UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Commission File Number: 001-39667 LESLIE'S, INC. ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 3, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Delaware 20-8397425 (State or other jurisdiction of incorporation or organization) 2005 East Indian School Road Phoe ...

Financial Data and Key Metrics Changes - Net sales for Q1 2026 were $147.1 million, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and $1 million from closed stores [16][17] - Gross profit margin decreased to 18.4% from 27.2% in the prior year, with approximately 430 basis points of this decline due to a non-cash impairment charge on inventory from closed stores [18] - Net loss for Q1 2026 was $83 million, compared to a net loss of $44.6 million in Q1 2025, with an adjusted net loss of $48.7 million versus $40.7 million in the prior year [19][20] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [17] - The company closed 80 underperforming stores, which is expected to have an annual sales impact of approximately $25 million-$35 million but will yield an annualized net EBITDA improvement of $4 million-$10 million once fully completed [9][22] Market Data and Key Metrics Changes - The company is seeing positive comparable store sales momentum in January 2026, indicating a potential recovery as it approaches the pool season [4][39] - The pricing transformation initiative aims to improve customer pricing on key items, addressing previous misalignments with market pricing [4][5] Company Strategy and Development Direction - The company is committed to becoming America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][14] - A new integrated marketing campaign, "New Low Prices, Same Great Quality," is set to launch, aimed at driving traffic and increasing customer loyalty [5][28] - The restructuring of the field organization into a market leadership model is intended to enhance customer relationships and drive transaction growth [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the progress of transformation initiatives, reaffirming full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][25] - The company anticipates generating the majority of sales and earnings in the second half of the year due to the seasonal nature of the business [25] Other Important Information - Inventory at the end of Q1 2026 was $210 million, a 23% reduction year-over-year, due to inventory optimization initiatives and store closures [20][21] - The company is focused on disciplined inventory management and has implemented a SKU rationalization initiative to eliminate over 2,000 SKUs, expected to generate $4 million-$5 million in incremental EBITDA savings [12][24] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and transitioning to a more consistent pricing strategy centered around everyday value, which is expected to limit gross margin reductions [31][33] Question: Positive momentum in January and its implications - Management noted that while there is a healthier base, the positive comparable store sales in January are encouraging, and they are optimistic about the upcoming pool season [38][39] Question: Insights on basket-building during pricing pilot - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to the new pricing strategy [44][45] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center footprints to enhance service to pool owners, while also identifying opportunities for expansion in new markets [49][50]

Financial Data and Key Metrics Changes - Net sales for Q1 2026 were $147.1 million, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and a $1 million impact from closed stores [16][17] - Gross profit margin decreased to 18.4% from 27.2% year-over-year, with a significant portion of the decline due to a non-cash impairment charge related to closed stores and lower margins on core chemicals [18] - Net loss for Q1 2026 was $83 million, compared to a net loss of $44.6 million in Q1 2025, while adjusted net loss was $48.7 million, up from $40.7 million [19][20] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [17] - The company closed 80 underperforming stores, which is expected to have an annual sales impact of approximately $25 million-$35 million but will yield an annualized net EBITDA improvement of $4 million-$10 million once fully completed [9][23] Market Data and Key Metrics Changes - The company is seeing positive comparable store sales momentum in January 2026, indicating a potential recovery as it approaches the pool season [4][40] - The pricing transformation initiative aims to improve customer pricing on key items, addressing previous misalignments with market pricing [4][5] Company Strategy and Development Direction - The company is committed to becoming America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][14] - A comprehensive transformation plan is underway, including a pricing strategy aimed at driving traffic and increasing customer loyalty [5][12] - The company is optimizing its distribution network and has closed its Denver warehouse, which is expected to reduce costs while maintaining service levels [10][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategic direction and the progress of transformation initiatives, reaffirming full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][26] - The company anticipates generating the majority of its sales and earnings in the second half of the year due to the seasonal nature of the business [26][27] Other Important Information - Inventory at the end of Q1 2026 was $210 million, a 23% reduction year-over-year, attributed to inventory optimization initiatives and store closures [20][21] - The company is focused on disciplined inventory management and has implemented a SKU rationalization initiative to eliminate over 2,000 SKUs, expected to generate $4 million-$5 million in incremental EBITDA savings [12][25] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and changing promotional strategies to enhance competitiveness and customer traffic [33][34] Question: Positive momentum in January and its implications - Management noted that while there is a healthier base post-store closures, January's positive sales momentum is encouraging ahead of the pool season [40] Question: Insights on basket-building during pricing pilot - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to new pricing strategies [45][46] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center locations to enhance service to pool owners, while also identifying opportunities for future expansion [49][51]

