Leslie's (LESL) Q1 2026 Earnings Call Transcript

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DATE

Tuesday, Feb. 17, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Jason McDonell
• Chief Financial Officer — Jeffrey White

TAKEAWAYS

• Net Sales -- $147,100,000, reflecting a 16% decrease compared to the prior-year quarter.
• Comparable Sales -- Down 15.5% in the period, with most categories declining in line with this metric.
• Gross Profit Margin -- 18.4%, compared to 27.2% in the prior-year period.
• Inventory -- $210,000,000 at quarter end, representing a 23% reduction from $271,000,000 year over year, driven by optimization initiatives and store closures.
• SG&A Expense -- $85,700,000, down $1,700,000 or 2%, attributed to reduced store labor, corporate payroll, and other operating costs.
• Adjusted Net Loss -- $48,700,000, compared to $40,700,000 in the same period last year.
• Adjusted EBITDA -- Negative $40,300,000, compared to negative $29,300,000 a year ago.
• Noncash Impairment Charge -- $10,100,000 related to the closure of 80 stores and one distribution center, at the midpoint of guided expectations.
• Customer Attrition -- Net loss of 160,000 residential customers in fiscal 2025, driven by churn.
• Full-Year Guidance Maintained -- Net sales of $1,100,000,000 to $1,250,000,000 and adjusted EBITDA of $55,000,000 to $75,000,000 reaffirmed by management.
• Pricing Initiative -- National rollout of new lower pricing on key value items, expected to reduce annual gross profit margin by 100-150 basis points.
• Cost Savings and Store Optimization -- 80 underperforming store closures projected to reduce annual sales by $25,000,000 to $35,000,000 but improve annualized net EBITDA by $4,000,000 to $10,000,000.
• Distribution Network Optimization -- Closure of Illinois distribution center expected to deliver $500,000 to $1,000,000 in annual savings and further reductions in system-wide inventory.
• SKU Rationalization -- Over 2,000 SKUs eliminated, targeting $4,000,000 to $5,000,000 in annualized EBITDA improvement.
• Capital Expenditures -- $4,300,000 for the quarter, versus $4,700,000 last year, focused mainly on store and distribution center maintenance.
• Liquidity Position -- $25,000,000 in borrowings on the line of credit, $752,000,000 in long-term debt, and $128,000,000 available from cash/bank lines at quarter end.
• Seasonality -- Management reiterated that most sales and earnings are expected in the second half of the year due to seasonal demand patterns.
• Transformation Update -- Store closure and network reorganization substantially completed, with 80% of closures executed within a week of announcement.
• Digital and Delivery Initiatives -- National Uber delivery rollout in progress, following completion in Arizona and California, to improve same-day customer convenience.
• Market Leadership Model -- Field reorganization now puts all local store, service, and trade operations under unified management incentivized by ZIP code-level performance.

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RISKS

• Gross profit margin decline to 18.4%, down from 27.2% last year, with about 430 basis points attributed to a noncash inventory impairment from store closures.
• Comparable sales declined 15.5%, with management citing macro headwinds, lost hurricane benefit, un-favorable year-length comparison, and impact of shuttered stores.
• Net loss increased to $83,000,000 from $44,600,000, and adjusted net loss widened to $48,700,000 from $40,700,000, reflecting ongoing transformation-related expenses and top-line pressure.
• Management reported a net decline of 160,000 residential customers in the prior fiscal year, specifically identifying churn as the leading driver.

SUMMARY

Leslie's (NASDAQ:LESL) reported double-digit sales declines and margin compression as major restructuring expenses and customer attrition impacted Q1 profitability. Management emphasized that rapid execution of store and warehouse closures, along with inventory and SKU reductions, has realized immediate cost savings intended to support a national pricing transformation targeted at customer recovery. Capital allocation tightened as liquidity levels fell, but leadership maintained full-year sales and EBITDA guidance, citing initial positive comp store sales momentum at the start of Q2 and operational progress across digital and field initiatives.

