What Happened?
Shares of pool products retailer Leslie’s (NASDAQ:LESL) fell 24.4% in the afternoon session after the company reported weak fourth-quarter results. Revenue barely beat forecasts, with growth remaining flat. Gross margin shrank because of stock write-downs and higher rent and shipping costs. The weaker margins contributed to an earnings loss, which missed estimates. The forecast was also weak as EBITDA guidance for the next quarter fell short of Wall Street's estimates. Overall, this was a softer quarter.
The shares closed the day at $1.64, down 27.3% from previous close.
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What The Market Is Telling Us
Leslie’s shares are extremely volatile and have had 75 moves greater than 5% over the last year. But moves this big are rare even for Leslie's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 7 months 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 27.3% since the beginning of the year, and at $1.65 per share, it is trading 79.8% below its 52-week high of $8.18 from February 2024. Investors who bought $1,000 worth of Leslie’s shares at the IPO in October 2020 would now be looking at an investment worth $76.04.
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