Financial Data and Key Metrics Changes - The company reported net sales of $147.1 million for Q1 2026, a 16% decline from $175.2 million in Q1 2025, attributed to a $4 million hurricane-related sales benefit last year, a $10 million impact from the shift to a 52-week year, and approximately $1 million from closed stores [14][15] - Gross profit margin decreased to 18.4% from 27.2% in the prior year, with a significant portion of the decline due to a non-cash impairment charge related to closed stores and lower margins on core chemicals [15][16] - The net loss for Q1 was $83 million, compared to a net loss of $44.6 million in the same period last year, while adjusted net loss was $48.7 million, up from $40.7 million [17][18] Business Line Data and Key Metrics Changes - Comparable sales decreased by 15.5% in Q1 2026, with most categories reflecting this decline [15] - The company experienced a net loss of 160,000 residential customers in the previous fiscal year, primarily due to customer churn [4][6] Market Data and Key Metrics Changes - The company is implementing a pricing transformation initiative to improve pricing competitiveness, which is expected to drive traffic and increase conversion rates [4][5] - The company is focusing on re-engaging lapsed customers as a significant growth opportunity [6][7] Company Strategy and Development Direction - The company aims to become America's one-stop shop for pool care, focusing on customer value proposition and operational efficiency through cost optimization and better asset utilization [3][12] - A comprehensive transformation plan is underway, including store optimization, pricing strategy adjustments, and enhanced marketing efforts [3][10][12] - The company plans to close 80 underperforming stores, which is expected to yield an annualized net EBITDA improvement of $4 million-$10 million [8][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the upcoming pool season, supported by positive comparable store sales in January and a strategic pricing initiative [4][26] - The company reaffirmed its full-year guidance for net sales of $1.1 billion-$1.25 billion and Adjusted EBITDA of $55 million-$75 million [3][24] Other Important Information - The company has streamlined its distribution network, closing a warehouse to reduce costs and improve service levels [9][10] - A significant SKU rationalization initiative is in progress, aiming to eliminate over 2,000 SKUs to enhance inventory efficiency [11][23] Q&A Session Summary Question: Pricing actions and their impact on the business - Management explained that the pricing actions are aimed at optimizing regular prices and transitioning to a more consistent pricing strategy focused on everyday value, which is expected to limit gross margin reductions [30][31] Question: Positive momentum in January and February - Management noted that while January showed positive comparable store sales, February's performance was mixed, with optimism for the upcoming pool season due to new pricing strategies [36][37] Question: Insights on basket-building and customer recapture - Management shared that tests across various regions showed solid increases in units per transaction (UPT) and conversion rates, indicating a positive response to the new pricing strategies [42][43] Question: Long-term store footprint strategy - Management emphasized the importance of optimizing store and distribution center locations to enhance service speed and convenience, while also identifying opportunities for future expansion [46][48]

Sales and adjusted EBITDA in-line with Company expectations, reiterates full year guide 80 underperforming stores closed during Q1 2026 Improved inventory efficiency with ~23% reduction year-over-year PHOENIX, Feb. 17, 2026 (GLOBE NEWSWIRE) -- Leslie’s, Inc. (NASDAQ: LESL), the largest and most trusted direct-to-customer brand in the U.S. pool and spa care industry serving residential customers and pool professionals nationwide, today announced its financial results for the fiscal first quarter 2026. Jason ...