• Management articulated that expected margin pressure from lower prices is designed to recover lapsed customers and drive higher conversion and basket size, with further incremental cost cuts planned.
• The transition to a market leadership model and integrated omnichannel approach--including Uber same-day delivery--represents a shift in operating structure and aims to fully leverage network optimization benefits.
• Store closures and network consolidation were executed significantly faster than initially expected, accelerating the realization of their projected cost savings and inventory reductions.
• Despite taking a $10,100,000 impairment charge, management projected additional annualized savings from multiple optimization measures, stating total net benefit to EBITDA could reach $5,000,000 to $10,000,000 in 2026.

INDUSTRY GLOSSARY

• SKUs: Stock Keeping Units, unique product identifiers used for inventory management and assortment optimization.
• BOPUS: Buy Online, Pick Up in Store, an omnichannel fulfillment option enabling customers to order products digitally and collect them at local stores.
• Pool Perks: Leslie's, Inc.'s proprietary customer loyalty program capturing over 85% of transaction data for personalized marketing.
• EDLP: Everyday Low Price, a pricing strategy that maintains consistently low regular prices rather than periodic promotions.
• UPT: Units Per Transaction, a retail metric reflecting the average number of units purchased per customer visit.
• AOV: Average Order Value, a key performance indicator measuring the average dollar amount spent per transaction.

Full Conference Call Transcript

Jason McDonell: And thank you for joining us today to discuss our first quarter fiscal 2026 results. As we begin 2026, our unwavering commitment to become America's one-stop shop for pool care drives every action we are taking to position Leslie's, Inc. for a return to sustainable profitable growth. We see a clear opportunity as we execute our comprehensive transformation plan. We are working diligently to turn around and transform this business, with focus on our customer value proposition and rightsizing our operations through cost optimization and better asset utilization.

Before I dive in, I wanted to point to our earnings press release in which we reaffirmed our full-year guidance for net sales at $1,100,000,000 to $1,250,000,000 and adjusted EBITDA in a range of $55,000,000 to $75,000,000. To start quarter two, are seeing encouraging momentum with positive comparable store sales in January. This momentum coupled with the progress we are making on our transformation initiatives, gives us confidence in our team's ability to execute and deliver on our commitments in the upcoming pool season. As we move into the 2026 pool season, we are implementing a pricing transformation initiative that is a strategic decision to improve pricing for our customers on key items.

We have identified that our pricing was often out of step in the market contributing to our net loss of 160,000 residential customers this past fiscal year. We have been conducting price testing during the off season period measuring lift performance across various segments, and the results have given us confidence to move directly to national implementation. The renewed strategy will be supported by our new low prices, same great quality integrated marketing campaign launching this pool season. Our pricing strategy is designed to drive traffic, increase conversion rates, and build customer loyalty. Our field organization will capitalize on this opportunity by focusing on basket size growth.

With the improved pricing on key value items, through the integration with our proprietary 10 water testing system, and our in-store consultative approach. In partnership with our vendors, we have made significant investments in associate training and development programs to enhance their customer engagement capabilities, which are essential for successful basket building and sustained customer relationships. Our new low prices, same great quality campaign will also be powered by an integrated marketing plan that combines digital media with other precision targeted outreach. We will deliver personalized messages about our new pricing offer to both active and lapsed customers. By mining of our existing Pool Perks loyalty database that has captured customer information from over 85% of our transactions.

We have conducted extensive testing to inform this targeted approach, and will continue leveraging marketing mix modeling to optimize campaign effectiveness, and return on investment. Let me go a little deeper on our customer transition and retention efforts. As I mentioned, we had a net loss of 160,000 customers in 2025. Double clicking on this net loss the most significant driver was customer churn. Through a combination of our renewed price strategy, a revitalized targeted marketing approach, and our store-level pool expertise we are planning to grow our active customer file in 2026 and beyond. Although we see a clear opportunity to garner new-to-file customers, reengaging lapsed customers remains our greatest opportunity for growth over the near term.

