On Monday, BofA Securities updated its outlook on Leslie's (NASDAQ:LESL), a company specializing in pool supplies and maintenance, by increasing the price target to $8.00 from the previous $7.00, while reaffirming a Buy rating on the stock.
The company reported a sales decline of 11% year-over-year in the first quarter of fiscal year 2024, with comparable sales down 12%. The number of transactions fell by 6%, and the average order value decreased by 5%. The company saw an 18% year-over-year drop in nondiscretionary sales, which make up 80% of revenues. This category includes a significant 18% drop in hot tub sales, along with persistent weakness in heaters and above-ground pools.
However, Leslie's hot tub order book remained flat after experiencing declines for several quarters, suggesting a potential upcoming improvement in year-over-year growth. Additionally, chemical sales, estimated to account for half of the company's sales, fell by a smaller margin of 3%, even with a 5% decrease in price year-over-year.
The analyst from BofA Securities anticipates that chemical volumes will recover following a period of customer destocking. They also suggest that Leslie's could reclaim some of the market share it had lost, as its chemical prices are now more competitive with those of other market players.
InvestingPro Insights
As Leslie's (NASDAQ:LESL) navigates a challenging market landscape, the latest analysis from BofA Securities suggests a silver lining with a revised price target and a maintained Buy rating. To complement this view, InvestingPro offers additional insights into the financial health and performance of the company.
One notable InvestingPro Tip is Leslie's capacity to hold more cash than debt on its balance sheet, which is a reassuring sign of financial stability in these uncertain times. This positions the company to potentially weather economic downturns better than those with higher debt levels. Additionally, Leslie's has been recognized for its impressive gross profit margins, which could be a testament to its pricing power and cost management strategies, even as sales in certain categories decline.
InvestingPro Data further enhances our understanding of Leslie's financial standing. The company is currently trading at a low earnings multiple, which may suggest that the stock is undervalued relative to its earnings capacity. Moreover, cash flows from operations have been strong enough to cover interest payments, which indicates a lower risk of financial distress. Lastly, despite recent sales challenges, Leslie's has been profitable over the last twelve months, a metric that investors often look for when assessing company performance.
With a special New Year sale, InvestingPro is now offering a discount of up to 50% on subscriptions. For those looking to dive deeper into Leslie's financials and uncover more tips like these, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription. There are 9 additional tips listed in InvestingPro for Leslie's, providing a comprehensive look at the company's financial health and stock potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.