Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes, which are included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results or outcomes may differ materially from those anticipated in these forward-looking statements, which are subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
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 fiscal 2025, 2024, and 2023 refer to the fiscal years ended October 4, 2025, September 28, 2024, and September 30, 2023. Fiscal 2025 included 53 weeks of operations and 2024 and 2023, included 52 weeks of operations.
Our Company
Founded in 1963 by Phil Leslie Jr. in Southern California, the Company today known simply as “Leslie’s” has over six
decades of disruptive retail innovation in the $15 billion U.S. pool and spa care industry. Today, we are the largest and most trusted direct-to-consumer brand in our segment, serving residential consumers and pool professionals, and many of the largest commercial property operators in the country. With over 1,000 retail locations, an integrated, digitally forward omnichannel strategy, and a horizontally integrated, nationwide ecosystem under the Leslie’s and In the Swim ® brands, among others, we have built a market-leading share of residential aftermarket product spend, based on 2024 industry analyst reports, and a physical network larger than the sum of our 20 largest competitors. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, manufacturer certified installation and repair services, and in some markets, weekly pool maintenance services. Our dedicated, knowledgeable team of associates, pool and spa care experts, and experienced service technicians, are passionate about empowering every single Leslie’s customer with the knowledge, products, and solutions necessary to confidently maintain and thoroughly enjoy their pools and spas. The considerable scale of our integrated marketing and distribution ecosystem, which is powered by our direct-to-consumer network, uniquely enables us to efficiently reach and service nearly every pool and spa in the continental United States.
We operate primarily in the pool and spa aftermarket industry, a fundamentally attractive category in retail, given its scale, historical predictability, and growth outlook. More than 85% of our product assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas. This includes chemicals, new and replacement parts, cleaning and maintenance equipment, safety, recreational, and fitness-related products. We also offer important essential services, such as equipment installation and repair for residential and commercial customers. We have relationships with professional pool operators from major hotel and apartment owners to municipal, county and state governments, all the way to sole proprietors. In addition to a strong consumer and commercial retail and service presence, we operate a wholesale specialty pool and spa parts distribution business, giving us unique access to hard-to-find specialty parts; an integrated manufacturing plant, giving us vertical scale and competitive cost on parts of our chemical assortment; and a regionally located, hub-and-spoke distribution system throughout the continental United States.
We offer complimentary, commercial-grade in-store water testing and analysis via our proprietary AccuBlue ® system, leading to increased consumer engagement, conversion, basket size, and loyalty, resulting in higher lifetime value. Our water treatment expertise is powered by data and intelligence accumulated from the millions of water tests we have performed over the years, positioning us as the most trusted water treatment service provider in the recreational pool and spa industry. We then brought AccuBlue ® direct to pool owners’ backyards with AccuBlue Home ® , a pioneering app-enabled water testing device. These differentiated capabilities allow us to meet the needs of any pool and spa owner, whether they care for their pool or spa themselves or rely on a professional, whenever, wherever, and however they choose to engage with us.
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Key Factors and Measures We Use to Evaluate Our Business
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use under United States generally accepted accounting principles (“GAAP”) are sales, gross profit and gross margin, selling, general, and administrative expenses (“SG&A”), and operating income (loss). The key non-GAAP measures and other operating measures we use are comparable sales, comparable sales growth, Adjusted EBITDA, Adjusted net income (loss), and Adjusted diluted earnings per share.
Sales
We offer a broad range of products that consists of regularly purchased, non-discretionary pool and spa maintenance items such as chemicals, equipment, cleaning accessories and parts, as well as installation and repair services for pool and spa equipment. Our offering of proprietary, owned, and third-party brands across diverse product categories drives sales growth by attracting new consumers and encouraging repeat visits from our existing consumers. Revenue from merchandise sales at retail locations is recognized at the point of sale, revenue from services is recognized when the services are rendered, and revenue from e-commerce merchandise sales is generally recognized upon shipment of the merchandise. Revenue is recorded net of related discounts and sales tax. Payment from retail customers is generally at the point of sale and payment terms for professional pool operator customers are based on our credit requirements and generally have terms of less than 60 days. When we receive payment from a consumer before the consumer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue or as a customer deposit until the sale or service is complete. Sales are impacted by weather, seasonality, product mix and availability, promotional and competitive activities and the spending habits of our consumers, as well as inflation and interest rates. Growth of our sales is primarily driven by comparable sales growth and expansion of our locations in existing and new markets.
Comparable Sales and Comparable Sales Growth
We measure comparable sales growth as the increase or decrease in sales recorded by the comparable base in any reporting period, compared to sales recorded by the comparable base in the prior reporting period. The comparable base includes sales through our locations and through our e-commerce websites and third-party marketplaces. Comparable sales growth is a key measure used by management and our board of directors to assess our financial performance.
We consider a new or acquired location comparable in the first full month after it has completed one year of sales. Closed locations become non-comparable during their last partial month of operation. Locations that are relocated are considered comparable at the time the relocation is complete. Comparable sales is not calculated in the same manner by all companies, and accordingly, is not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies.
The number of new locations reflects the number of locations opened during a particular reporting period. New locations require an initial capital investment in location buildouts, fixtures, and equipment, which we amortize over time as well as cash required for inventory.
As of October 4, 2025, we operated over 1,000 locations in 39 states across the United States. We owned 27 locations and leased the remainder of our locations. Our initial lease terms are typically five years with options to renew for multiple successive five-year periods. We evaluate new opportunities in new and existing markets based on the number of pools and spas in the market, competition, our existing locations, availability and cost of real estate, and distribution and operating costs of our locations. We review the performance of our locations on a regular basis and evaluate opportunities to strategically close locations to improve our profitability. Our limited investment costs in individual locations and our ability to transfer sales to our extensive network of remaining locations and e-commerce websites allows us to improve profitability as a result of any strategic closures.
Gross Profit and Gross Margin
Gross profit is equal to our sales less our cost of merchandise and services sold. Cost of merchandise and services sold reflects the direct cost of purchased merchandise, costs to package certain chemical products, including direct materials and labor, costs to provide services, including labor and materials, as well as distribution and occupancy costs. The direct cost of purchased merchandise includes vendor rebates. We recognize vendor rebates based on an estimated recognition pattern using historical data. Distribution costs include warehousing and transportation expenses, including costs associated with third-party fulfillment centers used to ship merchandise to our e-commerce consumers. Occupancy costs include the rent, common area maintenance, real estate taxes, and depreciation and amortization costs of all retail locations. These costs are significant and are expected to continue to increase proportionate to our growth.
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Gross margin is gross profit as a percentage of our sales. Gross margin is impacted by merchandise costs, pricing and promotions, product mix and availability, inflation, and service costs, which can vary. Our proprietary brands, custom-formulated products, and vertical integration provide us with cost savings, as well as greater control over product availability and quality as compared to other companies in the industry. Gross margin is also impacted by the costs of distribution and occupancy costs, which can vary.
Our gross profit is variable in nature and generally follows changes in sales. The components of our cost of merchandise and services sold may not be comparable to the components of cost of sales or similar measures of other companies. As a result, our gross profit and gross margin may not be comparable to similar data made available by other companies.
Selling, General and Administrative Expenses
Our SG&A includes selling and operating expenses across our retail locations and digital platform, and our corporate-level general and administrative expenses. Selling and operating expenses at retail locations include payroll, bonus and benefit costs for personnel, supplies, and credit and debit card processing costs. Corporate expenses include payroll, bonus, and benefit costs for our corporate and field support functions, equity-based compensation, marketing and advertising, insurance, utilities, occupancy costs related to our corporate office facilities, professional services, and depreciation and amortization for all assets, except those related to our retail locations and distribution operations, which are included in cost of merchandise and services sold. Selling and operating expenses generally vary proportionately with sales and the change in the number of locations. In contrast, general and administrative expenses are generally not directly proportional to sales and the change in the number of locations, but may increase over time to support our growth and public company obligations. The components of our SG&A may not be comparable to the components of similar measures of other companies.
Impairments
The impairments were non-cash charges resulting from a decline in our operating results, store performance, and market capitalization. These charges were due to (i) the carrying value of our single reporting unit’s goodwill being greater than the calculated fair value in the case of goodwill impairment and (i) the carrying value of our store assets being greater than the fair value in the case of asset impairment.
Operating Income (Loss)
Operating income (loss) is gross profit less SG&A. Operating income (loss) excludes interest expense, loss on debt extinguishment, income tax expense (benefit), and other (income) expenses, net. We use operating income (loss) as an indicator of the productivity of our business and our ability to manage expenses.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest (including amortization of debt issuance costs), taxes, depreciation and amortization, equity-based compensation expense, executive transition costs, severance, strategic project costs, merger and acquisition costs, and other non-recurring, non-cash or discrete items. Adjusted EBITDA is a key measure used by management and our board of directors to assess our financial performance. Adjusted EBITDA is also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures. We use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other companies using similar measures.
Adjusted EBITDA is not a recognized measure of financial performance under GAAP but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies, and accordingly, is not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance in isolation from, or as a substitute for, net income (loss), cash flows from operations or cash flow data, all of which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP. In the future, we may incur expenses or charges such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.