By optimizing our marketing spend to mid and lower funnel with a targeted approach. Now an update on our store optimization which we announced last quarter. A comprehensive review of our entire asset base led to the decision to close 80 underperforming locations. Our team completed approximately 80% of these closures in less than seven days after we made our announcement last quarter. This accelerated timeline was made possible through meticulous planning, strong cross-functional coordination, and the dedication of our field teams who manage this complex process while maintaining service to our customers.

The speed of execution not only minimized business disruption, but also allowed us to capture cost savings more quickly than projected, providing immediate benefit to our financial performance. As we discussed on our Q4 call, despite an expected annual sales impact of $25,000,000 to $35,000,000 the financial benefits of our store optimization strategy are expected to yield an annualized net EBITDA improvement of $4,000,000 to $10,000,000 once fully completed by the 2026. We have implemented a comprehensive customer transition strategy to retain relationships despite physical store closures. Utilizing our Pool Perks loyalty program, deployed targeted marketing to reach affected customers.

We are providing personalized offers to visit nearby Leslie's, Inc. locations as well as reminding customers to access our full portfolio of products and services through our online platform and mobile app. Building on this foundation, we are expanding our localized marketing efforts through digital channels, direct mail, and phone calls to remind customers that other nearby stores can help them with their pool care needs. We will continue to engage customers from closed stores on how Leslie's, Inc. can meet their needs throughout the upcoming pool season. Complementing our store optimization efforts, we have simultaneously streamlined our distribution footprint to create a more efficient and cost-effective supply chain network.

In Q3 last year, we successfully closed our Denver warehouse and seamlessly shifted volume to other distribution centers, reducing annual costs by approximately $500,000 while maintaining service levels. As we transition to a more efficient five distribution center network in 2026, we are on track with the planned closure of our Illinois facility, which will drive an additional $500,000 to $1,000,000 in annual savings and further reduce our system-wide inventory levels while maintaining strong and improved in-stock levels. The Illinois location was primarily focused on e-commerce fulfillment.

Our optimized network will enable us to fulfill e-commerce orders closer to our customers in regional DCs and supporting BOPUS capabilities at store level, thereby lowering shipping costs and significantly improving delivery speed across our digital platforms. In addition, we are continuing our focus on customer convenience, with the further expansion of our Uber partnership. We have completed the rollout in Arizona and California, and we will be rolling out our Uber delivery platform across the United States ahead of the pool season. Uber same-day delivery is Leslie's, Inc. next step on delivering added convenience for our customer. Aligned with our asset utilization and operational efficiency priorities, our SKU optimization initiative remains on track.

As we outlined in our Q4 call, we will have successfully reduced our SKU count by more than 2,000 SKUs entering the 2026 pool season, primarily eliminating long-tail items from our e-commerce and marketplace offerings fulfilled through our distribution centers. The reduction allows us to focus our assortment on our highest value inventory items that drive the majority of our sales. We believe the strategic SKU rationalization will enable us to simplify our go-to-market solutions and streamline operations while delivering the targeted $4,000,000 to $5,000,000 in annualized EBITDA improvement we projected. And finally, as we discussed on our Q4 call, we successfully implemented a significant restructuring of our field organization.

We moved away from the siloed approach that historically separated our stores, service, commercial, and trade operations and implemented a market leadership model that integrates all these functions under unified local management. This structure gives managers clear ownership of specific markets and ZIP codes enabling deeper customer relationships across all touch points: stores, services, and digital channels. We are implementing ZIP code ownership with incentives for managers who build their business and customer relationships in their territories. These programs are designed to drive transaction growth and higher order values while maintaining our consultative selling approach.

The restructuring also accelerates our customer-centric strategy by combining our customer data with local market leadership giving managers the tools and authority to capture growth opportunities amongst thousands of pool owners. In summary, we have made meaningful progress on our transformation plan during Q1. We continue executing fundamental changes to how we operate and serve our customers, focused on delivering improved value while maintaining our competitive advantages as the industry leader. Our strategic initiatives are advancing with urgency and discipline. We are excited about our pricing investments and targeted marketing efforts, while our cost optimization and asset utilization actions are proceeding on schedule.