Company Overview - Leslie's, Inc. is the largest and most trusted direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals nationwide [3] - Founded in 1963, the company operates over 1,000 physical locations and a robust digital platform, providing an extensive and largely exclusive assortment of essential pool and spa care products [3] - Leslie's aims to empower consumers with knowledge, products, and solutions necessary for maintaining and enjoying their pools and spas [3] Financial Results Announcement - The company will release its first quarter 2026 financial results after market close on February 17, 2026 [1] - A conference call will be held at 5:00 p.m. Eastern time on the same day to discuss the financial results and progress on strategic transformation initiatives [2] - A live webcast of the conference call will be available online, with a replay accessible for 180 days on the company's Investor Relations website [2]

Core Insights - Leslie's, Inc. has appointed John Hartmann as an independent director to its Board of Directors, effective January 7, 2026 [1] - The Board will expand from eight to nine members with Hartmann's addition, and he will stand for election at the Company's 2026 Annual Meeting of the Shareholders [2] Company Overview - Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [5] - The company operates approximately 950 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [5] Leadership Experience - John Hartmann brings nearly 25 years of retail leadership experience, having successfully executed turnarounds as a C-suite executive in various industries [2][3] - His previous roles include CEO of Ascend Wellness Holdings, COO of Bed Bath & Beyond, and CEO of True Value, among others [3][4] Board Contributions - Hartmann's expertise in leading large-scale transformations and modernization initiatives is expected to be a valuable asset to Leslie's Board and management team [3] - He currently serves on the board of Boyd Group Services and has held positions on several other boards, enhancing his governance experience [4]

Financial Performance - The company experienced a decline in sales and profitability starting from the fiscal year ending September 30, 2023, through the fiscal year ending October 4, 2025[133]. - For the year ended October 4, 2025, Leslie's, Inc. reported a net loss of $236.97 million, compared to a net income of $27.24 million for the year ended September 30, 2023[346]. - Sales for the year ended October 4, 2025, were $1.24 billion, down from $1.33 billion in the prior year, representing a decline of about 6.6%[340]. - The company recorded an impairment loss of $180.7 million in the fourth quarter, significantly impacting the operating income, which resulted in an operating loss of $169.9 million for the year[340]. - The stockholders' deficit increased to $408 million as of October 4, 2025, compared to $177.1 million the previous year, reflecting a worsening financial position[337]. - Net cash provided by operating activities decreased significantly to $8.82 million from $107.47 million in the previous year[346]. - The company incurred impairments totaling $183.83 million during the fiscal year, indicating potential asset value concerns[346]. Market and Economic Risks - The company faces significant risks related to achieving comparable sales growth, which could materially impact profitability and performance[94]. - Macroeconomic and geopolitical developments, including public health crises and supply chain disruptions, may adversely affect financial and operating performance[79]. - Economic conditions, including consumer discretionary spending, unemployment rates, and access to credit, directly affect demand for pool and spa products[110]. - The company faces risks from potential tightening of credit markets, which could limit consumer financing for pool and spa projects, negatively affecting sales[111]. - Recent changes in U.S. trade policies, including tariff exchanges with China, have disrupted supply chains and increased costs, potentially affecting customer spending patterns[145]. - Disruptions from natural disasters, geopolitical events, and economic crises could negatively impact demand for products and disrupt supply chains[104]. Competition and Market Position - The company operates in a highly competitive and fragmented aftermarket pool and spa care industry, facing significant competition from online platforms, mass merchants, and independent retailers[105]. - Competition from mass-market retailers like Walmart and Costco, as well as online retailers like Amazon, poses a significant threat to the company's market share[108]. - The company must manage competitive pressures and pricing strategies to maintain operating margins amid economic uncertainties[94]. Operational Challenges - Inventory management is critical; misalignment with consumer demand could lead to excess inventory or lost sales, adversely affecting financial performance[98]. - The company faces risks related to the cost of raw materials, particularly granular chlorine compounds, which could increase the cost of goods sold and negatively impact financial results[146]. - The company may incur significant costs associated with the closure of underperforming locations, including impairment charges and inventory write-offs[135]. - The company may face challenges in effectively managing product inventory, which could harm profitability and long-term growth prospects[150]. - The company relies on a network of suppliers for product inventory, and disruptions in supply could adversely affect profitability and operating results[144]. Human Resources and Compliance - The company is significantly dependent on attracting and retaining qualified personnel to maintain operations and customer service quality[101]. - Legal proceedings may pose material risks, with potential liabilities that could impact financial results[103]. - The company faces risks related to compliance with various governmental regulations, which could increase operating costs and divert management's attention[157]. - The company may incur significant legal fees and expenses due to product liability claims, which could adversely affect its financial condition[155]. Financial Management and Debt - The company has total borrowings of $756.7 million under its Credit Facilities as of December 5, 2025[168]. - The company's credit rating has been downgraded, impacting its ability to access capital markets and increasing borrowing costs[169]. - The company’s ability to generate sufficient cash flow to service its debt obligations is uncertain, which may require refinancing or asset sales[171]. - The company has pledged substantially all of its assets as collateral to secure its Credit Facilities, which could limit operational flexibility[175]. Seasonal and Environmental Factors - Seasonal fluctuations significantly impact sales, with a greater percentage of revenues generated during the warm months of April through September[114]. - The company is susceptible to adverse weather conditions, which can reduce chemical consumption and consumer purchases during peak sales seasons[117]. - The demand for pool chemicals may decline if consumer attitudes shift towards environmental or safety concerns, impacting sales[113]. - Changes in consumer preferences, particularly a shift from DIY to DIFM (Do It For Me) services, could impact demand for pool and spa care products[132]. Internal Controls and Governance - The company has identified material weaknesses in its internal control over financial reporting, which could affect the accuracy and timeliness of financial results[199]. - Remediation of identified material weaknesses is ongoing, but completion does not guarantee continued effectiveness of controls[203]. - The company may incur increased costs due to compliance with public company responsibilities and corporate governance practices[196]. - The company has faced potential delisting from Nasdaq due to non-compliance with the minimum bid price requirement, but has regained compliance[197][198]. Asset Management - As of October 4, 2025, Leslie's, Inc. reported total assets of $741.5 million, a decrease from $1.05 billion as of September 28, 2024, reflecting a decline of approximately 29.4%[337]. - The company recorded a goodwill impairment of $180.7 million during fiscal 2025, with no impairments in fiscal 2024 and 2023[382]. - The company has 9,290,311 shares of common stock outstanding, all eligible for resale, which could impact stock price if significant stockholders sell[185]. - The company executed a reverse stock split at a ratio of 1-for-20, effective September 29, 2025, to adjust its share structure[350].

