What happened
Shares of swimming pool retail company Leslie's (LESL) sank this week after the company made significant downward revisions to its full-year fiscal 2023 guidance. As of noon ET Friday, Leslie's stock was down 20% for the week, according to data provided by S&P Global Market Intelligence. This was well below the roughly 1% gain for the S&P 500.
So what
In reality, Leslie's management revised its guidance last Thursday after the market closed. But the stock was still reeling this week as analysts lowered their price targets in light of tougher-than-expected operating results.
Simply put, Leslie's customers aren't buying as much stuff for their pools right now -- some customers say they previously stocked up on supplies and are now using up what they have. Moreover, Leslie's costs are going up, but it's struggling to pass higher costs along to the consumer.
Leslie's consequently believes it will generate full-year revenue of $1.43 billion to $1.45 billion, down from its previous guidance of $1.56 billion to $1.64 billion. And the big shocker is that Leslie's expects full-year net income of only $33 million to $40 million, down sharply from previous expectations of at least $131 million.
Now what
Leslie's competitor Pool Corp reported financial results this week, and it, too, reported some struggles on its bottom line. Therefore, there are undoubtedly problems in the sector -- this isn't just a problem for Leslie's. Moreover, its updated revenue guidance, though lowered, would still represent its second-highest year ever, trailing only fiscal 2022. And it still expects to be profitable, despite the challenges.
Therefore, Leslie's still has a lot going for it. And given how much the stock has fallen, it may be worth a look for investors who like a bargain, assuming the company can get back to normal in the coming years.
