Leslie's, Inc. (LESL) sinks after warning for Q3

Leslie’s, Inc. (NASDAQ: LESL) shares fell 17% after-hours after the announced weaker-than-expected preliminary financial results for the third quarter of Fiscal 2023.

The Company expects preliminary sales for the third quarter of $611 million including a comparable sales decline of (12)%. Gross profit is expected to be $249 to $251 million and gross margin is expected to be approximately 41%. Net income is expected to be $70 to $73 million, Adjusted EBITDA is expected to be $124 to $128 million, Adjusted net income is expected to be $73 to $76 million, and Adjusted diluted earnings per share are expected to be $0.39 to $0.41.

(* The revenue consensus is $703.74 million and the EPS consensus is $0.69)

In light of these results and the expectation that trends experienced in the third quarter will persist through the fiscal fourth quarter, the Company is revising its Fiscal 2023 outlook. Net sales are now expected to be $1,430 to $1,450 million, gross profit is expected to be $549 to $559 million, net income is expected to be $33 to $40 million, Adjusted EBITDA is expected to be $170 to $180 million, Adjusted net income is expected to be $52 to $59 million, and Adjusted diluted earnings per share are expected to be $0.28 to $0.32.

Mike Egeck, Chief Executive Officer, commented, “Our fiscal third quarter results were well below our expectations as low double digit traffic declines in our Residential and Pro businesses drove negative comps across both discretionary and non-discretionary categories. While abnormal weather continued to pressure traffic levels, customer surveys conducted towards the end of the quarter also indicated increased price sensitivity and that consumers entered the pool season with a greater than normal amount of chemicals leftover from last year.”

Mr. Egeck continued, “Our third quarter gross margins were down year-over-year due to higher product costs that we could not pass through to consumers, the impact of higher distribution-related expenses and capitalized costs as we reduce inventory from peak levels, and fixed cost deleverage. While our team navigates these dynamics, we also continue to focus on the levers in our control – delivering exceptional customer service, bringing innovative and energy-saving products to market, and managing costs. We also continue to aggressively manage our inventory balances and rigorously review our costs to further optimize our non-store headcount. While this year’s pool season has presented a unique confluence of challenges, we remain focused on driving long-term market share gains and shareholder value.”

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