Leslie's maintains its price target with new CEO appointment

Leslie's Inc. (NASDAQ:LESL) maintained its Outperform rating and a price target of $4.00, as announced by Wolfe Research. This announcement comes in conjunction with the news that Leslie's is undergoing a change in leadership. The current CEO, Mike Egeck, has stepped down and is also leaving his position on the board. John Strain, the company's chairman, has been named interim CEO until Jason McDonell takes over the role on September 9th.

McDonell brings extensive experience to Leslie's, having begun his career in brand marketing at Proctor & Gamble in Canada in the mid-to-late 1990s. He then spent roughly 21 years at Pepsi in Canada, holding various marketing and sales positions, ultimately serving as the President of Pepsico (NASDAQ:PEP) Foods, Canada until 2019.

Most recently, McDonell was the Executive Vice President of Merchandising, Marketing, and e-Commerce at Advanced Auto Parts, a role he left in December 2023.

Leslie's, a player in the pool industry, has experienced fluctuating sales patterns since the onset of the pandemic. The company saw significant same-store sales growth of +18% in fiscal year 2020, +22% in fiscal year 2021, and +11% in fiscal year 2022.

However, the company has faced a downturn, with comparable store sales turning negative for the seventh consecutive quarter, with expectations of a mid-to-high single-digit decline in the upcoming quarter.

This downturn follows an impressive history of consistent growth, where Leslie's had increased sales for 59 consecutive years up to and including 2022. The ongoing sales challenges are seen as a contributing factor to the recent leadership changes.

Leslie's Inc. has announced significant developments in its corporate structure and financial performance. The company appointed Jason McDonell as its new CEO, effective from September 9, 2024, and he will also join the Board of Directors.

These changes are part of recent efforts to enhance clarity and consistency in the company's operations. Furthermore, Leslie's Inc. disclosed its Q3 fiscal 2024 earnings, showing a year-over-year decrease of 7% in total sales, amounting to $570 million. The company's gross margin dropped to 40%, with a gross profit of $229 million, while adjusted EBITDA stood at $109 million.

Despite these financial challenges, Leslie's Inc. remains focused on strategic initiatives for long-term growth, including opening two new stores by year-end and improving cost structure.

InvestingPro Insights

As Leslie's Inc. (NASDAQ:LESL) navigates through leadership transitions and fluctuating sales patterns, it's crucial for investors to consider key financial metrics and analyst expectations. According to InvestingPro data, Leslie's currently holds a market capitalization of approximately $567.68 million and trades at a high earnings multiple with a P/E ratio of 191.25. This high valuation comes at a time when analysts have revised their earnings expectations downwards for the upcoming period, suggesting that the market might be pricing in future growth or recovery prospects.

Despite the company's storied history of consistent growth, analysts anticipate a sales decline in the current year, with revenue growth showing a decrease of 8.69% over the last twelve months as of Q1 2023. This is aligned with the reported downturn in comparable store sales. Moreover, the company's stock has experienced significant price volatility, with a 39.92% drop in the three-month price total return as of Q1 2023. On a positive note, Leslie's liquid assets exceed its short-term obligations, which may provide some financial flexibility in navigating current challenges.

For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/LESL. These tips delve into aspects such as the company's profitability outlook for the year, its performance over the last twelve months, and the absence of dividend payments to shareholders—factors that are all pertinent to making informed investment decisions.

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