On Tuesday, Telsey Advisory Group adjusted its outlook on Leslie's (NASDAQ: NASDAQ:LESL) shares, decreasing the price target from $4.00 to $3.75, while maintaining a Market Perform rating. The 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, which the firm attributed to a challenging macroeconomic environment impacting consumer spending, particularly in the areas of large ticket and discretionary items.
Leslie's, facing these headwinds, has recently welcomed a new CEO, Jason McDonell, who has introduced strategic initiatives aimed at reversing the negative trends. These initiatives include enhancing customer centricity by personalizing communication and product offerings, improving convenience through better in-stock positions and localized assortments, and optimizing asset utilization by focusing on existing store sales productivity rather than expanding new units.
Despite these efforts to pivot and improve its financial performance, Telsey notes that the visibility into Leslie's future trends is limited due to the ongoing unfavorable macroeconomic conditions affecting industry demand. The firm expresses a cautious stance, choosing to remain on the sidelines until there are more definitive signs of business improvement.
Telsey's revised 12-month price target of $3.75 is based on an unchanged enterprise value to adjusted EBITDA multiple of approximately 10 times, applied to the firm's lowered fiscal year 2025 adjusted EBITDA estimate of $136 million, a decrease from the previous estimate of $145 million. This revision reflects the firm's current assessment of Leslie's financial outlook amid persistent economic challenges.
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. Despite these challenges, the company's e-commerce sales are growing, now accounting for nearly 20% of total sales.
Under the leadership of CEO Jason McDonald, Leslie's is focusing on customer centricity, convenience, and asset utilization. The company has also provided sales guidance for Q1 2025, projecting a range from a 3% decline to a 1% increase year-over-year. Further, Leslie's is prioritizing debt reduction, pausing new
InvestingPro Insights
Recent InvestingPro data provides additional context to Leslie's current financial situation. The company's market capitalization stands at $649.04 million, with a P/E ratio of 218.44, reflecting the challenging environment described in the article. Despite the recent headwinds, Leslie's has shown a significant return over the last week, with a 21.88% price increase, and a strong 24.47% return over the last month, potentially indicating some investor optimism about the new CEO's strategic initiatives.
However, aligning with Telsey's cautious stance, InvestingPro Tips highlight that analysts anticipate a sales decline in the current year, and net income is expected to drop. This corroborates the article's mention of underwhelming fourth-quarter results and challenging first-quarter guidance. The stock's high price volatility, as noted in another InvestingPro Tip, further underscores the uncertainty surrounding Leslie's near-term performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Leslie's, providing a deeper understanding of the company's financial health and market position.
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