LESL

• Overall Business Context & Transformation Execution

  • The quarter operated in a challenging environment with softer consumer demand, heightened promotional competition, unfavorable weather that reduced in-store and online traffic, and shifting customer purchase behaviors
  • Management continues to execute a comprehensive transformation plan focused on pricing strategy, customer reactivation, store operations enhancement, cost optimization, and improved asset utilization to build a more efficient long-term business model

• Strategic Initiative Progress

  • The new pricing strategy has received positive customer feedback, with positive comparable sales delivered on leslies.com, where direct price comparisons are most common
  • The company successfully redirected customers from recently closed stores to nearby open locations and its digital platforms, demonstrating operational resiliency
  • Strong growth was achieved among lapsed customers who shopped Lesley's between 2021-2024 but not in the prior year, confirming that the updated value proposition and targeted marketing are effectively bringing former customers back
  • Full-scale training was completed for all store staff, in-stock levels for key never-out SKUs remained strong, supporting healthy in-store conversion and units per transaction growth in the quarter

• Balance Sheet & Strategic Alternatives

  • Management is evaluating options to address long-term debt obligations and strengthen the balance sheet, and has begun exploring strategic alternatives with financial stakeholders to gain incremental financial flexibility
  • Potential alternatives include a deleveraging transaction, potentially combined with one or more financing transactions; no final decisions have been made, and there is no guarantee any transaction will be completed
  • As of quarter end, the company held $207 million in total available liquidity (including cash and revolving credit facility capacity), with $30 million drawn on the revolver and $753 million in net long-term debt

• Updated Strategic Priorities

  • Traffic generation (across both physical stores and digital channels) is now identified as the company's central core challenge, beyond pricing and conversion
  • Management is sharpening focus on cost structure and operating model adjustments to align with the evolving macro environment

Given the weaker-than-anticipated customer traffic during the company's peak pool season and the ongoing uncertain macroeconomic environment, management has withdrawn its prior full-year fiscal 2026 outlook and is not providing an updated guidance at this time. Management expects full-year 2026 capital expenditures to come in well below $20 million, maintaining disciplined capital allocation.

The provided transcript does not break out financial performance by individual product segments. Only aggregate company-level results are reported: total Q3 2026 sales of $458.5 million (an 8.4% year-over-year decline), adjusted EBITDA of $55.7 million (down from $81.6 million year-over-year), gross profit margin of 36.5% (down from 39.6% YoY), SG&A of $106.4 million (down 17.9% YoY), net income of $47.8 million (up $26.1 million YoY), adjusted net income of $37.8 million (up $12.6 million YoY), ending inventory of $233.4 million (down 15% YoY), and year-to-date capital expenditures of $10.5 million (down from $19.1 million YoY).

• Softer-than-expected consumer demand and aggressive inventory-driven pricing actions from competitors have created meaningful operating leverage and margin headwinds
• Unfavorable weather patterns during the peak quarter reduced customer traffic and demand for higher-margin specialty chemical products, which typically drive store visits and revenue
• The company carries a substantial net long-term debt load of $753 million that creates balance sheet pressure, requiring strategic actions to deleverage and improve financial flexibility
• There is no guarantee that the ongoing exploration of strategic alternatives with financial stakeholders will result in a completed transaction that addresses the company's balance sheet needs
• Positive customer response to the new pricing strategy has not yet translated to consistent traffic improvements across physical store locations, creating uncertainty around near-term revenue growth

The provided earning call transcript concludes after management's prepared remarks and does not include a question and answer session with analysts or investors.