Стенограма дзвінка щодо прибутків Leslie's (LESL) за 4 квартал 2025 року

Image source: The Motley Fool. Date Tuesday, Dec. 2, 2025 at 5 p.m. ET Call participants - Chief Executive Officer — Jason McDonell - Chief Financial Officer and Treasurer — Jeffrey White Full Conference Call Transcript Jason McDonell: Good afternoon, everyone, and thank you for joining us today to discuss our fourth quarter and full year fiscal 2025 results. Before we dive into today's discussion, I'm pleased to announce that we've successfully completed a smooth transition in our CFO role during the quarter. I'd like to welcome Jeff White, who joined Leslie's in early October as our Chief Financial Officer and Treasurer. Jeff brings a combination of financial and accounting expertise and the operational retail experience that will be instrumental as we continue our transformation journey towards sustainable, profitable growth. Jeff has hit the ground running and is heads down focused on several key areas, helping us lead our critical transformation at Leslie's, including, but not limited to, cost optimization, cash and capital management and leading actions and next steps to address our capital structure. Jeff will provide more detail on these critical areas shortly. On today's call, I will provide a review and a summary of actions we are taking as we execute on the transformation road map for Leslie's future. I will then turn the call over to Jeff, who will discuss our financial results in detail as well as our financial outlook. I'll return with closing thoughts on our path forward before we open the line up for questions. As outlined in this morning's release, we have implemented immediate actions to improve Leslie's operations and accelerate our path to financial profitability. As we look at the past of Leslie's, we've experienced market share loss and the main driver is price value challenge on some of our key items. In specific national research we've conducted, we found that pricing on our key items was often out of step with our competitors. And as the customer environment continues to be more value-focused during these macroeconomic conditions, it is critical that we act and invest in our customer value proposition. While we believe the weather was also a factor leading to our softer sales, our price value equation has been a major contributor to a net loss of over 160,000 residential customers this year and decline in residential traffic in 2025 of 8.6%. Key value item pricing sets price value perception with our customer, and we need to improve here. Price optimization on many of these core items is an area we will address. Keeping in mind, we enjoy a vertical integration on many of these products. As we are streamlining costs in our manufacturing operations, we are also focused on cost optimization efforts across direct materials, packaging and distribution. Layering on top of these operational cost efforts, we've also taken actions to improve our cost structure by announcing the closure of 80 to 90 underperforming stores over the next month. We closed a warehouse in Denver in July, are closing a distribution center in Illinois that will be completed this January, and we are also currently exiting underperforming SKUs in our system. These overarching cost savings will allow us to invest in an improved price value equation on key items. Investing in our value proposition at Leslie's is a top priority to reinvigorite our traffic performance. The great news is that we are adjusting our pricing strategy, and we have the ability to target communications directly to customers based on our zero-party data, which is information that has been provided by the customer to Leslie's. Stated quite simply, we know who our current and former customers are, where to reach them via e-mail, phone or home address as well as other specifics about their pool and historical purchases. Our Pool Perks loyalty program captures these details on over 85% of our transactions. To communicate our pricing adjustments, we are utilizing precision targeted marketing via our customer data file. For example, delivering personalized messages to lapsed customers to directly address what they told us will bring them back. Our research shows the most effective approach combines a clear value message with Leslie's industry-leading expertise and water testing capabilities. We're refining these messages further by incorporating purchase history, regional uniquenesses and local weather events. Once we've established that connection with our customer, we leverage our key competitive advantage in this sector with our consultative destination retail model. Once in the store, we work with the customer and customize a solution specific for their needs. That has been a strength for us this year. In fiscal year '25, conversion rates after a water test increased by 500 basis points year-over-year, reinforcing the trust customers place in our technical expertise. Our 10-point water test delivers a personalized treatment plan tailored to each person's pool environment, size and water composition, driving deeper engagement and continuous improvement in every market we serve. This is a key advantage for us at Leslie's. When customers come to visit us at Leslie's, our team members will help our customers build their basket. Now this is similar to what is commonplace in the grocery industry. Customers come into the grocery store for milk and bread and fill their basket with other items. The same at Leslie's. As customers come in to buy pool chemicals, our team members make sure they have everything they need and build their basket. Our team members in our stores focused on this in quarter 4, and we achieved mid-single-digit growth in units per transaction in the latest quarter. Improving our value proposition with better pricing in combination with our customer service and pool expertise will help us grow the basket, improve overall loyalty and ultimately regain share that we've lost. In addition to the actions of price value improvements, targeted marketing and basket building, another action we're taking is to build on our strengths around expertise and customer service. Today, we are announcing a restructuring of our field teams around a market leadership approach that sharpens our focus and facilitates deeper multichannel consumer relationships to drive growth. In the past, we've operated in silos, stores, service, commercial and trade were all separate within the Leslie's organization. We are integrating at a local level, giving our managers clear ownership of the pools in the markets and ZIP codes they lead. This restructuring accelerates our vision of becoming America's one-stop shop for pool care. By combining our customer file with our new market leadership model, we will strengthen customer relationships and capture significant growth across millions of pool owners in local markets. The new structure enables full service delivery in every store from BOPIS and service appointments to equipment repair and improved PRO fulfillment. Supported by our vendor partners, we will also launch deeper training ahead of next pool season to elevate our pool expertise nationwide. These actions all fall under our customer centricity pillar that I've mentioned on past earnings calls and are focused on the Leslie's value proposition and targeted customer approach, which will help Leslie's drive traffic and grow our share across the United States. Our next set of actions are