LESL — Leslie's, Inc.

Leslie's Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Sales: Increased by 4.3% to $184.7 million compared to $177.1 million in Q2 2025.
• Comparable Sales: Up 6.6%, indicating strong performance excluding closed stores.
• Adjusted EBITDA: Improved to negative $26.8 million, a $9.2 million improvement from negative $36.1 million in the prior year.
• Gross Profit Margin: Increased to 28.9%, up from 24.8% year-over-year, driven by higher sales volumes and improved cost management.
• Net Loss: Reported at $52.5 million, slightly worse than the $51.3 million loss in Q2 2025.
• Inventory: Reduced by over 20% year-over-year to $262.4 million, reflecting effective inventory optimization.
• Capital Expenditures: Decreased to $9.5 million from $11.2 million in Q2 2025.

2. Strategic Updates and Business Highlights

• Transformation Plan: The company is executing a comprehensive transformation plan focusing on customer centricity, convenience, asset utilization, and cost optimization.
• Price Drop Initiative: Launched in March, this initiative has driven customer growth and improved transaction rates, with double-digit increases in store transactions.
• Customer Growth: Total customer count grew by 8%, with over 25% growth in reactivated customers.
• Distribution Network: Transitioned to a five-distribution-center model, yielding operational efficiencies.
• PRO Business Growth: Increased approximately 5% during the quarter, attributed to improved value offerings and customer engagement.

3. Forward Guidance and Outlook

• Sales Guidance: Reiterated expectations for fiscal 2026 sales between $1.1 billion and $1.25 billion.
• Adjusted EBITDA: Expected to range from $55 million to $75 million for the year.
• Capital Expenditures: Anticipated to be between $20 million and $25 million, focusing on maintenance and productivity.
• Cost Savings Initiatives: Expected to yield $7 million to $12 million in annualized savings, with benefits starting in the second half of 2026.

4. Bad News, Challenges, or Points of Concern

• Net Loss: The increase in net loss compared to the previous year raises concerns about profitability despite revenue growth.
• Equipment Sales: Noted softness in the equipment, cleaning, and maintenance categories, which could impact overall sales performance.
• Store Closures: While the company has completed its store closure plans, the impact of these closures on sales and customer retention remains a concern.
• Competitive Pressures: Challenges in adjusting prices for equipment due to MAP protection from vendors could limit flexibility in pricing strategies.

5. Notable Q&A Insights

• Gross Margin Sustainability: Management indicated that improvements in occupancy costs are sustainable, while inventory reserve adjustments may not recur.
• Price Drop Initiative: There is potential for expanding the Price Drop initiative, but management is cautious about increasing the investment without further assessment of market conditions.
• Equipment Category Performance: Equipment sales have been affected by vendor pricing controls, limiting the company’s ability to adjust prices in response to market changes.

Overall, Leslie's Q2 2026 results reflect a positive trajectory in revenue and customer growth, supported by strategic initiatives like the Price Drop campaign. However, ongoing net losses and challenges in specific product categories highlight areas for continued focus and improvement.