Leslie’s (NASDAQ:LESL) used its fiscal first-quarter 2026 earnings call to outline a broad transformation plan aimed at restoring “sustainable, profitable growth,” while reaffirming full-year guidance despite a weak start to the year. Management emphasized pricing changes, targeted marketing, and cost and asset optimization initiatives as key levers heading into the core pool season.
Guidance reaffirmed as company prepares for seasonal ramp
Chief Executive Officer Jason McDonell said the company reaffirmed its outlook for fiscal 2026 net sales of $1.1 billion to $1.25 billion and Adjusted EBITDA of $55 million to $75 million. He also said Leslie’s started the second quarter with “encouraging momentum,” citing positive comparable store sales in January.
Pricing overhaul targets traffic and customer retention
McDonell described a “pricing transformation initiative” that will roll out nationally during the 2026 pool season. He said Leslie’s identified that its pricing had often been “out of step in the market,” contributing to a net loss of 160,000 residential customers in fiscal 2025, with churn cited as the most significant driver.
The company has conducted off-season price tests across “various segments,” which McDonell said showed enough lift to proceed directly to national implementation. Leslie’s plans to support the rollout with a “New Low Prices, Same Great Quality” integrated marketing campaign.
In response to an analyst question, McDonell said the company is moving away from a “high-low” promotional approach to a strategy centered on “everyday value,” including adjustments to regular prices, bundles, and “buy more, save more” offers. He said store teams will focus on “building baskets” through a consultative approach and the company’s proprietary 10-point water testing system.
Chief Financial Officer Jeff White said the company continues to expect the pricing changes to reduce annual gross margins by about 100 to 150 basis points year-over-year in fiscal 2026. He added that cost reduction efforts are intended to offset the gross margin investments, which supports management’s decision to keep full-year guidance unchanged.
Marketing and customer re-engagement efforts rely on loyalty data
Management highlighted customer retention as a near-term focus, particularly re-engaging lapsed customers. McDonell said the company will use its Pool Perks loyalty database—which he noted has captured customer information from over 85% of transactions—to deliver personalized messages to active and lapsed customers. The marketing plan will combine digital media with “precision targeted outreach,” and the company said it will continue using marketing mix modeling to optimize return on investment.
Asked about results from the pricing pilots, McDonell said it was difficult to share specific metrics because tests spanned multiple products and categories. However, he said the company saw “good, solid increases” in units per transaction (UPT) in certain tests and noted the company has improved conversion in stores over the last year.
Store, distribution, and SKU changes aimed at cost savings and efficiency
Leslie’s provided updates on several asset utilization initiatives:
- Store closures: McDonell said a review of the asset base led the company to close 80 underperforming locations. The company completed about 80% of the closures in less than seven days, which management said helped minimize disruption and accelerate savings. Management reiterated an expected annual sales impact of about $25 million to $35 million, with an annualized net EBITDA improvement of $4 million to $10 million once fully completed by the end of Q2 2026.
- Customer transition plans: The company said it deployed targeted marketing via Pool Perks to encourage affected customers to shop nearby stores and to use online and mobile options. Efforts include localized outreach through digital channels, direct mail, and phone calls.
- Distribution network optimization: McDonell said the company closed its Denver warehouse in Q3 of last year, shifting volume to other facilities and reducing annual costs by about $500,000. He added the company is on track to close an Illinois facility in Q2 2026, expected to generate an additional $500,000 to $1 million in annual savings. Management said the Illinois site was primarily focused on e-commerce fulfillment and that the optimized network should reduce shipping costs and improve delivery speed by fulfilling orders closer to customers and supporting buy online, pick up in store (BOPUS).
- Uber delivery expansion: McDonell said the company completed rollout of its Uber partnership in Arizona and California and plans to expand Uber same-day delivery nationwide ahead of pool season.
- SKU rationalization: Leslie’s expects to reduce SKU count by more than 2,000 entering the 2026 pool season, primarily by eliminating long-tail items from e-commerce and marketplace offerings fulfilled through distribution centers. Management reiterated a target of $4 million to $5 million in annualized EBITDA improvement from the initiative.
- Field organization restructuring: McDonell said Leslie’s implemented a “market leadership model” that integrates stores, service, commercial, and trade operations under unified local management, with ZIP code ownership and incentives designed to drive transaction growth and higher order values.
During Q&A, management said store and network analysis also identified “white space opportunity” for potential expansion into new markets, even as it continues to evaluate store productivity and footprint optimization over time.
Fiscal Q1 results: lower sales and margin pressure, with impairment charges
White reported fiscal first-quarter net sales of $147.1 million, down from $175.2 million a year earlier, a 16% decline. He attributed the year-over-year decline to several factors, including the anniversary of a $4 million hurricane-related sales benefit in the prior year, about a $10 million impact from the shift from a 53-week fiscal 2025 to a 52-week fiscal 2026, and about a $1 million impact from closed stores.
Comparable sales decreased 15.5% in the quarter. White said the hurricane benefit, 53rd-week shift, and store closures collectively accounted for about 850 basis points of the comparable sales decline.
Gross profit margin was 18.4% versus 27.2% in the prior-year period. White said approximately 430 basis points of the decline was due to a one-time non-cash impairment charge on inventory in stores that were closed. He said the remaining decline was driven by lower margins on core chemicals, which he said had an outsized negative impact due to low sales volume, partially offset by cost reduction strategies.
SG&A decreased $1.7 million, or 2%, to $85.7 million, driven by lower store labor, corporate payroll, and other operating expenses. The company recorded a $10.1 million non-cash impairment charge related to the closure of 80 stores and one distribution center, which White said was at the midpoint of expectations.
Net loss was $83 million compared with a net loss of $44.6 million in the prior-year quarter. Excluding charges, adjusted net loss was $48.7 million compared with an adjusted net loss of $40.7 million. Adjusted EBITDA was negative $40.3 million versus negative $29.3 million in the prior year.
Inventory ended the quarter at $210 million, down from $271 million a year earlier, a 23% reduction attributed to inventory optimization initiatives and store closures. Capital expenditures were $4.3 million compared with $4.7 million a year ago.
On liquidity, White said Leslie’s ended the quarter with $25 million of outstanding borrowings on its line of credit and $752 million of long-term debt. As of quarter end, the company had about $128 million of availability from cash on hand and borrowing capacity under its credit facility.
Looking ahead, White said Leslie’s expects fiscal 2026 CapEx of $20 million to $25 million and said the company remains focused on generating positive free cash flow for the year. He also said Leslie’s is evaluating capital structure opportunities and is working with incumbent lenders and third-party capital providers to finance “incremental initiatives” intended to accelerate growth and shorten the path to profitability.
About Leslie’s (NASDAQ:LESL)
Leslie’s, Inc (NASDAQ: LESL) is the largest direct-to-consumer retailer of swimming pool supplies and related equipment in the United States. Through a network of more than 900 company-operated stores and a robust e-commerce platform, the company offers a comprehensive range of pool chemicals, cleaning tools, pumps, filters, heaters and pool accessories. In addition to product retailing, Leslie’s provides in-store and in-home water testing services, equipment installation, repair and ongoing maintenance programs designed to support both residential and commercial pool owners.
Founded in 1963 in North Miami Beach, Florida, Leslie’s has grown from a single neighborhood pool-supply shop into a national specialty retailer.
