===Leslie's (LESL) guides JunQ EPS and revs below consensus

 

Leslie's guides Q3 EPS and revs below consensus; lowers FY23 outlook due to traffic declines in Residential and Pro businesses; CFO Steve Weddell stepping down, effective August 7; to be succeeded by Scott Bowman

• Co issues downside guidance for Q3 (Jun), sees EPS of $0.39-0.41, excluding non-recurring items, vs. $0.69 FactSet Consensus; sees Q3 (Jun) revs of $611 mln vs. $701.33 mln FactSet Consensus.
• Co issues downside guidance for FY23 (Sep), sees EPS of $0.28-0.32, excluding non-recurring items, vs. $0.77 FactSet Consensus; sees FY23 (Sep) revs of $1.43-1.45 bln vs. $1.6 bln FactSet Consensus.
  • Prior guidance was EPS of $0.78-$0.86 and revs of $1.560-$1.640 bln
• Co added, "Our fiscal third quarter results were well below our expectations as low double digit traffic declines in our Residential and Pro businesses drove negative comps across both discretionary and non-discretionary categories. While abnormal weather continued to pressure traffic levels, customer surveys conducted towards the end of the quarter also indicated increased price sensitivity and that consumers entered the pool season with a greater than normal amount of chemicals leftover from last year."
• Co also announced that Scott Bowman has been appointed CFO, effective August 7, 2023. Mr. Bowman will join the company on July 17, 2023 and serve as Chief Financial Officer Designate through August 6, 2023. Steve Weddell, who is stepping down as CFO effective August 7, 2023, will remain an advisor to the Company through December 31, 2023 to facilitate the transition.

• Leslie's (LESL) is making some waves today in the swimming pool space. Leslie's is the largest US retailer of swimming pool supplies (cleaning chemicals, equipment, accessories, toys).
• LESL's Q3 (Jun) guidance last night was well below analyst expectations and it lowered FY23 guidance. The company cited low double digit traffic declines in its Residential and Pro businesses, which drove negative comps across both discretionary and non-discretionary categories. While abnormal weather pressured traffic levels, LESL also said surveys indicated increased price sensitivity and that consumers entered the pool season with a greater than normal amount of chemicals leftover from last year.
• This guidance runs counter to the general theme that homeowners are investing in their homes to make them better as they decide not to move and forfeit their low rate mortgages. Granted, LESL focuses more on pool supplies rather than installations, so we do not want to read too much into this, but it is still a bit disconcerting. Its weak guidance is dragging down pool distributors/manufacturers like Pool Corp. (POOL -4.1%) and Latham Group (SWIM -0.1%) although they have recovered off their lows.
• One related company that has impressed us is Trex (TREX 69.87 -0.68). It is a supplier of wood-alternative decking and railing, so it's not a swimming pool company, but it is in the backyard sphere. It was notably more positive on its Q1 call in May than it had been on prior calls. So this LESL guidance makes us a little nervous ahead of TREX's Q2 report in early August, but not really. TREX sounded quite positive heading into this summer season, but we will see. Read our July 3 InPlay profile for full details on TREX.