What Happened:
Shares of pool products retailer Leslie’s (NASDAQ:LESL) fell 5.7% in the morning session after the company announced that Mike Egeck is resigning from his role as CEO and board member. Jason McDonell will replace him as the next Chief Executive Officer. Mr McDonell has nearly 30 years of experience in retail and consumer products. Recently, he served as Executive Vice President, Merchandising, Marketing, and e-Commerce at Advance Auto Parts. Before that, he spent 21 years at Pepsico, where he held several leadership positions.
In the meantime, Chairman John Strain will serve as interim CEO until McDonell resumes his role on September 9, 2024. The stock's reaction suggests the market is likely struggling to digest the implications of the sudden change in leadership.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Leslie's? Access our full analysis report here, it’s free.
What is the market telling us:
Leslie's’s shares are somewhat volatile and over the last year have had 75 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about month ago, when the stock dropped 39.4% on the news that the company announced underwhelming preliminary fiscal third quarter results. Revenue is expected to come in at roughly $570 million (below consensus estimates of $619m). Adjusted EBITDA is expected to be $108 to $109 million (below estimates of $132m), and adjusted EPS is expected to be between $0.32 to $0.33 (below estimates of 0.42).
Providing more color on the weak guidance, Mike Egeck, Chief Executive Officer, added, "The cold and wet spring weather we experienced during the fiscal second quarter extended through May, reducing the number of pool days in non-seasonal markets and delaying the start of pool season in seasonal markets. We also continued to see weakness in large ticket discretionary categories as persistent inflation and high interest rates pressure pool owners' wallets. We experienced improved sales trends in June, but the April and May revenue impact created negative operating leverage and gross margin headwinds. While we are encouraged by improved June trends, our revised full year outlook at the midpoint assumes third quarter sales performance continues through the fourth quarter."
Leslie's is down 59.8% since the beginning of the year, and at $2.81 per share it is trading 65.7% below its 52-week high of $8.18 from February 2024. Investors who bought $1,000 worth of Leslie's’s shares at the IPO in October 2020 would now be looking at an investment worth $129.
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