Core Viewpoint - Leslie's, Inc. reported mixed financial results for the fourth quarter, with earnings significantly below analyst expectations but sales exceeding estimates [1][2]. Financial Performance - The company reported quarterly earnings of $0.09 per share, compared to the analyst consensus estimate of $1.29 per share [1]. - Quarterly sales reached $389.206 million, surpassing the analyst consensus estimate of $370.635 million [1]. Future Outlook - Leslie's projects FY2026 sales between $1.100 billion and $1.250 billion, which is below market estimates of $1.219 billion [1]. Operational Changes - The CEO announced the closure of 80-90 underperforming stores and one distribution center to improve operations and financial recovery [2]. - The company aims to reduce inventory by 10% year over year and achieve direct cost reductions of $7 million to $12 million, which will be reinvested into customer value [2]. Stock Performance - Following the earnings announcement, Leslie's shares fell by 14.3%, trading at $3.07 [2]. Analyst Ratings - Baird analyst Peter Benedict maintained a Neutral rating on Leslie's and lowered the price target from $6.50 to $3 [5]. - Mizuho analyst David Bellinger also maintained a Neutral rating, cutting the price target from $5 to $4 [5].

Core Insights - Leslie's, Inc. reported mixed fourth-quarter financial results, with earnings of $0.09 per share, significantly below the analyst consensus estimate of $1.29 per share, while quarterly sales of $389.206 million exceeded the consensus estimate of $370.635 million [1] - The company anticipates FY2026 sales between $1.100 billion and $1.250 billion, which is lower than market estimates of $1.219 billion [1] Financial Performance - Fourth-quarter sales and adjusted EBITDA were above the high end of previously established guidance [2] - The company plans to close 80-90 underperforming stores and one distribution center to improve operations and financial recovery [2] - Leslie's aims to reduce inventory by 10% year over year and achieve direct cost reductions of $7 million to $12 million, which will be reinvested into customer price value [2] Market Reaction - Following the earnings announcement, Leslie's shares fell by 14.3%, trading at $3.07 [2] - Analysts have adjusted their price targets for Leslie's stock, with Baird lowering it from $6.5 to $3 and Mizuho from $5 to $4, both maintaining a Neutral rating [5]