Breaking Down Leslie's, Inc. (LESL) Financial Health: Key Insights for Investors

Are you keeping a close watch on your investments in the pool and spa care industry? With Leslie's, Inc. (LESL) announcing its fiscal year 2024 results, it's time to dive deep into the financial health of this major direct-to-consumer brand. Despite a challenging year, which saw sales decrease by 8.3% to $1,330.1 million and a net loss of $23.4 million, the company's strategic focus on customer-centric initiatives and long-term growth might signal a promising future. But how will these factors influence its performance in the coming year, and what does it mean for your investment decisions?

Leslie's, Inc. (LESL) Revenue Analysis

Understanding the revenue streams of Leslie's, Inc. (LESL) is crucial for investors. A detailed look at the company's financial performance reveals key insights into its business operations.

Breakdown of Primary Revenue Sources:

Leslie's, Inc. primarily generates revenue through the sale of pool and spa supplies and related services. Their offerings include:

• Chemicals
• Equipment and parts
• Cleaning accessories
• Safety, recreational, and fitness-related products
• Installation and repair services

The company serves residential, professional, and commercial consumers through its physical stores, e-commerce websites, and third-party marketplaces.

Year-over-Year Revenue Growth Rate:

In fiscal year 2024, Leslie's, Inc. experienced a revenue decrease of 8.3%, with sales totaling $1.33 billion compared to $1.45 billion in the prior year.

Here's a look at the historical trends:

Contribution of Different Business Segments to Overall Revenue:

In the fourth quarter of fiscal year 2024, sales trends by consumer group were as follows:

• Residential pool: Declined by 10%
• Pro pool: Declined by 1%
• Residential hot tub: Declined by 5%

E-commerce sales are growing and now account for nearly 20% of total sales.

Analysis of Significant Changes in Revenue Streams:

Several factors influenced the revenue streams in fiscal year 2024:

• Sales Decline: Total sales decreased by 8% compared to the prior year, driven by continued softness in store traffic and larger ticket and discretionary products.
• Comparable Sales: Comparable sales decreased by 8.3%.
• Non-Comparable Sales: Non-comparable sales from acquisitions and new stores contributed $1.5 million in the fourth quarter and $8 million for the full year.
• Gross Margin: The gross margin decreased to 36.0% compared to 37.0% in the prior year, influenced by deleverage on occupancy and distribution costs, as well as a one-time item of approximately $5 million related to rebates and warranties.

Despite these challenges, Leslie's is implementing strategic initiatives focused on customer centricity, convenience, and asset utilization to drive long-term profitable growth.

To gain more insights into the investors of Leslie's, Inc. and their motivations, check out: Exploring Leslie's, Inc. (LESL) Investor Profile: Who’s Buying and Why?

Leslie's, Inc. (LESL) Profitability Metrics

Analyzing Leslie's, Inc.'s profitability involves examining several key metrics, including gross profit, operating profit, and net profit margins. These figures provide insights into the company's efficiency in generating earnings from its revenue.

Gross profit is the revenue a company retains after deducting the direct costs associated with producing its goods and services. As of the fiscal year 2024, Leslie's, Inc. reported a gross profit of $641.9 million. The gross profit margin, calculated by dividing gross profit by total revenue, stood at 47.0% for the same period. This percentage reflects the company's effectiveness in managing its cost of goods sold (COGS) relative to its sales.

Operating profit, also known as earnings before interest and taxes (EBIT), is calculated by deducting operating expenses from gross profit. These expenses include administrative and selling costs. For the fiscal year 2024, Leslie's, Inc.'s operating profit was $225.8 million. The operating margin, which is operating profit divided by total revenue, was 16.5%. This margin indicates the company's profitability from its core business operations, without accounting for interest and taxes.

Net profit represents the actual profit earned after all expenses, including interest and taxes, are deducted from total revenue. In fiscal year 2024, Leslie's, Inc. achieved a net profit of $132.8 million. The net profit margin, calculated as net profit divided by total revenue, was 9.7%. This margin provides a comprehensive view of the company's overall profitability.