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Adjusted Net Income (Loss) and Adjusted Diluted Earnings (loss) per Share
Adjusted net income (loss) and Adjusted diluted earnings (loss) per share are additional key measures used by management and our board of directors to assess our financial performance. Adjusted net income (loss) and Adjusted diluted earnings (loss) per share are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
Adjusted net income (loss) is defined as net income (loss) adjusted to exclude equity-based compensation expense, executive transition costs, severance, strategic project costs, merger and acquisition costs, change in valuation allowance for deferred taxes, and other non-recurring, non-cash, or discrete items. Adjusted diluted earnings (loss) per share is defined as Adjusted net income (loss) divided by the diluted weighted average number of common shares outstanding.
Factors Affecting the Comparability of our Results of Operations
Our reported results have been affected by, among other events, the following events, which must be understood in order to assess the comparability of our period-to-period financial performance and condition.
Impact of Macroeconomic Events and Uncertainties
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, tariffs, supply chain disruptions, labor market constraints, high rates of inflation, high interest rates, general economic slowdown, and potential failures among financial institutions. New or increased tariffs and other barriers to trade, especially in light of comments and executive orders made by the U.S. presidential administration, could further impact or exacerbate these conditions. The United States has announced tariffs on imports from most countries, including significant tariffs on imports from Canada, Mexico and China. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. There is substantial uncertainty about the duration of existing tariffs and whether additional tariffs may be imposed, modified or suspended, and the impacts of such actions on the Company’s business. Significant disruption to our supply chain for products we sell, as a result of geopolitical conflict, tariffs or trade policies 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 including inflation, tariffs, and varying interest rates 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.
Additional uncertainties that can impact our results of operations are consumer purchasing patterns and consumer cost-consciousness. In the past, we believe some customers stockpiled chemicals, resulting in unexpected changes in demand. As a result of such behavior, our revenue may be higher than normal during the periods of stockpiling and may be lower than normal during the periods after stockpiling has occurred.
Reverse Stock Split
On September 10, 2025, our shareholders approved a series of amendments to our Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”). On September 26, 2025, we filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effect a reverse stock split of our comment stock at a ratio of 1-for-20 (the “Reverse Stock Split”) and proportionately decrease the number of authorized shares of the Company’s common stock, which became effective upon filing (the “Effective Time”). The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on Nasdaq as of the open of trading on September 29, 2025 under the existing ticker symbol “LESL”. The Company’s common stock is now represented by a new CUSIP number, 527064 208.
As a result of the Reverse Stock Split, every 20 shares of our common stock issued and outstanding as of the Effective Time of the Reverse Stock Split was automatically converted into one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. The Company’s transfer agent aggregated all fractional shares of common stock that would otherwise have been issuable as a result of the Reverse Stock Split and sold them at the then prevailing prices on the open market on behalf of those shareholders who would otherwise be entitled to receive such fractional shares. Shareholders who otherwise would be entitled to receive fractional shares received their respective pro rata share of the total proceeds of such sale.
In addition, as of the Effective Time and as a result of the Reverse Stock Split, proportionate adjustments were made in accordance with the terms of the Company’s 2020 Omnibus Incentive Plan (the “Incentive Plan”), with respect to the number of shares of common stock issuable under outstanding stock options, restricted stock units and performance units, and any other equity-based awards, the per-share
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exercise price with respect to such awards, and the number of shares of common stock reserved for future issuance under the Incentive Plan.
All share and per share amounts presented herein have been retroactively adjusted to reflect the Reverse Stock Split for all years.
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Results of Operations
We derived our consolidated statements of operations for fiscal 2025, 2024, and 2023 from our 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 years indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts and percentages):
Year Ended
Statements of Operations Data:
October 4, 2025
September 28, 2024
September 30, 2023
Sales
Cost of merchandise and services sold
Gross profit
Selling, general and administrative expenses
Impairment
Operating (loss) income
Interest expense
(Loss) income before taxes
Income tax expense
Net (loss) income
(Loss) earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
Percentage of Sales (1)
Sales
Cost of merchandise and services sold
Gross margin
Selling, general and administrative expenses
Impairment
Operating (loss) income
Interest expense
(Loss) income before taxes
Income tax expense
Net (loss) income
Other Financial and Operations Data:
Number of new and acquired locations, net
Number of locations open at end of year
Comparable sales growth (2)
Adjusted EBITDA (3)
Adjusted EBITDA as a percentage of sales (3)
Adjusted net (loss) income (3)
Adjusted diluted (loss) earnings per share
Components may not add to totals due to rounding.
See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors and Measures We Use to Evaluate Our Business.”
The tables below provide a reconciliation from our net (loss) income to Adjusted EBITDA and net (loss) income to Adjusted net (loss) income for fiscal 2025, 2024, and 2023 (in thousands).
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Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Net (loss) income
Interest expense
Income tax expense
Impairment (1)
Depreciation and amortization expense (2)
Equity-based compensation expense (3)
Strategic project costs (4)
Executive transition costs and other (5)
Adjusted EBITDA
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Net (loss) income
Impairment (1)
Equity-based compensation expense (3)
Strategic project costs (4)
Executive transition costs and other (5)
Changes in valuation allowance (6)
Tax effects of these adjustments (7)
Adjusted net (loss) income
Represents non-cash charges related to the write-off of our goodwill given recent operating and market capitalization declines and asset write offs for certain underperforming stores.
Includes depreciation related to our distribution centers and store locations, which is reported in cost of merchandise and services sold and SG&A in our consolidated statements of operations.
Represents charges related to equity-based compensation and our related payroll tax expense, which are reported in SG&A in our consolidated statements of operations.
Represents non-recurring costs, such as third-party consulting costs related to first-generation technology initiatives, replacements of systems that are 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 consolidated statements of operations.
Includes certain senior executive transition costs and severance associated with completed corporate restructuring activities across the organization, losses on asset dispositions, merger and acquisition costs, and other non-recurring, non-cash, or discrete items as determined by management. Amounts are reported in SG&A in our consolidated statements of operations.
Represents a non-cash change in valuation allowance for deferred taxes. This item is reported in income tax benefit (expense) in our consolidated statements of operations.
Represents the tax effect of the total adjustments based on our combined U.S. federal and state statutory tax rates. Amounts are reported in income tax expense in our consolidated statements of operations.
Comparison of Fiscal 2025 and 2024
Sales
Sales decreased to $1,241.9 million in fiscal 2025 compared to $1,330.1 million in fiscal 2024, a decrease of $88.2 million, or 6.6%. The decrease was primarily driven by reductions in traffic and a lower number of transactions. Comparable sales decreased $91.4
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million, or 6.8%, compared to fiscal 2024, primarily driven by declines in traffic and average order value. Non-comparable sales, including acquisitions and new stores, were $3.2 million in fiscal 2025.
Gross Profit and Gross Margin
Gross profit decreased to $439.6 million in fiscal 2025 compared to $476.8 million in fiscal 2024, a decrease of $37.1 million or 7.8%. Gross margin decreased to 35.4% compared to 35.8% in fiscal 2024, a decrease of 40 basis points. The decrease in gross margin was primarily driven by negative impacts of 100 basis points from deleverage on occupancy costs partially offset by 60 basis point benefit from product rate.
Selling, General and Administrative Expenses
SG&A increased to $425.7 million in fiscal 2025 compared to $419.7 million in fiscal 2024, an increase of $6.0 million or 1.4%. This increase in SG&A was primarily related to increases of $7.7 million in compensation expenses, $4.4 million in professional fees and consulting expenses, $1.9 million in direct store expenses, and $1.4 million in information and technology spend. These increases were partially offset by decreases of $3.6 million in merchant fees, and $2.9 million in marketing fees.
Impairment
Impairment charges increased to $183.8 million in fiscal 2025. The impairment was comprised of a $180.7 million impairment to goodwill and $3.1 million asset write offs for underperforming stores. No impairment charges were recorded in the prior year.
Interest Expense
Interest expense decreased to $62.9 million in fiscal 2025 compared to $70.4 million in fiscal 2024, a decrease of $7.5 million. This decrease was primarily due to lower interest rates on our Term Loan and Revolving Credit Facility combined with a lower balance on the Term Loan.
Income Taxes
Income tax expense was $4.2 million in fiscal 2025 compared to $10.1 million in fiscal 2024, a decrease of $5.9 million. The change in income tax expense was the result of the $45.0 million increase in the non-cash valuation allowance against our deferred tax assets, plus the permanent effects of the goodwill impairment recorded during fiscal 2025, partially offset by a larger pretax loss in fiscal 2025 compared to fiscal 2024. Our effective tax rate was (1.8%) for fiscal 2025 compared to (76.1%) for fiscal 2024.
Net Loss and Diluted Loss per Share
Net loss was $237.0 million in fiscal 2025 compared to net loss of $23.4 million in fiscal 2024, a change of $213.6 million. The increase in net loss was primarily driven by lower sales volume during fiscal 2025, combined with impairments recorded during the year. Diluted earnings per share decreased to $(25.57) in fiscal 2025 compared to $(2.53) in fiscal 2024.
