Leslie's, Inc. Q4 FY2024 earnings call

• New CEO Jason McDonald emphasized customer centricity, convenience, and asset utilization as strategic themes. Customer centricity involves elevating customer care, leveraging loyalty program data, and building traffic through water testing and omnichannel services. Convenience focuses on improving inventory management and localized assortment for quicker service. Asset utilization targets optimizing physical assets (stores, DCs), technology/data assets, and human capital.
• Financial results: Q4 2024 sales $398M (-8%), FY2024 sales $1.33B (-8%). Adjusted EPS Q4 $0.02, FY2024 loss $0.01. Plan to pay down ~$25M debt in current quarter. First seven weeks of FY2025 in line with expectations, with positive demand from post-storm cleanup in SE US.

No detailed breakdown of product segments with revenue contribution percentages provided. For the fourth quarter, total sales were $398 million, down 8%, with comparable sales down 8.3%. For fiscal 2024, total sales were $1.33 billion, down 8%, with comparable sales down 8.8%. Gross profit in Q4 was $143 million (down from $160 million prior year), gross margin 36%. Full-year gross profit was $477 million (down from $548 million prior year), gross margin 35.9%. Adjusted EBITDA in Q4 was $43 million (down from $59 million prior year), full-year adjusted EBITDA was $109 million (down from $168 million prior year).

• Provided financial guidance for Q1 2025: sales expected in range of down 3% to up 1% YOY.
• Plan to update market on full-year 2025 thinking on next earnings call.
• Aim to pay down ~$25M debt in current quarter, with further debt paydown guidance in February call.

• Macro environment remains dynamic, affecting sales trends.
• One-time $5M gross margin headwind from vendor contract warranties in Q4.
• Dependence on effective inventory management to maintain service metrics and net promoter scores.

Q: Which strategic theme will have the largest impact in near to medium term?

A: Jason McDonald said asset utilization, focusing on physical assets, technology/data assets, and human capital to drive comp sales growth and efficiency.

Q: Why relative strength in pro business?

A: Scott Bowman cited targeted promotional activity, more pro partners (4400, up 14% YOY), and competitive pricing for pros.

Q: Breakout of Q4 comps negative 8.3% between ticket and traffic?

A: Scott Bowman said driven more by traffic.

Q: Unit growth and long-term outlook?

A: Scott Bowman said near-term priority is debt paydown, then will reengage on growth when comfortable; Jason McDonald emphasized leveraging proximity, product portfolio, and omnichannel to drive traffic and loyalty.

Q: Strategies to improve gross margins?

A: Scott Bowman said focus on top-line growth to drive leverage; Jason McDonald mentioned precision inventory and technology utilization.

Q: Inventory right-sizing and localized assortments?

A: Scott Bowman said room to consolidate inventory, Jason McDonald emphasized precision and tailored assortment based on neighborhood pools.

Q: 2025 outlook on chemical vs equipment demand?

A: Scott Bowman said equipment down ~15% but some bright spots, hot tub business improved with targeted events.

Q: E-commerce opportunity?

A: Scott Bowman discussed marketplace and proprietary site, Jason McDonald emphasized omnichannel approach.

Q: Five million contractual gross margin headwind?

A: Scott Bowman said renegotiated vendor contract to remove warranty liability, no further risks.

Q: Reinvestment and wages?

A: Jason McDonald discussed marketing mix modeling and prudent spending; Scott Bowman said mindful of SG&A investments following growth.

Q: Chemical pricing trends?

A: Scott Bowman said targeted pro pricing funded by better chemical pricing.

Q: SG&A and wage increases?

A: Scott Bowman said will invest in SG&A following growth, with incentive compensation to increase as growth picks up.