Leslie's Q1 2025 Earnings Call: Navigating Contradictions in Inventory, Tariffs, and Revenue Projections

These are the key contradictions discussed in Leslie's latest 2025Q1 earnings call, specifically including: Inventory Management and Out-of-Stocks, Impact of Tariffs, Revenue Outlook, and Gross Margin Improvements:



Revenue and Sales Performance:
- Leslie's reported revenue of $175 million for Q1 of fiscal 2025, up 0.7% compared to the first fiscal quarter of 2024.
- The growth was driven by a 9% increase in Pro Pool sales, despite a 1% decline in Residential Pool sales and a 5% decline in Residential Hot Tub sales.

Inventory Optimization and In-Stock Improvement:
- The company reduced overall inventory by $63 million or 19% year-over-year, while improving in-stock levels for top 600 items by over 300 basis points.
- This was achieved through a focus on precision inventory and reducing excess stock, aiming to improve working capital and pay down debt with excess free cash flow.

Pro Customer Growth:
- Pro Pool sales grew 9%, driven by better in-stock positions and a double-digit increase in Pro partner contracts.
- This growth is attributed to increased focus on Pro-centric initiatives, including customized Pro SKUs and expanded assortment, leveraging the company's extensive store network.

Operational Challenges and Strategic Initiatives:
- The company reported an adjusted EBITDA loss of $29 million for Q1, impacted by higher occupancy costs, payroll, and transformation-related expenses.
- Leslie's is investing in strategic initiatives like Local Fulfillment Centers (LFCs) and enhancing Pro store capabilities to improve customer convenience and asset utilization, aiming for sustainable revenue growth and margin dollar expansion.