Adjusted net loss was $43.7 million in fiscal 2025 compared to a loss of $1.1 million in fiscal 2024, a change of $42.6 million. Adjusted diluted loss per share was $(4.71) in fiscal 2025 compared to $(0.12) in fiscal 2024.
Adjusted EBITDA
Adjusted EBITDA decreased to $61.4 million in fiscal 2025 compared to $108.7 million in fiscal 2024, an decrease of $47.4 million. The decrease was primarily driven by lower sales volume during fiscal 2025, combined with decreases in occupancy deleverage and higher SG&A. These impacts were partially offset by higher product rate .
Comparison of Fiscal 2024 and 2023
Sales
Sales decreased to $1,330.1 million in fiscal 2024 compared to $1,451.2 million in fiscal 2023, a decrease of $121.1 million, or 8.3%, primarily driven by declines in traffic and average order value. Comparable sales decreased $127.4 million, or 8.8%, compared to fiscal 2023, Non-comparable sales including acquisitions and new stores were $7.9 million in fiscal 2024.
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Gross Profit and Gross Margin
Gross profit decreased to $476.8 million in fiscal 2024 compared to $548.2 million in fiscal 2023, a decrease of $71.4 million or 13.0%. Gross margin decreased to 35.8% compared to 37.8% in fiscal 2023, a decrease of 200 basis points. The decrease in gross margin was primarily driven by negative impacts of 121 basis points from product rate, 94 basis points from deleverage on occupancy costs and 50 basis points from the expensing of previously capitalized distribution center costs due to significant reductions in inventory during fiscal 2024. Additionally, there was a one-time item of approximately $5.0 million related to rebates and warranties on a contract that has subsequently been revised. The impacts discussed above were partially offset by a 72 basis point reduction related to inventory adjustments and distribution costs.
Selling, General and Administrative Expenses
SG&A decreased to $419.7 million in fiscal 2024 compared to $446.0 million in fiscal 2023, a decrease of $26.3 million or 5.9%. This decrease in SG&A was primarily related to a decrease merchant fees of $6.0 million associated with lower sales, a decrease in payroll costs of $4.0 million mainly due to lower headcount, a decrease in asset write offs of $5.9 million, a decrease in equity compensation of $3.4 million, a decrease in bonus and commissions of $1.9 million, and a decrease in marketing expenses of $1.6 million.
Interest Expense
Interest expense increased to $70.4 million in fiscal 2024 compared to $65.4 million in fiscal 2023, an increase of $5.0 million. This increase was primarily due to higher interest rates on our Term Loan and Revolving Credit Facility.
Income Taxes
Income tax expense was $10.1 million in fiscal 2024 compared to $9.5 million in fiscal 2023, an increase of $0.6 million. The change in income tax expense was the result of the impact of limitations on interest expense deductibility requiring us to record a $11.2 million non-cash valuation allowance against our deferred tax asset, partially offset by pretax loss in 2024, compared to pretax income in 2023. Our effective tax rate was -76.1% for fiscal 2024 compared to 25.9% for fiscal 2023.
Net (Loss) Income and Diluted Earnings per Share
Net loss was $23.4 million in fiscal 2024 compared to net income of $27.2 million in fiscal 2023, a change of $50.6 million. Diluted earnings per share decreased to $(2.53) in fiscal 2024 compared to $2.95 in fiscal 2023.
Adjusted net loss was $1.1 million in fiscal 2024 compared to income of $51.1 million in fiscal 2023, a change of $52.2 million. Adjusted diluted earnings per share decreased to $(0.12) in fiscal 2024 compared to $5.54 in fiscal 2023.
Adjusted EBITDA
Adjusted EBITDA decreased to $108.7 million in fiscal 2024 compared to $168.1 million in fiscal 2023, a decrease of $59.4 million. The decrease was primarily driven by lower sales volume during fiscal 2024, combined with decreases in gross margin, driven by higher product rate and occupancy deleverage. These decreases were partially offset by lower SG&A and inventory adjustments .
Seasonality and Quarterly Fluctuations
Our business is highly seasonal. Sales and earnings are highest during the third and fourth fiscal quarters, which include April through September, and represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters when we typically generate net losses and we realize negative operating cash flows. We have a long track record of investing in our business throughout the year, including in operating expenses, working capital, and capital expenditures related to new locations and other growth initiatives. While these investments drive performance during the primary selling season in our third and fourth fiscal quarters, they have a negative impact on our earnings and cash flow during our first and second fiscal quarters.
We typically experience a build-up of inventory and accounts payable during the first and second fiscal quarters in anticipation of the peak swimming pool supply selling season. We negotiate extended payment terms with certain of our primary suppliers as we receive merchandise in December through March, and we pay for merchandise in April through July.
The principal external factor affecting our business is weather. Hot weather can increase purchases of chemicals and other non-discretionary products as well as purchases of discretionary products and can drive increased purchases of installation and repair services.
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Unseasonably cool weather or significant amounts of rainfall during the peak pool sales season can reduce chemical consumption in pools and spas and decrease consumer purchases of our products and services. In addition, unseasonably early or late warming trends can increase or decrease the length of the pool season and impact timing around pool openings and closings and, therefore, our total sales and timing of our sales. Further, we generally close locations after our peak selling season ends. During this year, we experienced unseasonably cold and rainy weather in the North East in May and June, which we believe delayed the start to the pool season and pool openings.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are net cash provided by operating activities and borrowing availability under our Revolving Credit Facility. Historically, we have funded working capital requirements, capital expenditures, payments related to acquisitions, and debt service requirements with internally generated cash on hand and through our Revolving Credit Facility.
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled $64.3 million and $108.5 million as of October 4, 2025 and September 28, 2024. As of October 4, 2025 and September 28, 2024, we did not have any outstanding borrowings under our Revolving Credit Facility.
Our primary working capital requirements are for the purchase of inventory, payroll, rent, other facility costs, distribution costs, and general and administrative costs. Our working capital requirements fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases.
Our capital expenditures are primarily related to infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems, ongoing location improvements, expenditures related to our distribution centers, and new location openings. We expect to fund capital expenditures from net cash provided by operating activities.
Based on our growth plans, we believe our cash and cash equivalents position, net cash provided by operating activities and borrowing availability under our Revolving Credit Facility will be adequate to finance our working capital requirements, planned capital expenditures, strategic acquisitions, share repurchases, and debt service over the next 12 months and thereafter. If cash provided by operating activities and borrowings under our Revolving Credit Facility are not sufficient or available to meet our capital requirements, then we may need to obtain additional equity or debt financing. There can be no assurance that equity or debt financing will be available to us if we need it or, if available, whether the terms will be satisfactory to us.
As of October 4, 2025, outstanding standby letters of credit totaled $11.7 million, and after considering borrowing base restrictions we had $167.9 million of availability from cash on hand and available borrowing capacity under the terms of the Revolving Credit Facility. As of October 4, 2025, we were in compliance with the covenants under the Revolving Credit Facility and our Term Loan agreements. Additionally, during the first quarter of fiscal 2025, we repaid $25.0 million on our Term Loan.
During the quarter ended October 4, 2025, the Company received downgraded credit ratings from both Moody’s to (Caa3 from Caa1) and Standard and Poor’s (“S&P”) Global Ratings to (B- from B).
Summary of Cash Flows
A summary of our cash flows from operating, investing, and financing activities is presented in the following table (in thousands):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
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Cash Provided by Operating Activities
Net cash provided by operating activities was $8.8 million in fiscal 2025 compared to $107.5 million in fiscal 2024. This decrease was driven by the higher net loss in 2025 due to lower sales during fiscal 2025 combined with higher uses of cash for net working capital.
Net cash provided by operating activities was $107.5 million in fiscal 2024 compared to $6.5 million in fiscal 2023. This increase was primarily driven by changes in working capital related to reductions in inventories of $85.9 million, increases in accounts payable and accrued expenses of $6.7 million, partially offset by an increase in accounts receivable of $18.7 million.
Cash Used in Investing Activities
Net cash used in investing activities was $25.4 million in fiscal 2025 compared to $47.2 million in fiscal 2024. This decrease was driven by a decrease in purchases of property and equipment.
Net cash used in investing activities was $47.2 million in fiscal 2024 compared to $52.5 million in fiscal 2023. This decrease was driven by lower investments for business acquisitions, partially offset by increased purchases of property and equipment.
Cash Used in Financing Activities
Net cash used in financing activities was $27.6 million in fiscal 2025 compared to $7.2 million in fiscal 2024. This increase was primarily driven by higher repayments of long-term debt in fiscal 2025.
Net cash used in financing activities was $7.2 million in fiscal 2024 compared to $10.8 million in fiscal 2023. This decrease was primarily driven by lower payments of employee tax withholding related to restricted stock vesting.
Contractual Obligations and Other Commitments
The following table summarizes our contractual cash obligations as of October 4, 2025 (in thousands):
Payments Due By Period
Total
Thereafter
Long-term debt, net (1)
Purchase commitments (2)
Operating lease obligations (3)
Financing lease obligations (4)
Total
We are required to pay a commitment fee of 0.25% based on the unused portion of the Revolving Credit Facility, which is not included in the table above due to the unknown nature of future borrowings.