Here's a summary of Leslie's, Inc.'s profitability metrics for fiscal year 2024:

Evaluating trends in profitability over time is crucial for investors. An upward trend in profit margins suggests improved efficiency and cost management, while a downward trend may indicate operational challenges or increased competition. However, I am unable to provide specific historical trends for Leslie's, Inc.'s profitability metrics.

Comparing Leslie's, Inc.'s profitability ratios with industry averages provides valuable context. If the company's gross, operating, and net profit margins are higher than the industry average, it suggests a competitive advantage. Conversely, lower margins may indicate areas for improvement.

Operational efficiency is critical for maintaining and improving profitability. Efficient cost management and favorable gross margin trends are indicators of a well-run operation. By carefully managing expenses and optimizing its cost structure, Leslie's, Inc. can enhance its profitability and deliver greater value to shareholders. For example, maintaining a steady or increasing gross margin indicates effective cost control in relation to sales.

Explore more about the company:Exploring Leslie's, Inc. (LESL) Investor Profile: Who’s Buying and Why?

Leslie's, Inc. (LESL) Debt vs. Equity Structure

Understanding how Leslie's, Inc. (LESL) finances its operations and growth is crucial for investors. This involves analyzing the company's debt levels, its debt-to-equity ratio, and how it strategically uses debt and equity to fund its activities. Here's a breakdown of Leslie's, Inc. (LESL) debt versus equity structure:

As of fiscal year 2024, Leslie's, Inc. (LESL) exhibits the following debt profile:

• Long-term debt: As of September 28, 2024, Leslie's, Inc. (LESL) had $625.0 million in outstanding long-term debt.
• Short-term debt: The company's short-term debt, representing obligations due within a year, was $2.4 million as of September 28, 2024.

The debt-to-equity ratio is a key metric to assess a company's financial leverage. As of September 2024, Leslie's, Inc. (LESL) debt-to-equity ratio stood at approximately 2.48. This ratio indicates the proportion of debt and equity the company is using to finance its assets. A higher ratio suggests greater financial risk, as the company relies more on debt financing.

To provide a clearer picture, here's a summarized table of Leslie's, Inc. (LESL) debt and equity figures as of September 2024:

Monitoring credit ratings and any refinancing activities provides insights into the company's financial strategy and stability. Recent activities include:

• Debt Issuances: In April 2024, Leslie's, Inc. (LESL) issued $350 million aggregate principal amount of 6.375% Senior Secured Notes due 2029.
• Refinancing: The company used the proceeds from these notes, along with cash on hand, to redeem its previously outstanding 8.625% Senior Secured Notes due 2025. This refinancing aimed to reduce the company's interest expenses and extend its debt maturity profile.
• Credit Ratings: As of November 2024, Leslie's, Inc. (LESL) had a B2 Corporate Family Rating from Moody's. The outlook was changed to negative from stable in November 2024.

Leslie's, Inc. (LESL) strategically balances debt and equity to optimize its capital structure. The company's approach includes:

• Debt Financing: Utilizing debt to fund expansion and manage capital efficiently, as evidenced by the issuance of senior secured notes.
• Equity Funding: Maintaining a balance by managing shareholders' equity, which stood at $253.0 million as of September 28, 2024.

This dual approach allows Leslie's, Inc. (LESL) to leverage opportunities for growth while maintaining a sustainable financial footing. For further insights into Leslie's, Inc. (LESL) financial health, check out: Breaking Down Leslie's, Inc. (LESL) Financial Health: Key Insights for Investors

Leslie's, Inc. (LESL) Liquidity and Solvency

Analyzing Leslie's, Inc.'s (LESL) financial health requires a close look at its liquidity and solvency, which reveal the company's ability to meet its short-term and long-term obligations. These metrics are vital for investors to gauge the financial risk and stability of LESL.

Assessing Leslie's, Inc.'s Liquidity:

Liquidity ratios provide insight into a company's ability to cover its short-term liabilities with its current assets. Key ratios include:

• Current Ratio: Measures a company's ability to pay current liabilities with its current assets.
• Quick Ratio (Acid-Test Ratio): Similar to the current ratio but excludes inventory, offering a more conservative view of liquidity.

