• Fourth Quarter Revenue: $398 million, down 8% year-over-year.
• Full Year Revenue: $1.33 billion, down 8% year-over-year.
• Fourth Quarter Adjusted EPS: $0.02.
• Full Year Adjusted EPS: Loss of $0.01.
• Fourth Quarter Adjusted EBITDA: $43 million.
• Full Year Adjusted EBITDA: $109 million.
• Comparable Sales Decline: 8.3% for the fourth quarter.
• Gross Margin Rate: 36% for the fourth quarter, decreased by 105 basis points.
• Inventory Reduction: Ended the year at $234 million, a decrease of 25% year-over-year.
• Debt Levels: $784 million outstanding on secured term loan, reduced by $6 million from the previous year.
• Cash and Cash Equivalents: $109 million at the end of fiscal 2024.
• First Quarter 2025 Sales Guidance: $169 million to $176 million.
• First Quarter 2025 Adjusted EBITDA Guidance: Negative $29 million to negative $27 million.
• First Quarter 2025 Adjusted Net Loss Guidance: $39 million to $37 million.
• Store Network: Over 1,000 stores, with plans to add approximately three stores in fiscal 2025.

• Warning! GuruFocus has detected 5 Warning Signs with LESL.

Release Date: November 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Leslies Inc (NASDAQ:LESL) has a strong competitive advantage with over 1,000 stores located within 20 miles of 80% of pools in the U.S., providing a significant proximity advantage.
• The company is focusing on three strategic themes: customer centricity, convenience, and asset utilization, which are expected to drive long-term profitable growth.
• Leslies Inc (NASDAQ:LESL) has a robust loyalty program with over 80% of DIY customers as members, providing valuable customer data for personalized solutions.
• The PRO business segment showed resilience with a low single-digit sales decline, outperforming the overall company sales decline.
• Leslies Inc (NASDAQ:LESL) plans to pay down approximately $25 million of debt in the current quarter, aligning with their priority of reducing debt and improving financial health.

Negative Points

• Sales for the fiscal fourth quarter and full year 2024 were down 8%, reflecting continued softness in traffic and larger ticket and discretionary products.
• Adjusted earnings per share were only $0.02 for the fourth quarter, with a loss of $0.01 for the year, indicating financial challenges.
• Gross margin rate decreased by 105 basis points in the fourth quarter, largely due to deleverage on occupancy and distribution center costs.
• The company is experiencing continued softness in larger ticket and discretionary categories, impacting overall sales performance.
• Leslies Inc (NASDAQ:LESL) is pausing new store growth and M&A activity to focus on debt reduction, which may limit expansion opportunities in the near term.

Q & A Highlights

Q: Jason, which strategic theme do you think will make the largest impact in the near to medium term? A: Asset utilization is expected to have the largest impact. It focuses on optimization and improving same-store sales. Leslie's proximity advantage and supply chain can be leveraged to deliver on customer needs. Additionally, there's an opportunity to optimize inventory through precision inventory management.

Q: Why is there relative strength in the PRO business compared to the rest of the business? A: The PRO business has seen success due to targeted promotional activities like flash sales and an increase in PRO partners, which are up 14% from last year. Competitive pricing has also been a focus, as PROs are price-sensitive and require competitive pricing to shop at Leslie's.

Q: Can you break down the negative 8.3% comps for the quarter between ticket and traffic? A: The decline was driven more by traffic. Initiatives are focused on driving top-line growth and leveraging competitive advantages in stores and other channels to improve traffic.

Q: What strategies are being considered to improve gross margins, and is there a focus on cost takeout or top-line improvement? A: The focus is more on top-line improvement. While there is room for marginal improvements in DC operations and inventory adjustments, the primary goal is to drive top-line growth to leverage fixed costs.

Q: Can you provide additional color on the $5 million contractual gross margin headwind? A: The headwind was due to a renegotiated supplier contract that involved taking on warranty responsibilities in exchange for higher volume-based rebates. The contract has been revised to eliminate this issue going forward.

Q: How do you plan to address potential reinvestment needs to build awareness and improve retail fundamentals? A: The focus is on defining key messaging and communication to drive traffic, leveraging competitive advantages, and reallocating current marketing spending to drive efficiency and performance.

Q: With the focus on debt paydown, how does this affect long-term unit growth outlook? A: The near-term priority is debt reduction, but there are still opportunities for future growth through store builds and M&A once comfortable with debt levels. The focus is on improving core profitability and top-line growth before reengaging in expansion.

Q: How do you view the opportunity in e-commerce, and is there incremental growth potential? A: The opportunity lies in taking an omnichannel approach, integrating digital and brick-and-mortar operations to best serve customers. The Leslie's proprietary site has shown positive results, and there are synergies to leverage further.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.