Purchase obligations include all legally binding contracts and primarily relate to firm commitments for inventory purchases. Purchase orders that are not binding agreements are excluded from the table above.
Operating lease obligations relate to our locations, office, distribution, and manufacturing facilities. We are obligated to make cash payments in connection with various lease obligations and purchase commitments and all obligations require cash payments to be made by us over varying periods of time. Certain leases are renewable at our option typically for periods of five or more years and some require payments upon early termination.
Financing lease obligations relate to equipment leases. We are obligated to make cash payments in connection with various lease obligations and purchase commitments and all obligations require cash payments to be made by us over varying periods of time. Certain leases have purchase option at the conclusion of the lease agreement.
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Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, we have identified the critical accounting policies and judgments, which are disclosed in this Annual Report on Form 10-K for the fiscal year ended September 28, 2024. We base these estimates on historical results and various other assumptions we believe to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.
Vendor Rebates
Many of our vendor arrangements provide for us to receive specified amounts of consideration meet the criteria defined in the agreement. Generally, the criteria relate to the volume level of purchases. We calculate the amount earned based on actual purchases, recorded as a reduction of the prices of the vendor’s products and therefore a reduction of inventory at the end of each period based on a detailed analysis of inventory and of the facts and circumstances of various contractual agreements with vendors. We recognize rebates based on an estimated recognition pattern using historical data, and we record this as a reduction of cost of merchandise and services sold in our consolidated statements of operations. We do not believe there is a reasonable likelihood there will be a material change in the future estimates or assumptions we use to calculate our reduction of inventory.
Inventories
Inventories are stated at the lower of cost or net realizable value. We value inventory using the average cost method which includes costs incurred to deliver inventory to our distribution centers including transportation, warehousing and distribution costs. We evaluate inventory for excess and obsolescence and record necessary reserves. We provide provisions for losses related to inventories based on management’s judgment regarding historical purchase cost, selling price, margin, and current business trends. If actual demand or market conditions are different than those projected by management, future margins may be unfavorably or favorably affected by adjustments to these estimates. When an inventory item is sold or disposed, the associated reserve is released at that time. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate our inventory reserve.
Goodwill and Other Intangibles, Net
Goodwill and intangible assets are recorded at their estimated fair values at the date of acquisition. We review goodwill and indefinite-lived intangible assets for impairment annually (in the fourth quarter) or more frequently if impairment indicators arise. Goodwill can be evaluated for impairment, at our option, by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than the carrying amount, a quantitative goodwill impairment test would be required. Additionally, we can elect to forgo a qualitative assessment and perform a quantitative test. The quantitative test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill.
If a quantitative test is performed, we would estimate the value considering the use of various valuation techniques which may use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. We include assumptions about sales growth, operating margins, discount rates and valuations multiples which consider our budgets, business plans, economic projections and marketplace data, and are believed to reflect market participant views which would exist in an exit transaction. Some of the inherent estimates and assumptions used in this analysis are outside the control of management, including cost of capital, tax rates and market EBITDA comparable financial metrics.
For our indefinite life intangible assets, a qualitative assessment can also be performed to determine whether the existence of events and circumstances indicates it is more likely than not the intangible asset is impaired. Similar to goodwill, we can also elect to forgo a qualitative test for indefinite life intangible assets and perform a quantitative test. Upon performing the quantitative test, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We evaluate whether certain trade names continue to have an indefinite life annually.
We performed a quantitative assessment of goodwill during the fourth quarter of 2025 and recorded a $180.7 million impairment. See Note 3 - Goodwill and Other Intangibles, Net to our consolidated financial statements included elsewhere in this Annual Report on Form
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10-K for further discussion.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Interest Rate Risk
The interest rates on borrowings under our Revolving Credit Facility and Term Loan were LIBOR-based rates prior to March 2023 and June 2023. Due to the discontinuation of LIBOR-based rates, we have transitioned the impacted interest rate benchmarks to Term SOFR-based rates. See Note 9—Long-Term Debt, Net to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. Accordingly, we are subject to interest rate risk in connection with borrowings under our Revolving Credit Facility and Term Loan, both of which bear interest at variable rates. As of October 4, 2025, we had $756.7 million outstanding on our Term Loan. No amounts were outstanding on our Revolving Credit Facility as of such date. The impact of a 1.0% rate change on our outstanding balance less contractual amortization would total approximately $7.6 million over the next 12 months.
Impact of Inflation and Deflation
We experience inflation and deflation related to our purchase of certain products. This price volatility could potentially have a material impact on our financial condition and/or our results of operations. We actively manage the impact of inflation, including tariffs, through strong relationships with our diverse supplier base, vendor negotiation, and promotion management. We also strategically invest through inventory purchases in order to obtain favorable pricing ahead of any vendor price increases. In order to mitigate price volatility, we monitor price fluctuations and may adjust our selling prices accordingly; however, our ability to recover higher costs through increased pricing may be limited by the competitive environment in which we operate. Although we may experience periodic effects on sales, gross profit, gross margins, and cash flows as a result of changing prices, we do not expect the effect of inflation or deflation to have a material impact on our ability to execute our long-term business strategy. We currently do not use derivative instruments to manage these risks.
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Item 8. Fina ncial Statements and Supplementary Data.
LESLIE’S, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements for the fiscal years ended October 4, 2025, September 28, 2024, and September 30, 2023
Page
Report of Independent Registered Public Accounting Firm ( PCAOB ID: 42 )
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Deficit
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Leslie’s, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Leslie’s, Inc. (the Company) as of October 4, 2025 and September 28, 2024, the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the three years in the period ended October 4, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 4, 2025 and September 28, 2024, and the results of its operations and its cash flows for each of the three years in the period ended October 4, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 4, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated December 18, 2025 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Vendor Rebates
Description of the Matter
As discussed in Note 2 to the consolidated financial statements, certain of the Company’s arrangements with vendors provide for consideration when the Company meets the criteria defined in the vendor agreements. Such consideration is generally based on purchase volume. The Company accounts for vendor rebate programs as a reduction of the prices of the vendor’s products and therefore a reduction of the cost of inventory. The Company estimates the recognition pattern of vendor rebate income based on historical trending and data and recognizes such consideration as a reduction of cost of merchandise and services sold. The Company had $4.6 million of vendor rebate receivables as of October 4, 2025.
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How We Addressed the Matter in Our Audit
Auditing vendor rebates was challenging due to the extent of audit effort required resulting from the volume of individual transactions and the subjective assumptions used in the recognition of the vendor rebate income.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over vendor rebates process, including controls over management’s review of the data used to calculate the earned vendor rebate and the assumptions used in the recognition of the vendor rebate income.
To test the vendor rebates, we performed audit procedures that included, among others, assessing the estimation methodology used by management. We agreed inputs used in the Company’s model to a sample of vendor rebate agreements and evaluated the relevant terms of the agreements. We recalculated the amount of vendor rebate income earned and the related reduction of the carrying cost of inventory based on the inputs and the terms of the agreements. We tested the Company’s pattern of recognition of vendor rebate income as a reduction of cost of merchandise and services sold and tested deferred rebate income for appropriateness and consistency with authoritative accounting guidance. In addition, we selected a sample of vendor rebate receivables and confirmed the amount outstanding directly with the vendors.
Description of the Matter
How We Addressed the Matter in Our Audit
Goodwill
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company’s goodwill is evaluated for impairment at least annually, or more frequently if impairment indicators arise. If goodwill is determined to be impaired, an impairment loss is measured as the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. As a result of identifying impairment indicators, the Company performed quantitative impairment tests during the third and fourth quarters and, in the fourth quarter, concluded that the estimated fair value of its single reporting unit exceeded the carrying value, resulting in a full goodwill impairment loss of $180.7 million. Significant, subjective assumptions used in the Company’s fair value estimate included debt fair value, the discount rate and forecasted revenue growth, cost of merchandise and services sold and selling, general and administrative expenses.
Auditing the Company’s goodwill impairment test was subjective due to the significant estimation required to determine fair value and required the involvement of a specialist in estimating the fair value of the single reporting unit. In particular, the fair value estimate was sensitive to the significant assumptions described above applied in estimating the reporting unit’s fair value which may be affected by future market conditions. Additionally, auditing the Company's goodwill impairment test was impacted by a material weakness in internal controls over the accounting for asset impairments.
After giving consideration to the material weakness, our audit procedures to test the estimated fair value of the reporting unit, specifically using the income approach, included, among others, assessing the valuation methodology used to determine the fair value, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company. For example, we evaluated management’s forecasted cash flows used in the fair value estimate by comparing those assumptions to the historical results of the Company. Additionally, we performed sensitivity analyses of the significant assumptions to evaluate the effect on the fair value estimate of the reporting unit. We audited the reconciliation of that fair value estimate to the total invested capital (including market capitalization) of its reporting unit in consideration of a market-participant control premium based on observable market information. We also involved a valuation specialist to assist in reviewing the valuation methodology and testing whether assumptions such as the discount rate were comparable to observable market data.
