Wolfe Research analyst Greg Badishkanian raised the price target on Leslie's (NASDAQ: LESL) to $3.00 (from $2.00) while maintaining a Outperform rating.

The analyst comments "F'2Q results improve YoY and QoQ. Same-store sales increased +6.6% and accelerated +15pts on a two-year basis from the prior quarter. Gross margins improved +400bps YoY to 28.9% despite pricing investments while EBITDA margins also improved +400bps to -16.3%. EBITDA of -$30mm beat consensus at -$32mm. Shift to everyday low price operator begins to drive positive momentum. The price investment began in March of this year and has been focused primarily on core chemical categories. Retail stores saw DD increase in transactions and a +350bps improvement in conversion rates; water testing grew DD YoY. Management continues to expect a 100-150bps in margin headwinds from pricing, which was more than offset in the current quarter due to cost savings. Costs savings are benefitting the bottom line. Leslie's finished its plan to close 80 locations in F'26 which is expected to benefit EBITDA by $4-$10mm despite losing $25-$35mm. The company has also nearly completed its transition to the smaller 5- DC footprint which is yielding annualized savings, inventory efficiencies, and lower distribution costs. The closing of the IL DC should drive $500k-$1,000k in distribution cost savings. SG&A expense reduction initiatives should drive another $7-$12mm in annualized savings, with benefits starting to be realized in the back half of the fiscal year. Finally, the removal of 2K SKUs should provide Leslie's wit a $4-$5mm in annualized EBITDA improvement. F'26 guidance (ending Sept) reiterated. Management kept the full year sales guide which implies a -5% decline at the midpoint and the full year EBITDA guide which implies +6% growth at the midpoint."