Pool products retailer Leslie’s (NASDAQ:LESL) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 6.8% year on year to $569.6 million. On the other hand, the company's full-year revenue guidance of $1.33 billion at the midpoint came in slightly below analysts' estimates. It made a non-GAAP profit of $0.34 per share, down from its profit of $0.41 per share in the same quarter last year.
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Leslie's (LESL) Q2 CY2024 Highlights:
- Revenue: $569.6 million vs analyst estimates of $570 million (small miss)
- EPS (non-GAAP): $0.34 vs analyst estimates of $0.32 (6.6% beat)
- The company dropped its revenue guidance for the full year from $1.44 billion to $1.33 billion at the midpoint, a 7.4% decrease
- EPS (non-GAAP) guidance for the full year is $0.06 at the midpoint, missing analyst estimates by 30.5%
- Gross Margin (GAAP): 40.2%, down from 41.2% in the same quarter last year
- EBITDA Margin: 19.2%, down from 21.1% in the same quarter last year
- Free Cash Flow of $165.2 million, similar to the same quarter last year
- Locations: 1,000 at quarter end, down from 1,009 in the same quarter last year
- Same-Store Sales fell 7% year on year (-11.8% in the same quarter last year)
- Market Capitalization: $559.8 million
Mike Egeck, Chief Executive Officer, said, “As we noted in our preliminary results on July 17, our fiscal third quarter results were impacted by a cold and wet start to the pool season, as well as continued weakness in discretionary product sales due to persistent inflation and high interest rates. As weather improved in June, we saw positive trends relative to the overall quarter, including improvements in total sales, chemical sales, and Pro and Hot Tub sales. The combination of these improvements, together with third-party credit card data indicating that our sales performance was better than the industry for the quarter, and that we gained market share in June, are encouraging signs for the business.”
Named after founder Philip Leslie, who established the company in 1963, Leslie’s (NASDAQ:LESL) is a retailer that sells pool and spa supplies, equipment, and maintenance services.
Specialty Retail
Some retailers try to sell everything under the sun, while others—appropriately called Specialty Retailers—focus on selling a narrow category and aiming to be exceptional at it. Whether it’s eyeglasses, sporting goods, or beauty and cosmetics, these stores win with depth of product in their category as well as in-store expertise and guidance for shoppers who need it. E-commerce competition exists and waning retail foot traffic impacts these retailers, but the magnitude of the headwinds depends on what they sell and what extra value they provide in their stores.
Sales Growth
Leslie's is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.
As you can see below, the company's annualized revenue growth rate of 8.4% over the last five years was mediocre as it opened new stores and expanded its reach.
This quarter, Leslie's missed Wall Street's estimates and reported a rather uninspiring 6.8% year-on-year revenue decline, generating $569.6 million in revenue. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
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Same-Store Sales
Leslie's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 7.6% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
In the latest quarter, Leslie's same-store sales fell 7% year on year. This decrease was a further deceleration from the 11.8% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Leslie's Q2 Results
It was good to see Leslie's beat analysts' EPS expectations this quarter. On the other hand, its full-year earnings forecast missed analysts' expectations and its full-year revenue guidance slightly missed Wall Street's estimates. Overall, this was a mixed but overall mediocre quarter for Leslie's. Despite this, the stock traded up 4.7% to $2.88 immediately after reporting.
So should you invest in Leslie's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.