We remain committed to transparent communication as we work to restore Leslie's, Inc. to sustainable profitable growth and rebuild stakeholder confidence through disciplined execution. Now for a brief update on our Q1 results, which were largely in line with our internal top line and adjusted EBITDA expectations. We saw top line net sales of $147,000,000. When reviewing this result, it is important to keep in mind last year's one-time impacts resulting from the hurricane benefit, the meaningful impact from the shift in comparing a 52-week year to last year's 53-week year, and the closure of 80 stores. When it comes to profitability, we surpassed our internal plan with disciplined cost control and efficient implementation of our initiatives.

As I mentioned in my opening comments, we are reaffirming our full-year outlook for both net sales and adjusted EBITDA anchored on our confidence in our strategic direction and the continued progress across our key transformation initiatives. I will now turn the call over to Jeffrey White for the financial results. Jeff? Thank you, Jason. I will begin my remarks today with a review of our first quarter fiscal results, then cover our liquidity and capital allocation plans, and finally, review our outlook for 2026. Net sales for the first quarter were $147,100,000, largely in line with our internal top line expectations, as it aligns to our full-year guide.

This is compared to $175,200,000 in the first quarter of the prior year or a 16% decline. To provide more detail on the decline on a year-over-year basis, we anniversaried a $4,000,000 benefit from hurricane-related sales last year

Jeffrey White: which we expected to be a headwind in Q1 2026. In addition, the shift from the 53rd week contributed approximately $10,000,000 to the year-over-year decline and the impact of closed stores was approximately $1,000,000 on a year-over-year basis. Comparable sales decreased 15.5% in the first quarter compared with the same time period of fiscal year 2025, with most categories down in line with the decline in comparable sales. The Q1 headwinds that were just mentioned accounted for approximately 850 basis points of the 15.5% decline we saw in comparable sales in Q1. Gross profit margin for the first quarter was 18.4% versus 27.2% in the prior-year period.

Approximately 430 basis points of this gross profit decline during the period was due to the one-time noncash impairment charge taken on inventory located within stores that were closed during the period. The remainder of the decline in gross margin on a year-over-year basis was due to a decline in overall margins on our core chemicals which had an outsized negative impact on our gross profit margin in Q1 due to the low sales volume. These declines were partially offset by our cost reduction strategies implemented during the quarter.

As Jason mentioned earlier in his remarks, we feel confident in our pricing strategy as we move into pool season and are reiterating our guide that these pricing investments will only cause a 100 to 150 basis point decline in annual gross profit margins on a year-over-year basis for fiscal 2026. SG&A decreased $1,700,000 or 2% to $85,700,000 compared to $87,400,000 a year ago, due to lower store labor, corporate payroll, and other operating expenses. We will continue to look for opportunities to reduce our fixed and variable costs as we remain focused on cost optimization and asset utilization.

During the quarter, we recorded a $10,100,000 noncash impairment charge related to the closure of 80 stores and one distribution center, which is at the midpoint of our expectations. Net loss for the first quarter was $83,000,000 compared with a net loss of $44,600,000 in the first quarter of the prior year. Excluding the charges, adjusted net loss in the first quarter was $48,700,000 compared with adjusted net loss of $40,700,000 in the first quarter of the prior year, which was in line with our internal expectations. Adjusted EBITDA for the first quarter was negative $40,300,000 compared with adjusted EBITDA of negative $29,300,000 in 2025.

Inventory at the end of the quarter was $210,000,000 compared to $271,000,000 at the end of 2025 due to inventory optimization initiatives and store closures, a reduction of 23% year over year. Inventory management is a key priority for us as we work to improve inventory productivity, manage our in-stocks, and flow goods to our stores in a more seasonally and regionally relevant manner. Capital expenditures for the first quarter were $4,300,000 compared to $4,700,000 a year ago, primarily relating to maintenance of our stores and distribution centers. Regarding liquidity, we ended the quarter with $25,000,000 of outstanding borrowings on our line of credit versus $40,000,000 in the prior year. We also had $752,000,000 of long-term debt.

