Leslie's, Inc. (LESL) shares plunged Wednesday after it reported its latest quarterly earnings, missing profit estimates but topping revenue expectations.
The swimming pool supplies retailer reported Q3 EPS of $0.14, $0.02 worse than the analyst estimate of $0.16. While revenue for the quarter came in at $432.4 million, topping the consensus estimate of $419.39 million, it came in 9.1% compared to the same period last year.
At the time of writing, LESL shares are down more than 20% from Tuesday's close.
The company said that following three years of "unprecedented growth," the pool industry and Leslie’s faced multiple transitory headwinds in 2023 that impacted LESL's financial results through the fiscal fourth quarter.
"Despite these impacts, we continued to deliver exceptional service to our customers," said Mike Egeck, LESL's Chief Executive Officer.
"In 2023, brand awareness, in stock service levels, and corresponding net promoter scores were at all-time highs. In addition, our Pool Perks® loyalty program grew, customer lifetime value increased and we continued to gain market share, all of which are a testament to the focus and execution of our team members,” he added.
Looking ahead, Leslie's sees FY2024 EPS between $0.25 and $0.33, versus the consensus of $0.30, with revenue expected to be from $1.41 billion to $1.47 billion, versus the consensus of $1.438 billion.
Reacting to the results, Telsey Advisory Group lowered its price target on the stock to $6 from $7.50 per share, maintaining a market perform rating.
The firm said the results were disappointing, and the company "continues to be impacted by a tough macro environment, especially discretionary categories, as well as weak demand for chemicals."
"Analysts were surprised by the magnitude of gross margin compression of 860 bps to 37% in 4QF23—mainly due to inventory-related adjustments, including lower pricing and higher shrink. These soft trends are expected to continue in 1HF24," they added.
Wolfe Research maintained an Outperform rating and $8 price target on LESL. The firm stated: "LESL reported mixed F'4Q results as gross margin headwinds hindered a top line beat. Mgmt also provided an underwhelming FY24 guide. Industry growth is expected to be flattish next year while margins need time to recover to pre-pandemic levels."