Leslie's, Inc. Q1 FY2026 earnings call

• Committed to being America's one-stop shop for pool care and executing transformation plan.
• Implemented pricing transformation initiative to improve customer pricing on key items, with positive comparable store sales in January.
• Conducted price testing, and new low prices, same great quality campaign launching for pool season.
• Implemented store optimization initiative, closing 80 underperforming locations with 80% completed in less than 7 days.
• Streamlined distribution footprint, closing Denver warehouse and on track to close Illinois facility.
• SKU optimization initiative reduced SKU count by over 2,000, focusing on high-value inventory.
• Restructured field organization to market leadership model for deeper customer relationships.

Net sales for the first quarter were $147.1 million, a 16% decline from the prior year. Comparable sales decreased 15.5%. Gross profit margin was 18.4% vs 27.2% prior year. SG&A decreased $1.7 million. Net loss was $83 million. Inventory was $210 million, a 23% year-over-year reduction. Adjusted EBITDA was negative $40.3 million. The company reaffirmed full year net sales guidance of $1.1 billion to $1.25 billion and adjusted EBITDA guidance of $55 million to $75 million.

• Reaffirmed full year net sales guidance of $1.1 billion to $1.25 billion and adjusted EBITDA guidance of $55 million to $75 million.
• Pricing initiative expected to impact annual product gross margins by 100 to 150 basis points.
• Store optimization to have annual sales impact of $25 million to $35 million and net EBITDA improvement of $4 million to $10 million annually.
• Expense reduction initiative expected to generate $7 million to $12 million in annualized savings starting in second half of 2026.
• DC network optimization to reduce annual cost by $500,000 to $1 million.
• Inventory optimization expected to result in onetime reduction of 100 to 200 basis points to annualized gross margins.
• SKU rationalization to generate $4 million to $5 million in incremental EBITDA savings.

Q: It sounds like the pricing actions sound like a move to EDLP in a way, which you want to be competitive on the important thing. I heard the remarks that you don't -- you sized up the gross profit impact. I guess the same question is, how do you feel like the whole year is intact despite these pricing changes? Did you have to find offsets? How does nothing move based on such a -- it feels like a drastic decision or in the right decision, but still a big decision? And then I have one follow-up.

A: Jason McDonell said pricing actions are about adjusting regular prices on key value items, testing in multiple markets, and focus on building baskets when traffic comes. Jeff White said expense cuts provide net benefit to adjusted EBITDA, with expense cuts greater than the pricing impact.

Q: The positive momentum in January, not to be too cute, I guess, you didn't mention February. Is this an inflection in the business or it's the byproduct of also the exit of the stores and now you have a healthier -- a much healthier base. So how to think about those 2 dynamics?

A: Jason McDonell said positive comp store sales in January continued into February in some areas, with optimism ahead of new pricing campaign.

Q: My first question was just a follow-up on pricing. I was hoping maybe you could just elaborate on what you're seeing from a basket building perspective during the pilot for new pricing? And just anything you can share in terms of the lift in UPT or AOV? And any metrics you'd want to share in terms of in those markets where you piloted the EDLP pricing, any kind of recapture of lapsed customers in that test?

A: Jason McDonell said team did various tests across regions, saw good increases in UPT, and conversion rate improvement.

Q: And then a quick follow-up, maybe just on the store base. I imagine the next step is to think about and measure sales transfer rates from the first 80 to 90 closures and maybe that will inform additional closures for '27 potentially. But if you think longer term, over a multiyear horizon, how do you think about kind of Leslie's footprint in being able to kind of serve the pool owner best? Obviously, convenience and proximity has always been an important part of the value proposition. So any thoughts in terms of as you've done more work and more customer insights, how that's making you think about kind of the footprint longer term?

A: Jason McDonell said pool industry allows knowing pool locations, importance of right store and DC footprint and omnichannel approach. Jeff White added studies found areas of oversaturation and white space opportunity for expansion.