LESL Q2 Deep Dive: Weather, Traffic, and Competition Weigh on Outlook and Execution

Pool products retailer Leslie’s (NASDAQ:LESL) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 12.2% year on year to $500.3 million. The company’s full-year revenue guidance of $1.22 billion at the midpoint came in 1.7% below analysts’ estimates. Its non-GAAP profit of $0.20 per share was 6.2% above analysts’ consensus estimates.

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StockStory’s Take

Leslie’s faced a difficult Q2, with the market reacting negatively to results as management attributed the performance to persistent cool weather, lower residential store traffic, and rising competitive pressures. CEO Jason McDonell described the quarter as challenging, highlighting that “significant precipitation and cooler temperatures across key geographies disrupted the peak pool season,” leading to notable declines in sales, especially in chemicals. The company also saw heightened price competition and shifts in customer behavior, prompting a cautious, self-critical tone as management acknowledged underperformance and the need for urgent changes.

Looking ahead, Leslie’s revised guidance reflects greater caution as management prioritizes transformation through cost optimization and asset utilization. The company is focusing on targeted pricing strategies, a revamped loyalty program, and accelerated inventory reduction to navigate ongoing market headwinds. McDonell noted, “We are acting with urgency and conducting deep customer research to thoughtfully address these opportunities while working to recapture and grow Leslie’s share.” The team’s commitment centers on improving operating efficiency, reducing debt, and adapting quickly to evolving competitive and macroeconomic conditions.

Key Insights from Management’s Remarks

Management attributed Q2’s performance to cool weather impacts, aggressive industry pricing, and operational adjustments, while highlighting early progress in key transformation initiatives.

• Weather-driven sales declines: Management cited unusually cool and wet weather in core markets as a primary driver behind softer sales, particularly in chemicals and the North region, where Memorial Day demand was hit hard. This weather pattern led to a 12% traffic drop in residential stores, disrupting the typical pool season.
• Competitive pricing pressures: Leslie’s responded to late-quarter aggressive price cuts from competitors, especially as industry players sought to clear excess inventories. This shift forced Leslie’s to adjust its own pricing and contributed to residential market share loss, with CEO McDonell emphasizing the need for a more strategic pricing approach going forward.
• Pro segment resilience: While residential sales lagged, the Pro (professional customer) segment showed improvement, with new Pro partner contracts increasing by 12%. Management is focused on expanding this business to help offset residential weakness and sees further growth potential through dedicated efforts and resource allocation.
• Inventory and cost actions: The company accelerated inventory reduction efforts, improving in-stock rates for key items while cutting overall inventory by nearly 10%. A warehouse closure in Denver was initiated to streamline operations and cut $800,000 in annual costs, as part of a broader review of all assets for further efficiency gains.
• Omnichannel and loyalty initiatives: Leslie’s launched enhancements to its Pool Perks loyalty program and began piloting same-day delivery through Uber, aiming to boost customer engagement and convenience. Management expects these moves to better personalize offers, increase traffic, and improve share of wallet among existing and new customers.

Drivers of Future Performance

Management expects ongoing headwinds from competitive pricing and traffic challenges, while focusing on cost reduction, targeted marketing, and operational efficiency to stabilize performance.

• Traffic recovery initiatives: Management is deploying localized marketing, personalized offers, and expanded loyalty program tiers to drive store traffic and customer engagement. The effectiveness of these efforts, especially in reversing recent declines, will be a critical driver for sales improvement.
• Fixed cost and asset optimization: The company’s strategic review aims to address fixed cost deleverage by consolidating assets, reducing inventory, and closing underutilized facilities. Successful execution on these initiatives is expected to improve margins and free up cash for debt reduction.
• Competitive landscape adjustments: Leslie’s is re-evaluating its pricing, assortment, and promotional strategies in response to heightened industry competition. Management believes that adapting quickly to industry dynamics and leveraging data-driven insights will be necessary to regain residential market share and protect profitability.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be monitoring (1) whether localized pricing and marketing programs drive sustainable traffic growth, (2) the pace and impact of cost and asset optimization—including warehouse closures and inventory reduction, and (3) the effectiveness of digital and omnichannel initiatives like same-day delivery. Progress on reducing debt and adapting to competitive pressures will also be important markers of management’s execution.

Leslie's currently trades at $0.29, down from $0.37 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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