/s/ Ernst & Young LLP
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We have served as the Company’s auditor since 2000.
Phoenix, Arizona
December 18, 2025
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LESLIE’S, INC.
Consolida ted Balance Sheets
(Amounts in Thousands, Except Share and Per Share Amounts)
October 4, 2025
September 28, 2024
Assets
Current assets
Cash and cash equivalents
Accounts and other receivables, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill and other intangibles, net
Deferred tax assets
Other assets
Total assets
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities
Income taxes payable
Current portion of long-term debt
Total current liabilities
Deferred tax liabilities
Operating lease liabilities, noncurrent
Long-term debt, net
Other long-term liabilities
Total liabilities
Commitments and contingencies
Stockholders’ deficit
Common stock, $ 0.001 par value, 50,000,000 shares authorized and 9,290,311 and 9,248,464 issued and outstanding as of October 4, 2025 and September 28, 2024
Additional paid in capital
Retained deficit
Total stockholders’ deficit
Total liabilities and stockholders’ deficit
See accompanying notes which are an integral part of these consolidated financial statements.
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LESLIE’S, INC.
Consolidated S tatements of Operations
(Amounts in Thousands, Except Per Share Amounts)
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Sales
Cost of merchandise and services sold
Gross profit
Selling, general and administrative expenses
Impairment
Operating (loss) income
Interest expense
Net (loss) income before taxes
Income tax expense
Net (loss) income
(Loss) earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
See accompanying notes which are an integral part of these consolidated financial statements.
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LESLIE’S, INC.
Consolidated Statements of Stockholders’ Deficit
(Amounts in Thousands)
Common Stock
Additional
Paid in
Capital
Retained
Total
Stockholders’
Shares
Amount
(Deficit)
Deficit
Deficit
Balance, October 1, 2022
Issuance of common stock under the Incentive Plan
Equity-based compensation
Restricted stock units surrendered in lieu of withholding taxes
Net income
Balance, September 30, 2023
Issuance of common stock under the Incentive Plan
Equity-based compensation
Restricted stock units surrendered in lieu of withholding taxes
Net loss
Balance, September 28, 2024
Issuance of common stock under the incentive Plan
Equity-based compensation
Restricted stock units surrendered in lieu of withholding taxes
Net loss
Balance, October 4, 2025
See accompanying notes which are an integral part of these consolidated financial statements.
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LESLIE’S, INC.
Consolidated S tatements of Cash Flows
(Amounts in Thousands)
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Operating Activities
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization
Equity-based compensation
Amortization of deferred financing costs and debt discounts
Impairments
Provision for credit losses
Deferred income taxes
Loss on asset dispositions
Changes in operating assets and liabilities:
Accounts and other receivables
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses
Income taxes payable
Operating lease assets and liabilities, net
Net cash provided by operating activities
Investing Activities
Purchases of property and equipment
Business acquisitions, net of cash acquired
Proceeds from asset dispositions
Net cash used in investing activities
Financing Activities
Borrowings on Revolving Credit Facility
Payments on Revolving Credit Facility
Repayment of long-term debt
Payment on finance lease
Payments of employee tax withholdings related to restricted stock vesting
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental Information:
Interest
Income taxes, net of refunds received
See accompanying notes which are an integral part of these consolidated financial statements.
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LESLIE’S, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Business and Operations
Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, and cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through over 1,000 company-operated locations in 39 states and e-commerce websites.
Reverse Stock Split
On September 10, 2025, our shareholders approved a series of amendments to our Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”). On September 26, 2025, we filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effect a reverse stock split of our comment stock at a ratio of 1-for-20 (the “Reverse Stock Split”) and proportionately decrease the number of authorized shares of the Company’s common stock, which became effective upon filing (the “Effective Time”). The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on the Nasdaq Global Select Market (“Nasdaq”) as of the open of trading on September 29, 2025 under the existing ticker symbol “LESL”. The Company’s common stock is now represented by a new CUSIP number, 527064 208.
As a result of the Reverse Stock Split, every 20 shares of our common stock issued and outstanding as of the Effective Time of the Reverse Stock Split was automatically converted into one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. The Company’s transfer agent aggregated all fractional shares of common stock that would otherwise have been issuable as a result of the Reverse Stock Split and sold them at the then prevailing prices on the open market on behalf of those shareholders who would otherwise be entitled to receive such fractional shares. Shareholders who otherwise would be entitled to receive fractional shares received their respective pro rata share of the total proceeds of such sale.
In addition, as of the Effective Time and as a result of the Reverse Stock Split, proportionate adjustments were made in accordance with the terms of the Company’s 2020 Omnibus Incentive Plan (the “Incentive Plan”), with respect to the number of shares of common stock issuable under outstanding stock options, restricted stock units and performance units, and any other equity-based awards, the per-share exercise price with respect to such awards, and the number of shares of common stock reserved for future issuance under the Incentive Plan.
All share and per share amounts in the accompanying consolidated financial statements and notes to the financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
We prepared the accompanying consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Fiscal Periods
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. Fiscal 2025 is defined as the 53 weeks ended October 4, 2025, and fiscal 2024 and fiscal 2023 is defined as the 52 weeks ended September 28, 2024 and September 30, 2023.
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Segment Reporting
Our Chief Operating Decision Maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and assessing performance. We operate all of our locations in the United States and offer consumers similar products, services, and methods of distribution through our retail locations and e-commerce websites. As a result, we have a single reportable segment.
Seasonality
Our business is highly seasonal. Sales and earnings are highest during our third and fourth fiscal quarters, which include April through September, which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters, when we typically generate net losses and we realize negative operating cash flow.
Use of Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net income (loss) during any period. Actual results could differ from those estimates.
Significant estimates underlying the accompanying consolidated financial statements include inventory reserves, lease assumptions, vendor rebate programs, sales returns reserve, self-insurance liabilities, and the recoverability of intangible assets and goodwill.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, money market funds and credit and debit card transactions. Our cash balance at financial institutions may exceed the FDIC insurance coverage limit. We consider all investments with an original maturity of three months or less and money market funds to be cash equivalents. All credit card and debit card transactions that process in less than seven days are classified as cash and cash equivalents.
Fair Value Measurements
We use fair value measurements to record the fair value of certain assets and to estimate the fair value of financial instruments not recorded at fair value but required to be disclosed at fair value.
To determine the fair value, we maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability.
The fair value hierarchy is as follows, of which the first two are considered observable and the last unobservable:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes instruments for which the determination of fair value requires significant judgment or estimation.
As of October 4, 2025 and September 28, 2024, we held no assets that were required to be measured at fair value on a recurring basis. There were no transfers between levels in the fair value hierarchy during fiscal 2025, 2024, and 2023.
The fair value of our Amended and Restated Term Loan Credit Agreement (“Term Loan”) due in 2028 was determined to be $ 208.6 million and $ 758.2 million as of October 4, 2025 and September 28, 2024. These fair value estimates, determined to be
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Level 2, are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
We estimated the fair value of our one reporting unit in our goodwill impairment test performed using a combination of the income approach (discounted cash flow method) and market approach (comparable company multiples). Key assumptions used in the valuation techniques include future cash flow projections, long-term growth rates, and discount rates. The fair value estimates used in the goodwill impairment analysis are classified as Level 3 within the fair value hierarchy, due to significant unobservable inputs.
The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturity of these instruments.
Vendor Rebates
Many of our vendor arrangements provide for us to receive specified amounts of consideration when we meet the criteria defined in the agreement. Generally, the criteria relate to the volume level of purchases. We calculate the amount earned based on actual purchases, recorded as a reduction of the prices of the vendor’s products and therefore a reduction of inventory value at the end of each period based on a detailed analysis of inventory and of the facts and circumstances of various contractual agreements with vendors. We recognize rebates based on an estimated recognition pattern that assumes the oldest inventory is sold first, and we record this as a reduction of cost of merchandise and services sold in our consolidated statements of operations. Accounts and other receivables include vendor rebate receiva bles of $ 4.6 million and $ 21.8 million as of October 4, 2025 and September 28, 2024.
Allowance for Credit Losses
Allowance for credit losses is calculated based on historical experience, counterparty credit risk, consumer credit risk and application of the specific identification method.
Inventories
Inventories are stated at the lower of cost or net realizable value. We value inventory using the average cost method which includes costs incurred to deliver inventory to our distribution centers including transportation, warehousing and distribution costs. We evaluate inventory for excess and obsolescence and record necessary reserves. We provide provisions for losses related to inventories based on management’s judgment regarding historical purchase cost, selling price, margin, movements, and current business trends. If actual demand or market conditions are different than those projected by management, future margins may be unfavorably or favorably affected by adjustments to these estimates. When an inventory item is sold or disposed, the associated reserve is released at that time.
Property and Equipment, Net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Costs of normal maintenance and repairs are charged to expense as incurred. Major replacements or improvements of property and equipment are capitalized. When items are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is included in our consolidated statements of operations.
