What Happened?
Shares of pool products retailer Leslie’s (NASDAQ:LESL) fell 33% in the afternoon session after the company reported weak third-quarter results. All key metrics, along with its outlook, missed Wall Street's estimates. The company observed "softness in store traffic and larger-ticket and discretionary categories." and the weakness also reflected in profits. Overall, this was a challenging quarter.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Leslie's? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Leslie’s shares are extremely volatile and have had 83 moves greater than 5% over the last year. But moves this big are rare even for Leslie's and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock dropped 39.4% on the news that the company announced underwhelming preliminary fiscal third quarter results. Revenue was expected to come in at roughly $570 million (below consensus estimates of $619m). Adjusted EBITDA was also expected to be $108 to $109 million (below estimates of $132m) and adjusted EPS to be between $0.32 to $0.33 (below estimates of 0.42).
Providing more color on the weak guidance, Mike Egeck, Chief Executive Officer, added, "The cold and wet spring weather we experienced during the fiscal second quarter extended through May, reducing the number of pool days in non-seasonal markets and delaying the start of pool season in seasonal markets. We also continued to see weakness in large ticket discretionary categories as persistent inflation and high interest rates pressure pool owners' wallets. We experienced improved sales trends in June, but the April and May revenue impact created negative operating leverage and gross margin headwinds. While we are encouraged by improved June trends, our revised full year outlook at the midpoint assumes third quarter sales performance continues through the fourth quarter."
Leslie's is down 66.2% since the beginning of the year, and at $2.35 per share, it is trading 71.3% below its 52-week high of $8.18 from February 2024. Investors who bought $1,000 worth of Leslie’s shares at the IPO in October 2020 would now be looking at an investment worth $108.28.
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