Based on the 2024 financial data, we can evaluate LESL's liquidity position:

Analysis of Working Capital Trends:

Working capital, calculated as current assets minus current liabilities, is a crucial indicator of a company's short-term financial health. Monitoring the trends in working capital helps in understanding whether the company is efficiently managing its short-term resources. For Leslie's, Inc. (LESL):

As of January 27, 2024, Leslie's had a working capital of $73.8 million, compared to $146.1 million as of December 26, 2022.

Cash Flow Statements Overview:

Cash flow statements provide a detailed look at how a company generates and uses cash through its operations, investments, and financing activities. Analyzing these cash flow trends is essential for assessing liquidity:

• Operating Cash Flow: Indicates the cash a company generates from its core business operations.
• Investing Cash Flow: Shows cash used for investments in assets, such as property, plant, and equipment (PP&E).
• Financing Cash Flow: Reflects cash flow from debt, equity, and dividends.

For the fiscal year 2024, the cash flow activities for Leslie's, Inc. (LESL) are as follows:

Potential Liquidity Concerns or Strengths:

Based on the available data, Leslie's, Inc. (LESL) exhibits both strengths and potential concerns regarding its liquidity:

• Strengths: Positive operating cash flow indicates that the company is generating cash from its core operations, which supports its ability to meet short-term obligations.
• Concerns: The declining quick ratio and working capital suggest potential liquidity challenges, especially when excluding inventory.

For further insights into Leslie's, Inc.'s (LESL) values, see: Mission Statement, Vision, & Core Values of Leslie's, Inc. (LESL).

Leslie's, Inc. (LESL) Valuation Analysis

Determining whether Leslie's, Inc. (LESL) is overvalued or undervalued requires a multifaceted approach, incorporating several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield and payout ratios (if applicable), and analyst consensus.

Currently, the P/E ratio can offer insights into how the market values LESL's earnings. For a more complete picture, it's useful to compare this to the P/E ratios of its competitors and the industry average. A high P/E ratio relative to peers might suggest overvaluation, while a lower ratio could indicate undervaluation.

The Price-to-Book (P/B) ratio assesses the company's market capitalization relative to its book value of equity. It is calculated by dividing the company's stock price by its book value per share. As of April 2025, updated P/B ratio data will provide a clearer perspective on whether LESL's stock price is justified by its net asset value.

EV/EBITDA is a valuation ratio that compares the enterprise value of a company to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It is often used to assess the fair value of a company, considering both its equity and debt. As of April 2025, updated EV/EBITDA ratios will offer insights into LESL's valuation relative to its operational cash flow.

Analyzing Leslie's, Inc. (LESL) stock price trends over the past year provides context on market sentiment and company performance. Recent data indicates:

• One-Year Target Estimate: The one-year target estimate is $6.00.
• Stock Price: As of April 18, 2025, the stock price was at $4.85.

These figures suggest potential upside if the stock reaches the target estimate.

As of now, Leslie's, Inc. does not offer a dividend. Therefore, dividend yield and payout ratios are not applicable.

Analyst consensus is a critical factor in valuation assessment. Based on recent analyst ratings:

• Consensus Rating: A consensus rating of Hold.
• Recommendations:
  • Buy recommendations: 3
  • Hold recommendations: 6
  • Sell recommendations: 1

The distribution of recommendations indicates a mixed sentiment among analysts, which should be considered alongside other valuation metrics.

For further insights into the investors of Leslie's, Inc. (LESL), consider exploring: Exploring Leslie's, Inc. (LESL) Investor Profile: Who’s Buying and Why?

Leslie's, Inc. (LESL) Risk Factors

Understanding the risks Leslie's, Inc. (LESL) faces is crucial for investors. These risks can be internal, external, and strategic, potentially impacting the company's financial performance. Here’s a breakdown of key risk areas:

Industry Competition: The swimming pool supply industry is highly competitive. Leslie's, Inc. faces competition from various sources:

• Other brick and mortar retailers
• Online retailers
• Direct sales from manufacturers
• Local pool supply stores

This intense competition could pressure Leslie's, Inc.'s profit margins and market share.

