Leslie’s (NASDAQ:LESL) reported higher fiscal second-quarter sales and improved adjusted EBITDA as executives said the pool supplies retailer’s transformation plan is beginning to drive customer traffic, store productivity and margin improvement.
Chief Executive Officer Jason McDonell said the company’s second-quarter performance showed progress across several of its strategic priorities, including pricing, customer reactivation, store operations, cost controls and asset utilization. For the quarter, Leslie’s reported revenue growth of 4.3%, comparable sales growth of 6.6%, a 26% year-over-year improvement in adjusted EBITDA and 8% total customer count growth.
Price Drop campaign lifts traffic and customer engagement
Management highlighted the company’s Price Drop initiative, launched in March in Sun Belt markets, as a key driver of improved results. McDonell said the pricing strategy is intended to increase traffic, improve conversion and build loyalty by lowering prices on select key items while preserving product quality.
According to McDonell, the campaign contributed to a double-digit increase in retail store transactions and more than a 350-basis-point improvement in the company’s overall conversion rate. He also said Leslie’s proprietary 10-point water testing system saw double-digit growth in water tests conducted compared with the prior-year quarter.
McDonell said the company entered fiscal 2026 with a goal of reducing customer churn, which had contributed to a net loss of residential customers in 2025. In the second quarter, Leslie’s posted mid-single-digit growth in both new and retained customers, along with more than 25% growth in reactivated customers. The company defines reactivated customers as those who did not shop with Leslie’s last year but had shopped with the company between 2021 and 2024.
Leslie’s supported the pricing initiative with targeted marketing, direct mail, digital media and in-store signage. McDonell said the company is using customer data to prioritize marketing channels and encourage lapsed customers to return.
Second-quarter sales and margin improve
Chief Financial Officer Jeff White said net sales rose to $184.7 million from $177.1 million in the prior-year quarter, ahead of the company’s expectations. Comparable total company sales, which exclude closed stores, increased 6.6%.
White said retail store sales were strong, with notable gains in residential and pro customers, particularly in March and across the Western United States. Category strength included sanitizers, shock and specialty chemicals, which management linked to the Price Drop campaign. Those gains were partially offset by softness in equipment, cleaning and maintenance, as well as expected declines in safety and solar as the company lapped a clearance event from the prior year.
Gross profit margin increased to 28.9% from 24.8% a year earlier. White attributed the improvement to leverage from higher sales volumes, favorable distribution and occupancy costs, and lower inventory reserves as inventory health improved.
SG&A expenses were essentially flat at $92.2 million, compared with $92.3 million a year earlier. White said lower labor and store costs were partially offset by higher technology and marketing spending tied to the Price Drop launch. As a percentage of sales, SG&A improved by more than 220 basis points.
The company reported a net loss of $52.5 million, compared with a net loss of $51.3 million in the same quarter last year. Adjusted net loss was $50 million, compared with $48.3 million a year earlier. Adjusted EBITDA improved to a loss of $26.8 million from a loss of $36.1 million in the prior-year quarter.
Inventory, store and distribution changes continue
Management said Leslie’s is continuing to pursue cost reductions and asset utilization improvements. Inventory at quarter-end was $262.4 million, down from $335.1 million a year earlier, reflecting inventory optimization and store closures. White said inventory declined 22% year over year, while in-stock levels on key products remained at all-time highs.
McDonell said the company has closed 80 stores in fiscal 2026 and completed its store optimization plan for the year. Management still expects the store closures to reduce annual sales by approximately $25 million to $35 million while generating annualized net EBITDA benefits of $4 million to $10 million. White said the company does not anticipate additional closures for the rest of fiscal 2026.
Leslie’s has also largely ceased operations at its Illinois distribution facility and shifted to a five-distribution-center network in Texas, Florida, Kentucky, California and New Jersey. McDonell said the transition is producing annualized savings and inventory efficiencies.
The company is also rationalizing its assortment by removing 2,000 long-tail SKUs from e-commerce and marketplace offerings fulfilled through its distribution centers. McDonell said Leslie’s expects that effort to deliver approximately $4 million to $5 million in annualized EBITDA improvement.
Guidance reaffirmed for fiscal 2026
Leslie’s reiterated its fiscal 2026 outlook for sales of $1.1 billion to $1.25 billion and adjusted EBITDA of $55 million to $75 million. White noted that fiscal 2026 is a 52-week year, compared with a 53-week year in fiscal 2025.
The company continues to expect capital expenditures of $20 million to $25 million, focused on maintenance and productivity investments, and said it expects to generate positive free cash flow for the year.
White said Leslie’s expects its pricing strategy to reduce annual gross margins by 100 to 150 basis points, while inventory optimization is expected to create a one-time reduction of approximately 100 to 200 basis points to annualized gross margins in the third and fourth quarters. At the same time, the company expects expense reduction initiatives to generate $7 million to $12 million in annualized savings, with benefits beginning in the second half of 2026.
White said the combined initiatives are expected to improve fiscal 2026 EBITDA by $5 million to $10 million, with some of the savings reinvested into the Price Drop strategy.
Analysts ask about margin sustainability and pricing
During the question-and-answer portion of the call, Jefferies analyst Jonathan Matuszewski asked about the sustainability of gross margin drivers. White said occupancy cost improvement was one of the largest contributors and could continue to support margins. He also said inventory reserve benefits were one-time in nature, though not “tremendously material” for the quarter.
White added that product margin improved as the company worked with vendors to optimize costs, and he said there is room for continued improvement through the second half of 2026 and into 2027.
In response to a question from Mizuho Securities analyst David Bellinger about potential expansion of the Price Drop initiative, White said Leslie’s would continue to evaluate opportunities to extend everyday value pricing into additional categories. He said the March rollout was primarily focused on core chemicals, where the company saw strong results. On equipment, White said many products are protected by minimum advertised pricing, limiting Leslie’s ability to move on price because vendors effectively set market pricing.
McDonell said the company still faces important weeks ahead as peak pool season accelerates, but he said early results from customer-facing investments funded by operational efficiencies support Leslie’s strategic direction.
About Leslie’s (NASDAQ:LESL)
Leslie’s, Inc (NASDAQ: LESL) is the largest direct-to-consumer retailer of swimming pool supplies and related equipment in the United States. Through a network of more than 900 company-operated stores and a robust e-commerce platform, the company offers a comprehensive range of pool chemicals, cleaning tools, pumps, filters, heaters and pool accessories. In addition to product retailing, Leslie’s provides in-store and in-home water testing services, equipment installation, repair and ongoing maintenance programs designed to support both residential and commercial pool owners.
Founded in 1963 in North Miami Beach, Florida, Leslie’s has grown from a single neighborhood pool-supply shop into a national specialty retailer.