Depreciation and amortization are computed using the straight-line method. These charges are based on the following range of useful lives:
Building and improvements
5 - 40 years
Vehicles, machinery and equipment
3 - 10 years
Office furniture, computers and software
3 - 7 years
Leasehold improvements
5 years, not to exceed the lease life
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We evaluate our long-lived assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. The evaluation for long-lived assets (asset group) is performed at the lowest level of identifiable cash flows, which, for location assets, is the individual location level. The assets of a physical location with indicators of impairment are evaluated for recoverability by comparing its undiscounted future cash flows with its carrying value. If the carrying value is greater than the undiscounted future cash flows, we then measure the asset’s fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment charges are recorded in SG&A in our consolidated statements of operations.
We use estimates of market participant rents to calculate fair value of lease ROU assets and discounted future cash flows of the asset group to quantify fair value for other long-lived assets. These nonrecurring fair value measurements are considered Level 3 inputs as defined elsewhere in Note 2 Summary of Significant Accounting Policies - Fair Value Measurements of the notes to our consolidated financial statements. The impairment loss calculations require management to apply judgment estimating, among other things, market participant rents, future cash flows, and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for assets in regular retail locations are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected location closures, we evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group.
Cloud Computing Arrangements
From time-to-time, we enter into various agreements with unaffiliated third parties for assistance with technical development work related to our security-related software and systems and other ongoing projects. Expenditures for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the ven dor are capitalized generally in the same manner as internal use software and are recorded as other assets in our consolidated balance sheets. Such costs are amortized over the life of the related cloud computing arrangement. As of October 4, 2025 and September 28, 2024, $ 10.9 million and $ 9.4 million associated with these agreements are included in prepaid expenses and other current assets in our consolidated balance sheets, along with $ 34.4 million a nd $ 37.2 million associated with these agreements included in other assets in our consolidated balance sheets as of October 4, 2025 and September 28, 2024 . In addition, for the year ended September 30, 2023, the Company recognized $ 6.3 million of expense in connection with the discontinued use of certain software subscriptions which is recorded in SG&A in our consolidated statements of operations and a corresponding $ 4.4 million liability for future obligations associated with these subscriptions. F or the year ended October 4, 2025, there was $ 1.8 m illion liability remaining for those future obligations included in accrued expenses and other current liabilities in our consolidated balance sheets.
Goodwill and Other Intangibles, Net
Goodwill and intangible assets are recorded at their estimated fair values at the date of acquisition. We review goodwill and indefinite-lived intangible assets for impairment annually (in the fourth quarter) or more frequently if impairment indicators arise. Goodwill can be evaluated for impairment, at our option, by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, the fair value of the reporting unit may be more likely than not less than the carrying amount, a quantitative goodwill impairment test would be required. Additionally, we can elect to forgo a qualitative assessment and perform a quantitative test. The quantitative test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill.
If a quantitative test is performed, we would estimate the value considering our enterprise value and additionally the use of various valuation techniques which may use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. We include assumptions about sales growth, operating margins, discount rates and valuations multiples which consider our budgets, business plans, economic projections and marketplace data, and are believed to reflect market participant views which would exist in an exit transaction. Some of the inherent estimates and assumptions used in this analysis are outside the control of management, including cost of capital, tax rates and market EBITDA comparable financial metrics.
Finite-lived intangible assets are amortized to reflect the pattern of economic benefits consumed. We evaluate amortizable intangible assets for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. Intangible assets useful lives are reviewed annually.
For our indefinite life intangible assets, a qualitative assessment can also be performed to determine whether the existence of events and circumstances indicates it is more likely than not the intangible asset is impaired. Similar to goodwill, we can also elect to
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forgo a qualitative test for indefinite life intangible assets and perform a quantitative test. Upon performing the quantitative test, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We evaluate whether certain trade names continue to have an indefinite life annually.
After we made our assessments, it was determined that there was no impairment related to other intangible assets in fiscal 2025, however we did record $ 180.7 million impairment on our goodwill during fiscal 2025. During fiscal 2024 and 2023 there was no impairment related to goodwill or other intangible assets. See Note 3 Goodwill and Other Intangibles, Net below for further details.
Leases
We enter into contractual arrangements for the utilization of certain non-owned assets which are evaluated as finance or operating leases upon commencement and are accounted for accordingly. Specifically, a contract is or contains a lease when (1) the contract contains an explicitly or implicitly identified asset and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract in exchange for consideration. We assess whether an arrangement is or contains a lease at inception of the contract.
We lease certain retail locations, warehouse and distribution space, office space, equipment, and vehicles. A substantial majority of our leases have an initial lease term of five years , typically with the option to extend the lease for at least one additional five-year term. Some of our leases may include the option to terminate in less than five years. The lease term used to calculate the right-of-use asset and lease liability at commencement includes the impacts of options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When determining whether it is reasonably certain that we will exercise an option at commencement, we consider various existing economic factors, including market conditions, real estate strategies, the nature, length, and terms of the agreement, as well as the uncertainty of the condition of leased equipment at the end of the lease term. Based on these considerations, we generally conclude that the exercise of renewal options would not be reasonably certain in calculating our operating lease liability at commencement. The discount rate used to calculate the present value of lease payments is the rate implicit in the lease, when readily determinable. As the rate implicit in the lease is rarely readily determinable, we use a secured incremental borrowing rate, which is updated on a periodic basis as the discount rate for the present value of lease payments. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are generally our obligations under our lease agreements. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligation for those payments is incurred. For variable payments dependent upon an index or rate, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the measurement of our operating lease liabilities as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases that have a term of 12 months or less upon commencement are considered short-term in nature and as such are not included in the measurement of our operating lease right-of-use assets and operating lease liabilities on the consolidated balance sheets and are expensed on a straight-line basis over the lease term. In addition, we do not separate lease and non-lease components (e.g., common area maintenance). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customer, in an amount that reflects the consideration we expect to be entitled to in exchange for such goods or services. Revenue from merchandise sales at retail locations is recognized at the point of sale and revenue from services is recognized when the services are rendered. Revenue from e-commerce merchandise sales is recognized either at the time of pick-up at one of our locations or at the time of shipment, depending on the customer’s order designation. Revenue is recorded net of related discounts, loyalty point deferrals, and sales tax. Payment from retail customers is generally at the point of sale and payment terms for professional pool operators are based on our credit requirements and generally have terms of less than 60 days . When we receive payment from a consumer before the consumer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue or as a customer deposit until the sale or service is complete. Shipping and h andling are treated as costs to fulfill the contract and not a separate performance obligation.
We estimate a liability for sales returns based on current sales levels and historical return trends. At each financial reporting date, we assess our estimates of expected returns, and a corresponding adjustment to cost of sales for our right to recover the goods returned by the customer, net of any expected recovery cost. Adjustments related to changes in return estimates were immaterial in all periods presented.
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Pool Perks ® allows members to earn reward points based on their purchases. Members’ spending level determines the threshold that points convert to awards. The awards may be used on future purchases. Points and awards are valid for 270 days from issuance. We defer revenue related to earned points and awards that have not yet been redeemed. The amount of deferred revenue is based on the estimated standalone selling price of points and awards earned by members and reduced by the percentage of points and awards expected to be redeemed. Estimating future redemption rates requires judgment based on current trends and historical patterns. Revenue is recognized when the rewards are redeemed and expired. To the extent we have a change in our breakage estimates, the corresponding amount of change is recognized in revenue. As of October 4, 2025 and September 28, 2024, deferred revenue related to the loyalty program was $ 3.5 million and $ 4.4 million, and is included in accrued expenses in our consolidated balance sheets.
Cost of Merchandise and Services Sold
Cost of merchandise and services sold reflects the direct cost of purchased merchandise, costs to package certain chemical products, including direct materials and labor, costs to provide services, including labor and materials, as well as distribution and occupancy costs. Distribution costs include warehousing and transportation expenses, including costs associated with third-party fulfillment centers. Occupancy costs include the rent, common area maintenance, real estate taxes, and depreciation and amortization costs of all retail locations .
Selling, General and Administrative Expenses
Our SG&A includes selling and operating expenses at our retail locations and corporate level general and administrative expenses. Selling and operating expenses at retail locations include payroll, bonus and benefit costs for personnel, supplies, and credit and debit card processing costs. Corporate expenses include payroll, bonus, and benefit costs for our corporate and field support functions, equity-based compensation, marketing and advertising, insurance, utilities, occupancy costs related to our corporate office facilities, professional services, and depreciation and amortization for all assets, except those related to our retail locations and distribution operations, which are included in cost of merchandise and services sold.
Advertising
We expense advertising costs as incurred. Advertising costs for fiscal 2025, 2024, and 2023 were $ 30.2 million, $ 33.4 million, and $ 35.1 million.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities. Deferred tax assets, including the benefit of net operating loss and tax credit carryforwards, are evaluated based on the guidelines for realization and are reduced by a valuation allowance if it is deemed more likely than not that such assets will not be realized. We consider several factors in evaluating the realizability of our deferred tax assets, including the nature, frequency and severity of recent losses, the remaining years available for carryforwards, the timing of the reversals of year end deferred tax assets and liabilities, changes in tax laws, the future profitability of the operations in the jurisdiction, and tax planning strategies. Our judgments and estimates concerning realizability of deferred tax assets could change if any of the evaluation factors change, resulting in an increase or decrease to income tax expense in any period.
