Pool products retailer Leslie’s (NASDAQ: LESL) fell short of the market’s revenue expectations in Q4 CY2025, with sales falling 16% year on year to $147.1 million. The company’s full-year revenue guidance of $1.18 billion at the midpoint came in 1.2% below analysts’ estimates. Its non-GAAP loss of $5.24 per share was 23.7% below analysts’ consensus estimates.

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StockStory’s Take

Leslie’s reported fourth quarter results that fell short of Wall Street’s expectations, with management highlighting operational changes and shifting customer dynamics as key drivers. The company attributed the revenue decline to several factors, including a net loss of 160,000 residential customers, ongoing store closures, and a strategic overhaul of its pricing model. CEO Jason McDonell described the period as “a pivotal time,” emphasizing the impact of rightsizing operations and cost optimization efforts. Management acknowledged that the customer churn and competitive pricing pressures weighed heavily on performance but pointed to progress in transformation initiatives as a positive development.

Looking forward, Leslie’s focus is on stabilizing and growing its active customer base through a national rollout of new pricing strategies and targeted marketing campaigns. The company is implementing a “new low prices, same great quality” campaign, supported by data-driven outreach to both active and lapsed customers. Management believes that these actions, along with operational streamlining and expanded delivery options, will help drive traffic and improve conversion rates as the pool season begins. CFO Jeff White noted, “We remain confident in our pricing strategy as we move into pool season and are reiterating our guide that these pricing investments will only cause an approximate 100 to 150 basis point decline in annual gross profit margins.”

Key Insights from Management’s Remarks

Management attributed the quarter’s results to customer attrition, aggressive store optimization, and a major shift in pricing strategy, while emphasizing early momentum from recent transformation actions.

• Customer attrition drove sales decline: Management cited a net loss of 160,000 residential customers as the most significant contributor to lower sales, primarily resulting from higher churn rates and competitive pressures.

• Comprehensive store optimization: The company closed 80 underperforming stores, executing most closures within one week to quickly capture cost savings and minimize disruption. This move is expected to yield $4–10 million in annualized EBITDA improvement once fully implemented.

• Pricing strategy overhaul: Leslie’s transitioned from a high-low promotional model to more competitive, everyday value pricing on key items, following extensive price testing and market analysis. The new pricing approach aims to drive store traffic, boost conversion rates, and recapture lapsed customers.

• Targeted marketing and loyalty focus: The “new low prices, same great quality” campaign will leverage digital marketing, direct outreach, and the Pool Perks loyalty program, which now encompasses data from over 85% of transactions, to engage both active and lapsed customers.

• Distribution and SKU rationalization: The company streamlined its supply chain by closing one distribution center and reducing its product assortment by more than 2,000 SKUs, focusing on higher-value inventory and improving operational efficiency. These initiatives are projected to deliver $4–5 million in annualized EBITDA savings.

Drivers of Future Performance

Management expects that renewed pricing, enhanced marketing, and further operational efficiencies will be central to the company’s outlook for the next quarter and the rest of the year.

• Pricing and marketing investments: The shift to lower, consistent pricing is designed to attract both new and returning customers. Management believes targeted marketing and a focus on basket size will help offset the gross margin impact of these pricing changes.

• Operational streamlining and cost control: Continued store and distribution center optimization are expected to further reduce costs, with the company pursuing contract renegotiations and SG&A reductions. These actions are intended to improve profitability and free up resources for growth initiatives.

• Omnichannel and convenience enhancements: Leslie’s is expanding same-day delivery through Uber and optimizing buy-online, pick-up-in-store (BOPIS) capabilities. These steps, alongside inventory and SKU management, are aimed at improving customer experience and supporting the seasonal lift expected during the upcoming pool season.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the impact of Leslie’s national pricing campaign and targeted marketing on recapturing lapsed customers, (2) the effectiveness of store and distribution center optimizations in driving cost savings, and (3) progress in expanding omnichannel offerings like same-day delivery and BOPIS. Execution on these initiatives will be critical during the peak pool season.

Leslie's currently trades at $1.22, up from $1.21 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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