Leslie's, Inc.

Dominant pool-and-spa retailer suffering declining sales, operating losses, and negative interest coverage despite a defensible franchise.

Strengths

• Market-leading DTC scale (1,000+ stores), non-discretionary product mix, and long cash runway (15.4 quarters, 79th pct)
• Strong net income growth optics (off a depressed base) and adequate current ratio (1.57)

Risks

• Revenue down 6.6% (16th pct), operating margin -13.7%, net margin -19% (23rd pct)
• Negative interest coverage (-2.7) with negative book equity (D/E -1.84); ROE 0.58 is an artifact
• Weather/housing-driven demand softness pressuring comparable sales

Notable findings

• No interest coverageInterest coverage -2.70 (cannot cover interest)
• Exec changeRecent 8-K item 5.02 8-K ↗
• Negative equityNegative book equity (debt/equity -1.84)
• Auditor changeRecent 8-K item 4.01 8-K ↗
• Cash burnNegative free cash flow (-16.7M)
• Net lossNet loss (net margin -19.1%)
• Buying back stockNet buyback — share count -51%/yr over 4y