Leslies Inc
For the period ended Mar 30, 2024. Filed May 9, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 30, 2024 · Filed May 9, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-30; filed 2024-02-02.
0000950170-24-009961
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-30; filed 2024-05-09.
0000950170-24-056120
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 95 current paragraphs.
70 unchanged; 19 reworded; 6 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Represents non-recurring costs, such as third-party consulting costs related to first-generation technology initiatives, replacements of systems that have been no longer supported by our vendors, investment in and development of new products outside of the course of continuing operations, or other discrete strategic projects that are infrequent or unusual in nature and potentially distortive to continuing operations. These items are reported in SG&A in our condensed consolidated statements of operations.
Current report
Sales decreased to $362.6 million for the six months ended March 30, 2024, from $407.9 million in the prior year period, a decrease of $45.3 million, or 11.1%. The decrease was primarily driven by a reduction in average order volume of approximately 7% primarily due to chemical pricing actions and a decrease in transaction volume of 4%. Comparable sales decreased $48.5 million, or 11.9%, compared to the prior year period. Non-comparable sales including acquisitions and new stores contributed $3.2 million in the period.
Current report
SG&A decreased to $171.7 million during the six months ended March 30, 2024 from $188.6 million in the prior year period, a decrease of $16.9 million, or 9.0%. The decrease in SG&A was primarily related to a decrease in merchant fees of $2.3 million associated with lower sales, lower payroll costs of $4.5 million, lower executive transition costs of $2.5 million, and lower store expenses of $1.5 million.
Current report
Interest expense increased to $18.2 million for the three months ended March 30, 2024 from $17.2 million in the prior year period, an increase of $1.0 million. Interest expense increased to $35.2 million for the six months ended March 30, 2024 from $30.6 million in the prior year period, an increase of $4.6 million.
Current report
The effective income tax rate was a benefit of 29.0% and 27.5% for the three and six months ended March 30, 2024, respectively. The effective income tax rate was a benefit of 25.7% and 25.4% for the three and six months ended April 1, 2023, respectively.
Current report
Net loss increased to $(34.6) million for the three months ended March 30, 2024 compared to $(31.5) million in the prior year period, an increase of $3.1 million. Net loss increased to $(74.1) million for the six months ended March 30, 2024 compared to $(61.8) million in the prior year period, an increase of $12.3 million. These increases in net loss were primarily due to decreases in gross profit. Diluted earnings per share was $(0.19) for the three months ended March 30, 2024 compared to $(0.17) in the prior year period. Diluted earnings per share was $(0.40) for the six months ended March 30, 2024 compared to $(0.34) in the prior year period.
Removed paragraphs (3)
Previous report
Represents non-recurring costs, such as third-party consulting costs, which are not part of our ongoing operations and are incurred to execute differentiated, strategic projects, and are reported in SG&A in our condensed consolidated statements of operations.
Previous report
The effective income tax rate was a benefit of 26.1% and 25.0% for the three months ended December 30, 2023 and December 31, 2022, respectively, and included net income tax expenses attributable to equity-based compensation awards in each period.
Previous report
Net loss increased to $(39.6) million for the three months ended December 30, 2023 compared to $(30.3) million in the prior year period, an increase of $9.3 million. Diluted earnings per share was $(0.21) for the three months ended December 30, 2023 compared to $(0.16) in the prior year period.
Reworded paragraphs (19)
Previous wording
We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended December 30, 2023 and December 31, 2022 refer to the 13 weeks ended December 30, 2023 and December 31, 2022, respectively.
Current wording
We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended March 30, 2024 and April 1, 2023 refer to the 13 weeks ended March 30, 2024 and April 1, 2023, respectively. References to the six months ended March 30, 2024 and April 1, 2023 refer to the 26 weeks ended March 30, 2024 and April 1, 2023, respectively.
Previous wording
Our financial performance and condition may be impacted to varying extents from period to period by macroeconomic and geopolitical developments, including public health crises, escalating global conflicts, supply chain disruptions, labor market constraints, rising rates of inflation, rising interest rates, general economic slowdown, and potential failures among financial institutions. The direct and indirect impact COVID-19 has had on our financial and operating performance since 2020 has made period-to-period analysis and accurate forecasting difficult. Due to the non-discretionary nature of our products and services, our business delivered strong growth and profitability throughout the pandemic, in spite of restrictions on the operation of our locations and distribution facilities. Significant disruption to our supply chain for products we sell, as a result of COVID-19, geopolitical conflict or otherwise, can also have a material impact on our sales and earnings and cause unpredictable changes in results. In addition, we believe adverse macroeconomic trends and uncertainties also increase consumers’ sensitivity to price and result in cost-conscious behavior, which can result in corresponding declines in sales and/or gross profit.