As of quarter end, we had approximately $128,000,000 of availability from cash on hand and borrowings available under our line of credit facility. As Jason mentioned, we continue to execute our key strategic initiatives, and want to reiterate the impact these initiatives will have on our fiscal year 2026 results. We are making adjustments to the pricing of our core chemicals, working closely with our suppliers to ensure that we are priced competitively in the market. We continue to expect this initiative to impact annual product gross margins by 100 to 150 basis points. As part of our store optimization strategy, made the decision to close 80 underperforming stores in the first quarter.

We expect that this will have an annual sales impact of approximately $25,000,000 to $35,000,000 and generate a net EBITDA improvement of $4,000,000 to $10,000,000 annually once they are fully completed. In late 2025, we began a comprehensive expense reduction initiative to align our costs with the trends of the business. These efforts will include the renegotiation of all contracts with our vendors, suppliers, and landlords and a full review of all noncore assets of the business.

We strongly believe that we can leverage our SG&A to further enhance the profitability of the company as we continue to focus our efforts on driving traffic and transactions, through strategic investments in pricing and meeting the customer with the skill and expertise that they expect from Leslie's, Inc. We expect these results to drive an additional $7,000,000 to $12,000,000 of annualized savings with benefits starting to be realized in the 2026. Our DC network optimization is well underway with the closure of our Illinois distribution center in Q2 2026. We expect this to reduce annual cost by approximately $100,000 to $1,000,000 annually. We remain focused on disciplined inventory management.

We will execute this initiative by clearing slow-moving inventory in categories that are not delivering our target gross margin returns. This inventory optimization process is expected to result in a one-time reduction of approximately 100 to 200 basis points to annualized gross margins. We expect this impact to occur prominently in our Q3 and Q4 periods. Our SKU rationalization initiative involves eliminating over 2,000 SKUs to drive cost and inventory efficiency. We expect this focused approach to generate $4,000,000 to $5,000,000 in incremental savings by optimizing our product assortment. We continue to expect these combined efforts of all these initiatives to deliver a net benefit to EBITDA of approximately $5,000,000 to $10,000,000 in fiscal 2026.

We remain confident in our ability to drive traffic and sales by delivering the right product in the right place at the right time and at the right price for our customers. We have identified significant cost savings opportunities across our operations that will strengthen our financial position. Consistent with our historical performance, we expect to generate the majority of our sales and earnings in the second half of the year due to the seasonal nature of our business. For fiscal 2026, which is a 52-week year compared to a 53-week year in fiscal 2025, we continue to expect sales of $1,100,000,000 to $1,250,000,000 and adjusted EBITDA of $55,000,000 to $75,000,000.

We expect CapEx to be in the range of $20,000,000 to $25,000,000 in 2026 as we focus on maintenance and productivity investments as well as providing positive free cash flow for fiscal year 2026. We continue to evaluate capital structure opportunities and are actively working with our incumbent lenders as well as third-party capital providers to finance a series of incremental initiatives that could further accelerate our growth and shorten the path to profitability. The company has ample liquidity and is well positioned to capitalize on the 2026 pool season. In closing, we remain confident in our strategic direction.

Through our strategic actions to drive sales and transactions, while enhancing our profitability and strengthening our balance sheet, we are positioned to drive shareholder value and long-term growth. Now I will turn the call back over to Jason for closing remarks.

Jason McDonell: We have made meaningful progress on our transformation. And our strategic initiatives are advancing with urgency. We are excited about our pricing investments and targeted marketing efforts while our cost optimization and asset utilization actions proceed on schedule. The successful execution of our store closure program, distribution network optimization, and SKU rationalization demonstrates our operational excellence. As we move into the 2026 pool season, with our new low prices, same great quality campaign, we are well positioned to rebuild customer relationships through our enhanced value proposition and consultative retail model. Also, the progress we are making across our strategic initiatives give us the conviction on delivering on our full-year commitments.

