Leslie's, Inc. (LESL) Stock Tumbles as Guidance Disappoints

August 5, 2022 1:26 PM EDT
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Price: $15.37 -5.06%

Rating Summary:
    8 Buy, 4 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 42 | New: 10
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Leslie's, Inc. (NASDAQ: LESL) shares fell Friday after the company reported earnings missing analyst expectations on earnings, revenue and guidance.

The swimming pool supplies retailer posted fiscal third-quarter earnings of $0.68 per share, $0.06 worse than the analyst estimate of $0.74, while revenue for the quarter came in at $673.6 million below the consensus estimate of $696.45 million.

Leslie's said its performance during the quarter was impacted by execution issues at its Northeastern distribution center and product margin decreases associated with supply chain challenges and industry promotions.

As a result, the company lowered its guidance for 2022. Leslie's now sees 2022 adjusted earnings between $0.90 and $0.96 per share, versus the consensus of $1.06, and down from the previous $1.02 to $1.10 per share. In addition, the company sees 2022 revenue of $1.55-1.57 billion versus the consensus of $1.59 billion and below the prior outlook of $1.575 billion to $1.610 billion.

Commenting on the latest earnings report, Goldman Sachs analyst Kate McShane said they "expect a negative reaction to LESL's 3Q print given the miss and guide down."

"On the call, we will be listening for more color around: a). Within the guidance revision how much of the sales guide down was related to the distribution issues v. a slow down in consumer spend, b). changes in the mix of the business and understanding where the higher promotions were focused c). an update on chlorine demand, pricing, and the supply chain, and d). market share and any additional drivers of consolidation in the quarter," explained McShane.

Stifel analyst W. Andrew Carter said in a note to clients that "the miss and reduced guidance are disappointing."

However, they "believe the bigger issue is the company's messaging over the past three months, including the June update focused on providing F3Q22's proportional percentage of 2H22 revenue versus explicit guidance to reset expectations."

"While numbers should move lower, our focus is on the company's ability to perform in line with long-term guidance in FY23, which should be achievable, given the outsized exposure to the category's non-discretionary sales serving higher-end consumers," said Carter.

By Sam Boughedda

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