On Tuesday, Baird has adjusted its outlook on shares of Leslie's (NASDAQ:LESL), a company specializing in swimming pool supplies and related maintenance services. The firm has lowered the price target to $3.50 from the previous $4.00 while maintaining a Neutral rating on the stock. The revised target reflects a more cautious stance from the analyst following the company's fourth-quarter results.
In the recent quarterly report, Leslie's experienced a significant adjusted EBITDA shortfall, which was approximately 25%, or 17% when excluding a one-time item. This shortfall was primarily due to a softer gross margin. Despite this, there has been an uptick in sales trends quarter-to-date, with guidance suggesting a range between a 3% decline and a 1% increase, compared to the fourth quarter's 8% drop.
However, the first quarter is typically an off-season period for Leslie's, and the management's outlook for gross margin was notably below expectations, with a 200 basis point decline versus the anticipated 140 basis point increase expected by the Street. This disappointing projection has led to a more guarded view from analysts.
The company is currently undergoing strategic changes under the leadership of the new CEO, Jason McDonell. Due to these transitions, Leslie's has decided not to provide full-year guidance at this time. The absence of this guidance indicates that the company's path to profitable growth is still being formulated.
In light of these factors, Baird has chosen to lower their estimates and price target for Leslie's. The firm has opted to retain a Neutral rating on the stock, signaling a wait-and-see approach until there is greater clarity on the company's ability to achieve profitable growth in the future.
In other recent news, Leslie's Pool (NASDAQ:POOL) Supplies has reported a decrease in sales and profitability for the fiscal year 2024, with total sales dropping by 8% to $1.33 billion.
Telsey Advisory Group has adjusted its outlook on Leslie's shares, decreasing the price target from $4.00 to $3.75, while maintaining a Market Perform rating. This adjustment follows Leslie's announcement of underwhelming fourth-quarter fiscal year 2024 results, including a comparable sales decrease of 8.3% and a 28% drop in adjusted EBITDA.
The company also issued first-quarter fiscal year 2025 guidance that fell short of expectations, attributed to a challenging macroeconomic environment impacting consumer spending. Despite these headwinds, Leslie's has recently welcomed a new CEO, Jason McDonell, who has introduced strategic initiatives aimed at reversing the negative trends.
In addition to these developments, Leslie's is focusing on customer centricity, convenience, and asset utilization under the leadership of the new CEO. The company has also provided sales guidance for Q1 2025, projecting a range from a 3% decline to a 1% increase year-over-year.
Despite the overall decline, Leslie's e-commerce sales are growing, now making up nearly 20% of total sales. The company is also prioritizing debt reduction, pausing new store openings and mergers and acquisitions.
InvestingPro Insights
Recent InvestingPro data adds context to Baird's cautious stance on Leslie's (NASDAQ:LESL). The company's P/E ratio stands at a high 218.44, indicating that investors are paying a premium for current earnings. This aligns with one of the InvestingPro Tips, which notes that Leslie's is "Trading at a high earnings multiple."
Despite recent challenges, Leslie's has shown some positive momentum. The stock has experienced a "Significant return over the last week" and a "Strong return over the last month," with price total returns of 21.88% and 24.47% respectively. However, these short-term gains should be viewed in the context of longer-term performance, as the stock has taken a "big hit over the last six months," with a -31.31% price total return over that period.
The company's financial health presents a mixed picture. While Leslie's is "Profitable over the last twelve months" and "Analysts predict the company will be profitable this year," there are concerns about future performance. The InvestingPro Tips highlight that "Analysts anticipate sales decline in the current year" and "Net income is expected to drop this year." This aligns with the revenue growth of -8.69% over the last twelve months and the EBITDA growth of -45.62% in the same period.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Leslie's, providing a deeper understanding of the company's financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.