I want to recognize our Leslie's, Inc. team members nationwide, their exceptional commitment during this pivotal time. Their adaptability and determination implementing these strategic changes have been outstanding. I also want to thank all our stakeholders for their ongoing support as we execute Leslie's, Inc. transformation. Together, we are creating a stronger foundation Leslie's, Inc. future success. Now, I would like to pass the call back to the operator.

Jeffrey White: Thank you.

Operator: We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. We ask to please limit to one question and one follow-up. Your first question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead.

Jason McDonell: Hey, Jason. My question is it sounds like the pricing actions sound like a move to EDLP in a way, which

Simeon Gutman: you want to be competitive on the important thing. I heard the remarks that you do not you sized up the gross profit impact I guess, same question is how do you feel like the whole year is intact despite these pricing changes? Did you have to find offsets? Did you know, how does how does move based on such a it feels like a drastic decision or in the right decision, but still a big decision. Then I have one follow-up.

Jason McDonell: Okay. Yes. Thanks, Simeon. Thanks for the question. So, think the first thing is when it comes to the pricing actions that we are taking, did an assessment of how we are looking from a from an regular price standpoint. And this program is really us looking at our regular prices that we had in the marketplace. On some key value items that we have and we are then we put tests into action around finding ways to optimize that regular price in the future. To look at different price points, look at different bundles, look at, even different combinations of buy more save more, and we looked at multiple markets.

So were actually taking the regular price down and, also changing the promotional strategy from where we were more high low before to something that is a lot more consistent and competitive in the marketplace that really is centered around every value. So know, that is I mean, that is from the work we have done with our customers. And that is also from the work we have done with our customers specific to switchers and lab users to get to ensure that we improve the value proposition to get the traffic.

And then when the traffic comes in the stores, our teams are going to focus on the bill building baskets, which is that consultative approach I talked about in the prepared remarks. I will pass it to Jeff, and he will talk to specifically how we have

Simeon Gutman: built that into the financials as we look to the balance of the year.

Jeffrey White: Yes. Simeon, it is a good question. And we talked about it a little bit in our previous call. But as we looked at the dollar amount in gross margin that we are going to have to invest on these pricing changes, you know, we have explained all of the cost cutting initiatives both from a direct and indirect cost cut perspective that we have done throughout the business. We have said that on a net benefit, it is going to provide roughly $7,000,000 to $10,000,000 to the bottom line. Adjusted EBITDA number on a full-year basis. Amount of expense cuts that we have been able to achieve is a lot greater than the 7% to 10.

So the seven to ten is the net that flows down to the bottom line while we are taking the rest of the cost savings, and we are investing them back into the pricing changes that we have to make in the gross margin. Which is why we feel confident that we are able to guide to we do expect it reduce gross margins on an overall year to year basis by about a 100 to a 150 basis points. But we can limit the reduction there through the initiatives that we have executed on thus far. And to Jason's point, the building of the basket as we get the traffic and transactions back into the store.

Simeon Gutman: Okay. And then the quick follow-up the positive momentum January not to be too cute, I guess, you did not mention February. Is this an inflection in the business or it is the byproduct of also the exit of stores and now you have a healthier know, the a much healthier base. So how to think about those two dynamics? Yeah. So there is we have we have we have a healthier base. That is

Jason McDonell: it. When we are looking at the Q2 performance, we are seeing positive comp store sales through January like you called out. You know, as we got into February, you know, the where we are pleased is where you see weather that has been more normal. In February over the first little bit, that being for us in Western United States. That we have seen that trend continue. And it is been a bit more challenged, you know, in the North part of the country as well as in some of the more southerly states. That said, the part that makes us

Simeon Gutman: feel

Jason McDonell: you know, optimistic about the future is that this is all ahead of the, campaign we are about to bring to the marketplace through the pool season around new lower prices and same great quality. So that is why we feel confident, and we are looking forward to this pool season, Simeon.

Simeon Gutman: Okay. Thanks. Good luck.

Operator: Thank you. Your next question comes from the line of Jonathan Richard Matuszewski with Jefferies. Please go ahead.