under our convenience pillar and are focused on directly addressing the evolving expectations of today's pool owners who demand service when, where and how they want. To be even more convenient at Leslie's, we are accelerating our proximity to pools competitive advantage and our omnichannel transformation by expanding same-day delivery through our Uber partnership. In our Phoenix test market, new technology integrations cut ship-to-home fulfillment from days to hours and often minutes. We are now scaling this model across Arizona, and we'll continue expanding across the United States through 2026. Another action we are taking is to build on the pool service and repairs that we provide by expanding our pool maintenance and service offerings in new markets to meet customers' needs. Today, we offer pool service for their equipment in each territory across the country and are looking to grow this service business. In addition, today, we offer pool maintenance in Northern California, linked to stores in our Sacramento market and have recently added a test market in Orlando, Florida. In our California market, we've experienced strong double-digit sales growth. And overall, we've grown our active customer accounts by double digits as well. Pool maintenance provides a great opportunity for us at Leslie's. Being right there in their own backyard gives us more frequent connections with each of our customers. At Leslie's, we are the easy one place customers can go for quality products, advice to solve a problem, get service on their pool equipment, reliable, accurate water test or in expanding markets, we help maintain their pool. Under convenience, we also continue to optimize our local fulfillment centers to maximize coverage and efficiency while providing flexibility to better manage inventory and reduce working capital. Our local fulfillment centers continue to show benefits, improving in-stock rates and accelerating fulfillment speed, especially in high-volume markets. These local fulfillment centers are giving smaller locations the ability to better serve our PRO customers with access to larger PRO items like 50-pound buckets of chlorine tabs or 100-pound buckets of shock. Additionally, they hold long-tail inventory and stores can meet local customers' needs with having the inventory in the market to help meet the local demand. We look forward to sharing more in the future on how Leslie's will continue to be more convenient and deliver on being customers' one-stop shop for pool care. Now to discuss the asset utilization pillar, which directly addresses the fixed cost deleverage challenge at Leslie's that we have highlighted on past calls and represents one of our most significant opportunities for operational improvement. For asset utilization, we have used a combination of internal and external resources to evaluate our asset base, to help optimize productivity, drive efficiency, maximize profitability and optimize the debt structure. Starting with our stores. We first looked at pool proximity as it is a key competitive advantage, then pool density, the number of pools in the market and then the optimal distance between stores with an omnichannel mindset and approach. We also looked at the profitability and performance of each store. And as mentioned, we made the strategic decision to optimize the Leslie's store network. As I touched on above, we are announcing today that we will be closing 80 to 90 underperforming locations. These stores represent an annual sales impact of approximately $25 million to $35 million, and this decision will yield an annualized net EBITDA improvement of $4 million to $10 million. These locations are across multiple regions across America and are not centralized in one region of the country. For those stores that are closing, we will use a targeted marketing approach to reach out to customers and invite them with a personalized offer to another nearby location and remind them of accessing our portfolio and services online or via our mobile app. These decisive measures will improve our fixed cost structure, enhance EBITDA flow-through and position Leslie's for sustainable profitable growth. As we reset our store network, we are also streamlining our distribution footprint. In quarter 3, we closed our Denver warehouse and seamlessly shifted volume to other DCs, reducing annual cost by roughly $500,000. Looking ahead, we will transition to a more efficient 5 DC network in 2026, including the planned closure of our Illinois facility in January, driving another $500,000 in annualized savings. The Illinois location was mainly focused on our e-commerce fulfillment. Our optimized 5 DC network will fulfill e-commerce orders closer to the customer through local DCs and support BOPIS in stores, lowering shipping costs and significantly improving delivery speed across our app, website and marketplace business. In another action to improve asset utilization, we are continuing to take a precision inventory approach. Under our recently hired Chief Merchandising and Supply Chain Officer, Amy College, we are improving the Leslie's assortment. The first priority in our inventory optimization work is in SKU optimization. We're conducting a comprehensive assortment review to focus on our highest value inventory items, reducing the long tail of SKUs and deepening our focus on the most valuable items that drive most of our sales. As we enter the 2026 pool season, we are strategically reducing our SKU count by more than 2,000 SKUs, mainly coming from our long tail in e-commerce and marketplace that is fulfilled from our DCs. With the reduction in SKU count in our distribution centers, this enables Leslie's to simplify our go-to-market solutions and our operations. With this reduction, we will improve our annualized EBITDA by $4 million to $5. Building on SKU optimization, inventory management also remains a key priority. I'm pleased with the focus that the team has put towards inventory optimization in 2025 as it simplifies our operations by ensuring we have the right product at the right place with the right level of product depth. In 2025, we rationalized our inventory by $26 million, which exceeded our Q3 commitment of $20 million. Even with this inventory reduction, we improved in-stock levels in our top-selling never out SKUs by over 400 basis points compared to 2024. This in-stock performance helped support strong traffic conversion results by 74 basis points in fiscal year 2025. With a clear focus on inventory, SKU and network optimization, we are targeting continued inventory rationalization by another $20 million to $40 million in fiscal year 2026. As part of our strategic operating review, we continue to be in a process of conducting a thorough assessment of all of our noncore assets. Specific to our Stellar manufacturing facility, it represents a critical vertical integration asset for our key value items like chlorine tabs, and it enables us to compete effectively in the marketplace. Our team is working diligently to drive continued cost productivity at this site, and this will be passed on to the customer in everyday price value. When it comes to our hot tubs and Horizon businesses, we continue to evaluate, and we'll provide a further update on upcoming calls. In summary, we have a very robust asset optimization plan for Leslie's across our stores, DCs, warehouse, inventory and SKU assortment. These initiatives represent the next phase of our strategic transformation plan, which