Current wording
Our financial performance and condition may be impacted to varying extents from period to period by macroeconomic and geopolitical developments, including public health crises, escalating global conflicts, supply chain disruptions, labor market constraints, rising rates of inflation, rising interest rates, general economic slowdown, and potential failures among financial institutions. The direct and indirect impact COVID-19 has had on our financial and operating performance since 2020 has made period-to-period analysis and accurate forecasting difficult. Due to the non-discretionary nature of our products and services, our business delivered strong growth and profitability throughout the pandemic, in spite of restrictions on the operation of our locations and distribution facilities. Significant disruption to our supply chain for products we sell, as a result of COVID-19, geopolitical conflict or otherwise, can also have a material impact on our sales and earnings and cause unpredictable changes in results. In addition, we believe adverse macroeconomic trends and uncertainties also increase consumers’ sensitivity to price and result in cost-conscious behavior inclusive of high ticket items, which can result in corresponding declines in sales and/or gross profit.
Previous wording
We derived our condensed consolidated statements of operations for the three months ended December 30, 2023 and December 31, 2022 from our condensed consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts):
Current wording
We derived our condensed consolidated statements of operations for the three and six months ended March 30, 2024 and April 1, 2023 from our condensed consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts):
Previous wording
The tables below provide a reconciliation from our net loss to Adjusted EBITDA and net loss to Adjusted net loss for the three months ended December 30, 2023 and December 31, 2022, respectively (in thousands).
Current wording
The tables below provide a reconciliation from our net loss to Adjusted EBITDA and net loss to Adjusted net loss for the three and six months ended March 30, 2024 and April 1, 2023 (in thousands).
Previous wording
Represents charges related to equity-based compensation and the Company’s related payroll tax expense, which are reported in SG&A in our condensed consolidated statements of operations.
Current wording
Represents charges related to equity-based compensation and our related payroll tax expense, which are reported in SG&A in our condensed consolidated statements of operations.
Previous wording
Sales decreased to $174.0 million for the three months ended December 30, 2023, from $195.1 million in the prior year period, a decrease of $21.1 million, or 10.8%. Comparable sales decreased $22.6 million, or 11.7%, compared to the prior year period. Non-comparable sales including acquisitions and new stores contributed $2.6 million in the period.
Current wording
Sales decreased to $188.7 million for the three months ended March 30, 2024, from $212.8 million in the prior year period, a decrease of $24.1 million, or 11.4%. The decrease was primarily driven by a reduction in average order volume of approximately 5% primarily due to chemical pricing actions and a decrease in transaction volume of 6%. Comparable sales decreased $25.6 million, or 12.1%, compared to the prior year period. Non-comparable sales including acquisitions and new stores contributed $1.5 million in the period.
Previous wording
Gross profit decreased to $50.4 million for the three months ended December 30, 2023 from $65.3 million in the prior year period, a decrease of $14.9 million, or 22.8%. Gross margin decreased to 29.0% compared to 33.5% in the prior year period, which represents a decrease of 450 basis points. The changes in gross margin were primarily driven by the timing of rebate recognition resulting in a decrease of 235 basis points, expensing of previously capitalized distribution expenses resulting in a decrease of 105 basis points, deleverage on distribution and occupancy costs due to lower comparable sales resulting in a decrease of 220 basis points, partially offset by favorability in inventory adjustments resulting in an increase of 110 basis points.
Current wording
Gross profit decreased to $54.3 million for the three months ended March 30, 2024 from $71.2 million in the prior year period, a decrease of $16.9 million, or 23.7%. Gross margin decreased to 28.8% compared to 33.4% in the prior year period, which represents a decrease of 460 basis points. The decrease in gross margin was primarily driven by deleverage of 229 basis points on occupancy costs due to lower comparable sales and a negative impact of 131 basis points related to chemical pricing actions. Gross profit decreased to $104.7 million for the six months ended March 30, 2024 from $136.5 million in the prior year period, a decrease of $31.8 million, or 23.3%. Gross margin decreased to 28.9% compared to 33.5% in the prior year period, which represents a decrease of approximately 460 basis points. The decrease in gross margin was primarily driven by deleverage of 214 basis points on occupancy costs due to lower comparable sales and a negative impact of 112 basis points due to the timing of rebate recognition.
Previous wording
SG&A decreased to $86.9 million during the three months ended December 30, 2023 from $92.3 million in the prior year period, an decrease of $5.4 million, or 5.9%. This decrease in SG&A was primarily related to a decrease in merchant fees associated with corresponding lower sales, lower headcount and executive transition costs, and lower merger and acquisition costs.
Current wording
SG&A decreased to $84.9 million during the three months ended March 30, 2024 from $96.4 million in the prior year period, a decrease of $11.5 million, or 11.9%. The decrease in SG&A was primarily related to a decrease in merchant fees of $1.3 million associated with lower sales, lower payroll costs of $3.0 million, lower executive transition costs of $1.4 million, and lower store expenses of $1.2 million.
Previous wording
Interest expense increased to $17.1 million for the three months ended December 30, 2023 from $13.4 million in the prior year period, an increase of $3.7 million. This increase was due to higher interest rates on our Term Loan and Revolving Credit Facility.
Current wording
These increases for the three and six months ended was due to higher interest rates on our Term Loan and Revolving Credit Facility.