The ultimate realization of deferred tax assets can be dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. On a quarterly basis, we evaluate whether it is more likely than not that our deferred tax assets will be realized in the future and conclude whether a valuation allowance must be established.
We record a liability for uncertain tax positions to the extent a tax position taken or expected to be taken in a tax return does not meet certain recognition or measurement criteria. Considerable management judgment is necessary to assess the inherent uncertainties related to the interpretations of complex tax laws, regulations and taxing authority rulings. Our judgments and estimates may change as a result of the evaluation of new information, such as the outcome of tax audits or changes to or further interpretations of tax laws and regulations, resulting in an increase or decrease to income tax expense in any period. Interest and penalties accrued, if any, relating to uncertain tax positions will be recognized as a component of the income tax provision.
Equity-Based Compensation
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Stock-based compensation expense is measured at grant date, based on the fair value of the award, and is recognized on a straight-line basis over the requisite service period for awards expected to vest. See Note 14—Equity-Based Compensation for further discussion.
Self-Insurance Reserves
We are self-insured for losses relating to workers’ compensation, general liability, and employee medical. Stop-loss coverage has been purchased to limit exposure to any material level of claims. Liabilities for self-insurance reserves are estimated based on independent actuarial estimates, which are based on historical information and assumptions about future events. We utilize various techniques, including analysis of historical trends and actuarial valuation methods, to estimate the cost to settle reported claims and claims incurred but not yet reported as of the balance sheet date. The actuarial valuation methods consider loss development factors, which include the development time frame and expected claim reporting and settlement patterns, and expected loss costs, which include the expected frequency and severity of claim activity.
Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed giving effect to all potentially dilutive shares, unless their effect is antidilutive. We apply the treasury stock method for dilutive share-based awards. Performance-based share-based awards are included in diluted shares only if the related performance conditions have been considered satisfied as of the end of the reporting period. Additionally, all per share amounts have been recast to account for the Reverse Stock Split.
Recent Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 335-40): Targeted Improvements to the Accounting for Internal-Use Software. The guidance modernizes and clarifies the threshold for when an entity is required to start capitalizing software costs and is based on when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures; however, we do not expect there to be a material impact.
In January 2025, FASB issued ASU No. 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 2020-40): Disaggregation of Income Statement Expenses. This update clarifies the initial effective date for entities that do not have an annual reporting period that ends on December 31 to be the first annual reporting period beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In November 2024, FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update requires additional disclosures over certain expenses, including purchases of inventory, employee compensation, depreciation, intangible asset amortization, and other specific expense categories. This standard also requires disclosure of the total amount of selling expenses and the Company's definition of selling expenses. This update is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amended guidance requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years
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beginning after December 15, 2024, with early adoption permitted. We adopted this guidance in the fourth quarter of 2025. For additional information, see Note 16—Segment Reporting.
There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as applicable. We do not believe any of these new accounting pronouncements have had, or will have, a material impact on our consolidated financial statements or disclosures.
Note 3—Goodwill and Other Intangibles, Net
Goodwill
The following table details the changes in goodwill (in thousands):
October 4, 2025
September 28, 2024
Balance at beginning of the year
Acquisitions, net of measurement period adjustments
Impairment
Balance at the end of the year
Goodwill Impairment
During our review of goodwill for impairment during the fourth quarter, management identified certain continued indicators (i.e., decline in market capitalization and reduced operating performance), which required further goodwill impairment evaluation.
As a result, we a performed a quantitative impairment test for our only reporting unit under ASC 350, Intangibles - Goodwill and Other. The fair value of the reporting unit was estimated using a combined discounted cash flow model and market approach, consistent with valuation methodologies used historically.
Key assumptions of the analysis included:
Discount rate: 13 %
Long-term growth rate: 2 %
During the fourth quarter of 2025, we identified a decline in market capitalization and reduced operating performance as compared to the prior year and determined that indicators of impairment existed and that a quantitative test should be performed for the one reporting unit. In determining fair value, management utilized valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The fair value technique used in this instance was classified as Level 3, where unobservable inputs are used when little or no market data was available.
In performing the quantitative test of goodwill, management primarily used the income approach method of valuation. Under the income approach, our future cash flows were estimated and present valued based on a discount rate reflecting a market participant risk-adjusted rate of return.
Significant assumptions used to determine fair value included expected sales trends, cost of sales, operating expenses, and an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax cost of debt. We selected estimates used in the discounted cash flow projections using historical data as well as current and anticipated market conditions, and estimated growth rates with consideration of published industry trends. We also compared the total invested capital (including
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market capitalization) to the fair value of its reporting unit to assess the reasonableness of fair value after consideration of a control premium based on observable comparable company transactions.
Based on the results of this analysis we determined that the carrying value of the reporting unit exceeded the fair value, and therefore we recorded a goodwill impairment charge of $ 180.7 million during fiscal 2025.
Other Intangible Assets
Other intangible assets consisted of the following as of October 4, 2025 (in thousands, except weighted average remaining useful life):
Weighted
Average
Remaining
Useful Life
(in Years)
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Trade name and trademarks (finite life)
Trade name and trademarks (indefinite life)
Indefinite
Non-compete agreements
Consumer relationships
Other intangibles
Total
Other intangible assets consisted of the following as of September 28, 2024 (in thousands, except weighted average remaining useful life):
Weighted
Average
Remaining
Useful Life
(in Years)
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Trade name and trademarks (finite life)
Trade name and trademarks (indefinite life)
Indefinite
Non-compete agreements
Consumer relationships
Other intangibles
Total
Amortization expense was $ 3.7 million, $ 3.7 million, and $ 4.3 million in fiscal 2025, 2024, and 2023. No impairment of other intangible assets was recorded during fiscal 2025, 2024, and 2023. No impairment of goodwill was recorded in fiscal 2024 and 2023. See above for discussion of fiscal 2025 goodwill impairment.
The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our consolidated balance sheet as of October 4, 2025 (in thousands):
Amount
Thereafter
Total
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Note 4—Accounts and Other Receivables, Net
Accounts and other receivables, net consisted of the following (in thousands):
October 4, 2025
September 28, 2024
Vendor and other rebates receivable
Customer receivables
Other receivables
Allowance for credit losses
Total
Note 5—Inventories, net
Inventories, net consisted of the following (in thousands):
October 4, 2025
September 28, 2024
Raw materials
Finished goods
Total
Changes in inventory excess and obsolescence reserves were as follows (in thousands):
Additions
Deductions
Balance at Beginning of Year
Charged to Costs and Expenses
Sale or Disposal of Inventories
Balance at
End of Year
Fiscal 2025
Fiscal 2024
Fiscal 2023
Note 6—Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
October 4, 2025
September 28, 2024
Prepaid insurance
Prepaid occupancy costs
Prepaid sales tax
Prepaid maintenance
Prepaid other
Income tax receivable
Other current assets
Total
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Note 7—Property and Equipment
Property and equipment consist of the following (in thousands):
October 4, 2025
September 28, 2024
Land
Buildings and improvements
Vehicles, machinery and equipment
Leasehold improvements
Office furniture, computers and software
Construction in process
Equipment under finance lease
Less: accumulated depreciation and amortization
Total
Depreciation and amortization expense on property and equipment was $ 29.3 million, $ 29.2 million, and $ 29.8 million in fiscal 2025, 2024, and 2023. Construction in process primarily consisted of leasehold improvements related to new or remodeled locations where construction had not been completed by the end of the period and internal use software as of October 4, 2025 and September 28, 2024.
Capitalized software additions placed into service was $ 5.7 million and $ 2.1 million in fiscal 2025 and 2024. Amortization expense on capitalized software was $ 3.0 million, $ 3.9 million, and $ 4.9 million in fiscal 2025, 2024, and 2023. C apitalized software accumulated amortization totaled $ 22.1 million and $ 19.2 million as of October 4, 2025 and September 28, 2024. Capitalized software and development costs remaining to be amortized were $ 8.7 million and $ 6.0 million as of October 4, 2025 and September 28, 2024.
Note 8—Accrued Expenses
Accrued expenses consisted of the following (in thousands):
October 4, 2025
September 28, 2024
Accrued payroll and employee benefits
Customer deposits
Interest
Inventory related accruals
Loyalty and deferred revenue
Sales tax
Self-insurance reserves
Other accrued liabilities
Total
As of October 4, 2025 and September 28, 2024, $ 1.4 million and $ 1.0 million of capital expenditures were included in other accrued liabilities.
Note 9—Long-Term Debt, Net
Our long-term debt, net consisted of the following (in thousands, except interest rates):
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Effective
Interest Rate (1)
October 4, 2025
September 28, 2024
Term Loan
Revolving Credit Facility
Total long-term debt
Less: current portion of long-term debt
Less: unamortized discount
Less: deferred financing charges
Total long-term debt, net
Effective interest rates as of October 4, 2025.
Carries interest at a specified margin over the Term Secured Overnight Financing Rate (“SOFR”) between 2.50 % and 2.75 % with a minimum SOFR of 0.50 % plus a SOFR adjustment.
