Pool products retailer Leslie’s (NASDAQ: LESL) reported Q4 CY2024 results topping the market’s revenue expectations, but sales were flat year on year at $175.2 million. On the other hand, next quarter’s revenue guidance of $184 million was less impressive, coming in 3.1% below analysts’ estimates. Its non-GAAP loss of $0.22 per share was 5.8% below analysts’ consensus estimates.

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PHOENIX, Feb. 06, 2025 (GLOBE NEWSWIRE) -- Leslie’s, Inc. (“Leslie’s”, “we”, “our”, “its”, or “Company”; NASDAQ: LESL), the largest and most trusted direct-to-customer brand in the U.S. pool and spa care industry serving residential customers and pool professionals nationwide, today announced its financial results for the first quarter of fiscal 2025.

Company Overview

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

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.33 billion in revenue over the past 12 months, Leslie's is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage.

As you can see below, Leslie’s 7.3% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was tepid.

This quarter, Leslie’s $175.2 million of revenue was flat year on year but beat Wall Street’s estimates by 0.9%. Company management is currently guiding for a 2.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, a deceleration versus the last five years. Still, this projection is above average for the sector and implies the market is baking in some success for its newer products.

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Store Performance

Number of Stores

Leslie's operated 1,000 locations in the latest quarter. It has opened new stores quickly over the last two years, averaging 1.6% annual growth, faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Leslie’s demand has been shrinking over the last two years as its same-store sales have averaged 9.4% annual declines. This performance is concerning - it shows Leslie's artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.

In the latest quarter, Leslie’s year on year same-store sales were flat. This performance was a well-appreciated turnaround from its historical levels, showing the business is improving.

Key Takeaways from Leslie’s Q4 Results

It was good to see Leslie's narrowly top analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed significantly and its EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 8% to $2.07 immediately after reporting.

Leslie's underperformed this quarter, but does that create an opportunity to invest 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.