Jason McDonell: Great. Good afternoon, Jason and Jeff. My first question was just a follow-up on pricing.

Jonathan Richard Matuszewski: I was hoping maybe you could just elaborate on what you are seeing from a basket building perspective during the pilot for new pricing? And just anything you can share in terms of the lift in UPT or AOV and any metrics you would you would wanna share in terms of you know, in those markets where you piloted the EDLP pricing, any kind of recapture of lapsed customers in that test? That was my first question. Thanks.

Simeon Gutman: Yeah. Jonathan, I will give you a thanks for that question.

Jonathan Richard Matuszewski: The specifics that we have done is the team has done a variety of different tests and we have done these tests, across multiple regions and markets. And then that being said, what is hard about giving numbers here is be is the fact that we have

Jason McDonell: we have actually done a variety of different categories and products across the portfolio that we have looked at. So what we have been really paying attention to is the types of tests that we are doing, whether it be price points or bundles.

Jonathan Richard Matuszewski: And, even the even the

Jason McDonell: buy more, save more multiples that we are looking at. And what we have seen is we are

Jonathan Richard Matuszewski: seeing some good solid increases from some of those tests in UPT and our team has done a really nice job over the last year on driving conversion level conversion at

Jason McDonell: the store, and we have talked about that in prior earnings results in terms of our convert conversion rate going up. So the combination of seeing good reaction in the marketplace some of these price changes as well as the conversion rate and the quality of the performance that is done by our teams makes us feel that we have a, you know, a great recipe for what we need to do to go to go forward with launch at the at the pool season this year.

Jonathan Richard Matuszewski: That is helpful. Thank you. And then a quick follow-up maybe just on the store base. I imagine the next step is to think about and measure sales transfer rates from the first you know, 80 to 90 closures, and maybe that will inform you know, additional closures for '27 potentially. But if you think longer term, over a multiyear horizon, how do you think about kind of Leslie's footprint in being able to kinda serve, you know, the pool owner best. You know, obviously, convenience and proximity is always you know, been an important part of the value proposition.

So you know, any thoughts in terms of as you have done more work and more customer insights, you know, how that is making you think about kind of the footprint longer term? Thank you.

Jeffrey White: Yeah. Thanks. Good question. This is a very important question because of

Jason McDonell: it is how we embarked on the work that we did just in the that we implemented in quarter one. So

Jonathan Richard Matuszewski: took a very strategic approach to how we are thinking about, proximity you know, that is one of the benefits of the pool is that we know where the pools are. And, obviously, what is key about that is making sure we have the right combination of how we are going to make sure that we service pools and the pool owners going forward. So what is the right

Jason McDonell: combination of not only the stores that we have, but the DC footprint that we have but also the changes and improvements we make to our omnichannel approach on this business. So as we think about this for the future is you know, consistent optimization on not only our store footprint, our DC network to make sure that we are getting product to customers, as fast as we can. And we just recently done that with the closure of the Chicago DC where we believe that we can get having the products closer to the customer at the stores on an ecommerce

Simeon Gutman: purchase.

Jason McDonell: Helps drive speed and convenience for our customer. And then we also have

Jonathan Richard Matuszewski: all the different elements of providing an omnichannel approach through buy online, pick up in store, the recent announcement of Uber and how we are rolling that out nationally. So for us, it is about being the one-stop shop for cool care. And really about that is making sure that we are accessible and available to all customers whether they wanna come in a store or whether we service them digitally or online.

Jeffrey White: Jonathan, it is Jeff. One thing I will add on to that. You know, based off the studies that we did, while we found areas where we may have been oversaturated and had the ability to close stores, but also came to light during that analysis was areas across the country where opportunity for further expansion. So while this round, we closed 80 stores, and, ultimately, you know, could be we will we will continue to monitor and look at store productivity going forward. There is also white space opportunity and opportunity for us to go into new markets. As we as we did the network optimization study.

Jonathan Richard Matuszewski: That is helpful. Thank you.

Simeon Gutman: Thank you.

Operator: This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a day.

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