Previous wording
Income tax benefit increased to $14.0 million for the three months ended December 30, 2023 compared to $10.1 million in the prior year period, an increase of $3.9 million. This increase was primarily attributable to a higher pretax loss.
Current wording
Income tax benefit increased to $14.1 million for the three months ended March 30, 2024 compared to $10.9 million in the prior year period, an increase of $3.2 million. Income tax benefit increased to $28.1 million for the six months ended March 30, 2024 compared to $21.0 million in the prior year period, an increase of $7.1 million. These increases were primarily attributable to a higher pretax loss.
Previous wording
Adjusted net loss increased to $(36.8) million for the three months ended December 30, 2023 compared to $(25.3) million in the prior year period, an increase of $11.5 million. Adjusted diluted earnings per share was $(0.20) for the three months ended December 30, 2023 compared to $(0.14) in the prior year period.
Current wording
Adjusted net loss increased to $(32.0) million for the three months ended March 30, 2024 compared to $(25.7) million in the prior year period, an increase of $6.3 million. Adjusted net loss increased to $(68.8) million for the six months ended March 30, 2024 compared to $(51.0) million in the prior year period, an increase of $17.8 million. Adjusted diluted earnings per share was $(0.17) for the three months ended March 30, 2024 compared to $(0.14) in the prior year period. Adjusted diluted earnings per share was $(0.37) for the six months ended March 30, 2024 compared to $(0.28) in the prior year period.
Previous wording
Adjusted EBITDA decreased to $(24.4) million for the three months ended December 30, 2023 compared to $(11.9) million in the prior year period, a decrease of $12.5 million. These decreases were primarily due to decreases in gross profit.
Current wording
Adjusted EBITDA decreased to $(19.3) million for the three months ended March 30, 2024 compared to $(8.4) million in the prior year period, a decrease of $10.9 million. Adjusted EBITDA decreased to $(43.7) million for the six months ended March 30, 2024 compared to $(20.4) million in the prior year period, a decrease of $23.3 million. These decreases were primarily due to decreases in gross profit.
Previous wording
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled $8.4 million and $55.4 million as of December 30, 2023 and September 30, 2023, respectively. As of December 30, 2023, we had $38.0 million outstanding on our Revolving Credit Facility. We had no amounts outstanding on our Revolving Credit Facility as of September 30, 2023.
Current wording
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled $8.4 million and $55.4 million as of March 30, 2024 and September 30, 2023, respectively. As of March 30, 2024, we had $97.0 million outstanding on our Revolving Credit Facility. We had no amounts outstanding on our Revolving Credit Facility as of September 30, 2023.
Previous wording
As of December 30, 2023, outstanding standby letters of credit totaled $10.6 million and, after considering borrowing base restrictions, we had $201.4 million of available borrowing capacity under the terms of the Revolving Credit Facility. As of December 30, 2023, there have been no events of default under the Revolving Credit Facility and our Term Loan agreements.
Current wording
As of March 30, 2024, outstanding standby letters of credit totaled $10.7 million and, after considering borrowing base restrictions, we had $142.3 million of available borrowing capacity under the terms of the Revolving Credit Facility. As of March 30, 2024, we were in compliance with the covenants under the Revolving Credit Facility and our Term Loan agreements.
Previous wording
Net cash used in operating activities was $71.9 million compared to $184.4 million in the prior year period, a decrease of $112.5 million. The decrease was primarily driven by changes in working capital related to reductions in product inventories.
Current wording
Net cash used in operating activities was $115.1 million for the six months ended March 30, 2024 compared to $246.0 million in the prior year period, a decrease of $130.9 million. The decrease was primarily driven by changes in working capital related to reductions in product inventories.
Previous wording
Net cash used in investing activities decreased to $10.7 million for the three months ended December 30, 2023 compared to $13.7 million in the prior year period, a decrease of $3.0 million. This decrease was primarily driven by lower investments for business acquisitions, partially offset by increased investments in property and equipment.
Current wording
Net cash used in investing activities was $24.0 million for the six months ended March 30, 2024 compared to $23.6 million in the prior year period, an increase of $0.4 million. This increase was primarily driven by lower investments for business acquisitions of $9.9 million partially offset by higher purchases of property and equipment of $9.2 million.
Previous wording
Net cash provided by financing activities for the three months ended December 30, 2023 was $35.5 million compared to $88.6 million in the prior year period, a decrease of $53.1 million. This decrease was primarily driven by lower borrowings on our Revolving Credit Facility during the period.
Current wording
Net cash provided by financing activities for the six months ended March 30, 2024 was $92.1 million compared to $166.0 million in the prior year period, a decrease of $73.9 million. This decrease was primarily driven by lower borrowings on our Revolving Credit Facility during the period.
Previous wording
There have been no material changes to our contractual obligations and other commitments during the three months ended December 30, 2023 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Current wording
There have been no material changes to our contractual obligations and other commitments during the three months and six ended March 30, 2024 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Previous wording
There have been no material changes to our critical accounting estimates during the three months ended December 30, 2023 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Current wording
There have been no material changes to our critical accounting estimates during the three and six months ended March 30, 2024 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.