LESL — Leslie's, Inc.

Summary of Leslie's Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Net Sales: $389.2 million, a 2.2% decline from $397.9 million in Q4 2024. The 53rd week contributed approximately $18.3 million in sales but also resulted in a $0.21 loss to EPS.
• Same-store Sales: Decreased by 6.8% on a 13-week basis.
• Gross Margin: Improved to 38.6% from 36% year-over-year, driven by favorable vendor rebates and freight costs.
• Net Loss: $162.8 million or $17.54 per diluted share, compared to a net loss of $9.9 million or $1.07 per diluted share in Q4 2024. Adjusted net income was $840,000 or $0.09 per diluted share.
• Adjusted EBITDA: Increased to $45.2 million from $43 million in the prior year.
• Full Year Sales: Approximately $1.24 billion with an adjusted net loss of $4.70 per share, down from $1.33 billion in sales and a loss of $0.12 per share in 2024.

2. Strategic Updates and Business Highlights

• Leadership Transition: Jeff White joined as CFO, focusing on cost optimization and capital management.
• Store Closures: Plans to close 80 to 90 underperforming stores, expected to impact annual sales by $25 million to $35 million but improve EBITDA by $4 million to $10 million.
• Customer Retention Initiatives: Targeted marketing efforts to regain over 160,000 lost residential customers, with a focus on improving price value perception.
• Operational Efficiency: Streamlining distribution and inventory management, including a reduction of over 2,000 SKUs to enhance profitability.
• Omnichannel Expansion: Enhancing same-day delivery and expanding pool service offerings in new markets.

3. Forward Guidance and Outlook

• 2026 Sales Guidance: Expected between $1.1 billion to $1.25 billion, with adjusted EBITDA of $55 million to $75 million.
• Cost Optimization: Anticipated annualized EBITDA improvement of $7 million to $12 million from various initiatives.
• CapEx: Projected to be $20 million to $25 million, focusing on maintenance and productivity investments.

4. Bad News, Challenges, or Points of Concern

• Customer Loss: A net loss of over 160,000 residential customers attributed to pricing issues and competitive pressures.
• Impairment Charges: Recorded a $184 million impairment charge primarily related to goodwill and underperforming store closures, with expectations for further charges in Q1 and Q2 2026.
• Sales Decline: Continued challenges in same-store sales and competitive pricing pressures, particularly in the chemicals and equipment categories.
• Market Conditions: Uncertain macroeconomic environment affecting consumer spending and potential impacts from weather patterns.

5. Notable Q&A Insights

• Supplier Support: Management indicated strong support from vendor partners, improving inventory forecasting and allocation.
• Free Cash Flow: Guidance suggests a return to free cash flow positivity at the midpoint of the EBITDA guidance.
• Pricing Strategy: Focus on optimizing pricing for key value items, particularly chemicals, to regain competitive positioning.
• Store Optimization: Future closures may be considered if sales do not recover, but current closures target the most unprofitable locations.
• Marketing Efficiency: Plans to redeploy existing marketing dollars more effectively rather than increasing overall spend.

This summary encapsulates the key elements from Leslie's Q4 2025 earnings call, highlighting both the challenges faced and the strategic initiatives underway to drive future growth.