Leslie's, Inc.

What they do

Leslie's operates a direct-to-consumer retail network of over 900 stores (down from over 1,000) and an omnichannel platform under the Leslie's and In the Swim brands, selling chemicals, parts, equipment, and installation/repair services for residential and commercial pools and spas. It also runs a wholesale specialty parts distribution business, an integrated chemical manufacturing plant, and offers proprietary water testing via AccuBlue and AccuBlue Home. The company targets the $15 billion U.S. pool and spa care aftermarket, with a majority of products described as essential/non-discretionary.

Revenue drivers

• Retail stores — Over 900 locations are the primary sales channel; comparable sales decreased 6.2% in Q3 2026 and 5.5% for the nine months ended July 4, 2026.
• Chemicals and water treatment — A large portion of the assortment is essential chemicals; the AccuBlue water testing system drives engagement and basket size. Specific chemical revenue split not disclosed.
• Equipment, parts, and services — Includes new/replacement parts, cleaning equipment, installation and repair services, and weekly maintenance in some markets. Also operates a wholesale specialty parts distribution business; size not separately quantified.
• E-commerce/omnichannel — Integrated digital platform under Leslie's and In the Swim brands; specific e-commerce revenue not disclosed.

Recent performance

For the fiscal third quarter ended July 4, 2026, sales were $458.5 million, down 8.4% from $500.3 million in the prior year period, with comparable sales down 6.2%. Gross margin fell to 36.5% from 39.6%, and SG&A as a percentage of sales improved 270 bps. The company reported net income of $47.8 million (diluted EPS $5.01) versus $21.7 million (EPS $2.34) a year ago, but for the nine months ended July 4, 2026, net loss widened to $(87.7) million from $(74.2) million. Adjusted EBITDA for the nine-month period was $(11.4) million versus $16.2 million in the prior year period. Cash and cash equivalents were $45.9 million, with total liquidity of $207.1 million as of July 4, 2026.

Strategy

Management states it is advancing a 'strategic transformation' to right-size cost structure and supply chain, realign pricing, and invest in omnichannel capabilities. The company closed 80 underperforming stores and one distribution center in the first nine months of fiscal 2026, taking $8.3 million in non-cash impairment charges. It is also exploring strategic alternatives with financial stakeholders, which may include a deleveraging transaction and/or financing. Management says it is focused on driving store and digital traffic and will refine the new pricing strategy based on customer feedback.

Risks

• High leverage and negative equity — Long-term debt of $753.4 million and shareholder equity of $(492.7) million as of July 4, 2026, despite exploring financing alternatives.
• Declining sales and margins — Comparable sales have declined 5.5% in the first nine months of fiscal 2026 and gross margin contracted 270 bps year-over-year, reflecting demand softness and pricing changes.
• Weather and economic sensitivity — The business is sensitive to weather conditions, housing market trends, high interest rates, recession fears, and tariff-related trade policy changes, as noted in filings.
• Internal control and compliance — The 10-K references material weaknesses and the need to maintain Nasdaq listing standards; the company changed accountants in January 2026.

Outlook

Management notes continued macroeconomic softness and uncertainty about the company's ability to continue operations, leading it to explore strategic alternatives for incremental financial flexibility. For fiscal 2026, the company withdrew or did not reaffirm full-year expectations due to these uncertainties. Management says it has 'meaningful liquidity' and is operating in the normal course, but expects the challenging macro environment to persist.