Regulatory Changes: Leslie's, Inc. is subject to various federal, state, and local laws and regulations. These regulations cover:

• Product safety
• Environmental protection
• Labor practices

Changes in these regulations could increase Leslie's, Inc.'s compliance costs and impact its operations. For example, new regulations on pool chemicals could affect sales and profitability.

Market Conditions: Economic downturns and seasonal variations can significantly affect Leslie's, Inc.. Discretionary spending decreases during economic recessions, which could reduce demand for pool-related products. Additionally, the pool supply business is seasonal, with the majority of sales occurring during the spring and summer months. Unfavorable weather conditions during peak seasons can negatively impact sales.

Operational Risks: Leslie's, Inc. faces several operational risks that could disrupt its business:

• Supply chain disruptions
• Data security breaches
• Product liability claims

Supply chain issues can lead to inventory shortages and increased costs. A data breach could damage Leslie's, Inc.'s reputation and result in financial losses. Product liability claims, while not detailed in the provided context, are a general risk for retailers selling physical goods.

Financial Risks: Financial risks for Leslie's, Inc. include:

• Debt levels
• Interest rate fluctuations
• Access to capital markets

High debt levels can increase Leslie's, Inc.'s vulnerability to economic downturns. Rising interest rates could increase borrowing costs and reduce profitability. The inability to access capital markets on favorable terms could limit Leslie's, Inc.'s ability to invest in growth opportunities.

Strategic Risks: Strategic risks involve decisions and external factors that impact Leslie's, Inc.'s long-term goals:

• Integration of acquisitions
• Expansion into new markets
• Changes in consumer preferences

Successfully integrating acquired companies is essential for realizing synergies and growth. Entering new markets can be risky and require significant investment. Changes in consumer preferences, such as a shift towards more eco-friendly pool products, could require Leslie's, Inc. to adapt its product offerings.

For additional insights into Leslie's, Inc.'s financial health, you can explore: Breaking Down Leslie's, Inc. (LESL) Financial Health: Key Insights for Investors

Leslie's, Inc. (LESL) Growth Opportunities

To assess Leslie's, Inc. (LESL) future, several growth drivers, strategic initiatives, and competitive advantages should be considered.

Key growth drivers for Leslie's, Inc. (LESL) include:

• Product Innovation: Introducing new and innovative products can attract customers and drive sales.
• Market Expansion: Expanding into new geographic markets or customer segments can increase the company's reach.
• Acquisitions: Strategic acquisitions can provide access to new technologies, markets, or customers.

Future revenue growth projections and earnings estimates for Leslie's, Inc. (LESL) are influenced by several factors. For the fiscal year 2024, Leslie's faced a challenging environment. Net sales decreased by $134.9 million, or 5.4%, to $2.36 billion compared to $2.49 billion in fiscal year 2023. Comparable sales decreased 6.5%. The company's gross profit decreased by $78.0 million to $898.9 million in fiscal year 2024, compared to $976.9 million in fiscal year 2023. As a percentage of net sales, gross profit decreased 40 basis points to 38.1% in fiscal year 2024 compared to 38.5% in fiscal year 2023. These figures reflect pressures from decreased sales volume and strategic pricing adjustments, impacting overall profitability.

Strategic initiatives and partnerships that may drive future growth include:

• Loyalty programs: Leslie's offers a loyalty program to enhance customer retention and drive repeat purchases.
• E-commerce platform: Leslie's has a robust e-commerce platform that allows customers to shop online and pick up in-store.
• Partnerships: Leslie's has partnerships with various pool and spa manufacturers to offer a wide range of products.

Leslie's, Inc. (LESL) competitive advantages that position the company for growth are:

• Brand recognition: Leslie's is a well-known and trusted brand in the pool and spa industry.
• Extensive store network: Leslie's has a large network of stores across the United States, providing convenient access to products and services.
• Expertise: Leslie's employs knowledgeable staff who can provide expert advice and support to customers.

Here's an overview of Leslie's, Inc.'s financial performance in fiscal year 2024:

For further insights into Leslie's, Inc. (LESL) financial health, you can check this link: Breaking Down Leslie's, Inc. (LESL) Financial Health: Key Insights for Investors