.
• Employees: The ongoing strategic and operational review may lead to restructuring or changes impacting personnel.

Next Steps

• Host a conference call on August 6, 2025, at 5:00 p.m. Eastern time to discuss fiscal third quarter 2025 financial results.
• Provide an update for the balance of year expectations during the August 6, 2025 conference call.
• Continue the strategic and operational review of the business to drive improved sales and profitability.
• Work to accelerate Leslie's return to long-term profitable growth with the support of external resources.

Key Dates

Recommendation

The significant decline in preliminary third-quarter sales and profitability, coupled with the withdrawal of full-year guidance, indicates substantial operational challenges and a deteriorating financial outlook. While the company is undertaking a strategic review and has liquidity, the immediate performance suggests a negative trajectory that warrants a cautious or bearish stance for investors.

Keywords

Pool care, Spa care, Retail, Preliminary financial results, Q3 2025, Guidance withdrawal, Weather impact, Strategic review, LESL, Consumer discretionary