Carries interest at a specific margin between 0.25 % and 0.75 % with respect to base rate loans and between 1.25 % and 1.75 % with respect to Term SOFR loans, with a SOFR adjustment.
Term Loan
In June 2023, we entered into Amendment No. 1 (“Term Loan Amendment”) to our Term Loan. The Term Loan Amendment (i) replaced the existing LIBOR-based interest rate benchmark with a Term SOFR-based benchmark and (ii) amended certain other related terms and provisions, including the addition of a SOFR adjustment of (a) 0.11448 % per annum for one-month, (b) 0.26161 % per annum for three months, and (c) 0.42826 % per annum for six months. The other material terms of the Term Loan remained substantially unchanged.
The Term Loan provides for an $ 810.0 million secured term loan facility with a maturity date of March 9, 2028 . Borrowings under the Term Loan have an initial applicable rate, at our option, of (i) 2.75 % for loans that are Term SOFR loans and (ii) 1.75 % for loans that are Alternate Base Rate, (“ABR”) loans (the “Applicable Rate”). The Applicable Rate of the Term Loan is based on our first lien leverage ratio as follows: (a) if the first lien leverage ratio is greater than 2.75 to 1.00 , the applicable rate will be 2.75 % for Term SOFR loans and 1.75 % for ABR loans and (b) if the first lien leverage ratio is less than or equal to 2.75 to 1.00 , the applicable rate will be 2.50 % for Term SOFR loans and 1.50 % for ABR loans. For Term SOFR loans, the loans will bear interest at the Term SOFR-based benchmark rate plus the Applicable Rate and the SOFR adjustment, as defined above.
Revolving Credit Facility
In March 2023, we entered into Amendment No. 6 to our $ 200.0 million credit facility (“Revolving Credit Facility”) maturing on August 13, 2025 (the “Amendment”). The Amendment (i) increased the revolving credit commitments under the Revolving Credit Facility in the amount of $ 50.0 million, such that the aggregate commitments are $ 250.0 million and (ii) replaced the existing LIBOR-based rate with a Term SOFR-based rate, as an interest rate benchmark. The Revolving Credit Facility has (i) an applicable margin on base rate loans with a range of 0.25 % to 0.75 %, (ii) an applicable margin on Term SOFR loans with a range of 1.25 % and 1.75 %, (iii) a SOFR Adjustment of 0.10 % for all borrowing periods, (iv) a floor of 0 % per annum, and (v) a commitment fee rate of 0.25 % per annum. The other material terms of the Revolving Credit Facility prior to the Amendment remained substantially unchanged.
On April 3, 2024, we entered into Amendment No. 7 to our Revolving Credit Facility (the “2024 Amendment”). The 2024 Amendment (i) extended the maturity date to April 3, 2029 and (ii) revised the applicable margin on Term SOFR and base rate loans. The other material terms of the Revolving Credit Facility prior to the 2024 Amendment remained substantially unchanged.
As of October 4, 2025 and September 28, 2024, no amounts were outstanding under the Revolving Credit Facility. Th e amount available under our Revolving Credit Facility increased by $ 11.7 million and $ 10.4 million of existing standby letters of credit as of October 4, 2025 and September 28, 2024.
Representations and Covenants
Substantially all of our assets are pledged as collateral to secure our indebtedness. The Term Loan does not require us to comply with any financial covenants. The Term Loan and the Revolving Credit Facility contain customary representations and warranties, covenants, and conditions to borrowing. No events of default occurred as of October 4, 2025 and September 28, 2024.
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Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of October 4, 2025 (in thousands):
Amount
Thereafter
Total
Note 10—Leases
Leases
We lease certain locations, office, distribution, and manufacturing facilities under operating leases that expire at various dates through May 2049 . We are obligated to make cash payments in connection with various lease obligations and purchase commitments. All of these obligations require cash payments to be made by us over varying periods of time. Certain leases are renewable at our option typically for periods of five or more years. Certain of these arrangements are cancelable on short notice and others require payments upon early termination. Our lease expense is recorded in cost of goods sold for our store related leases and SG&A for all others.
The following table summarizes the components of lease expense (in thousands):
Year Ended
October 4, 2025
September 28, 2024
Operating lease expense
Finance lease amortization of ROU asset
Finance lease interest on lease liability
Total net lease expense
As of October 4, 2025 and September 28, 2024, operating lease right-of-use assets obtained in exchange for operating lease liabilities totaled $ 3.9 million and $ 12.3 million.
As of October 4, 2025 and September 28, 2024, finance lease right-of-use assets obtained in exchange for finance lease liabilities totaled $ 1.3 million and $ 0.6 million.
During the year ended October 4, 2025 we recorded $ 3.1 million in impairment on right-of-use assets related to underperforming stores, which had a aggregated fair value of $ 2.0 million at the time of impairment. During the year ended September 28, 2024 there were no impairments.
The follow ing table presents the weighted-average remaining lease term and discount rate for both operating and financing leases:
October 4, 2025
September 28, 2024
Weighted-average remaining operating lease term
5.0 years
5.3 years
Weighted-average discount rate - operating leases
Weighted-average remaining finance lease term
5.5 years
1.4 years
Weighted-average discount rate - finance leases
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The following table summarizes the future annual minimum lease payments for both operating and financing leases as of October 4, 2025 (in thousands):
Operating
Financing
Thereafter
Total
Less: amount of lease payments representing imputed interest
Present value of future minimum lease payments
Less: current lease liabilities
Lease liabilities, noncurrent
Note 11—Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Current:
Federal
State
Total Current
Deferred:
Federal
State
Total Deferred
Total income tax provision
A reconciliation of the provision for income taxes to the amount computed at the federal statutory rate is as follows (in thousands):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Federal income tax at statutory rate
Equity-based compensation
Section 162(m) limitation
Goodwill impairment
Permanent differences
Change in valuation allowance
State taxes, net of federal benefit
Credits
Other
Total income tax provision
Our effecti ve income tax rate for fiscal 2025 was ( 1.8 )% as compared to ( 76.1 )% in fiscal 2024.
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The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are summarized below (in thousands):
October 4, 2025
September 28, 2024
Deferred tax assets:
Compensation accruals
Inventories
Lease liabilities
Equity-based compensation
Intangibles
Reserves and other accruals
Interest limitation
Capitalized research expenditures
Other
Total deferred tax assets
Deferred tax liabilities:
Property, plant, and equipment
Intangibles
Lease assets
Deferred financing cost
Other
Total deferred tax liabilities
Valuation allowance
Deferred tax assets (liabilities), net
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets. The interest expense limitation passed in the Tax Cuts and Jobs Act created a deferred tax asset for the year ended September 28, 2024, and we recorded a valuation allowance of $ 11.2 million. We performed an analysis of the reversal of the deferred tax assets and liabilities, considered the historical earnings and overall business environment, as well as positive and negative evidence of the realizability of deferred tax assets for the year ended October 4, 2025. Based on this analysis, we do not believe it is more likely than not that the net deferred tax assets would be realized, which resulted in a valuation allowance of $ 56.2 million as of October 4, 2025.
As of October 4, 2025, we had $ 1.9 million and $ 12.7 million in net operating losses for federal and state tax return purposes, respectively. The federal and certain state net operating losses can be carried forward indefinitely, while most state net operating losses will expire at various dates beginning in fiscal 2036.
We are subject to United States federal and state taxes in the normal course of business and our income tax returns are subject to examination by the relevant tax authorities. We are no longer subject to United States federal examinations by taxing authorities for fiscal years before 2022, and, with few exceptions, are no longer subject to state examinations for fiscal years before 2021.
Our liability for unrecognized tax benefits is as follows (in thousands):
October 4, 2025
September 28, 2024
Balance at beginning of period
Gross increases - tax positions in prior period
Gross increases - tax positions in current period
Balance at end of period
The total amount of gross unrecognized tax benefits was $ 1.7 million as of October 4, 2025. The portion of unrecognized tax benefits that if recognized would affect the annual effective tax rate was $ 1.6 million and $ 0.3 million as of October 4, 2025 and September 28, 2024, respectively, before consideration of the valuation allowance. The portion of unrecognized tax benefits after consideration of the valuation allowance that if recognized would affect the annual effective tax rate was $ 1.1 million, and $ 0.3 million as of October 4, 2025 and September 28, 2024, respectively.
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We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. No material amounts were recognized during any of the periods presented. We do not expect a significant increase or significant decrease in our liability for unrecognized tax benefits in the next 12 months.
In August 2022, the Inflation Reduction Act of 2022 was signed into law and contains provisions effective January 1, 2023 which were not material to the Company's income tax provision.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law but did not have a material impact on our fiscal 2025 financial results. Among other provisions, this act includes permanently extending and modifying certain expiring provisions of the 2017 Tax Cuts and Jobs Act and immediate expensing of domestic research and development expenses. The benefit resulting from the reinstatement of 100% bonus depreciation on assets placed in service after January 19, 2025, has been reflected in the provision. Due to the effective dates of certain provisions in the bill, the immediate expensing of domestic research and development expenses and the return of the EBITDA threshold in the calculation of the interest limitation will not be applicable until fiscal 2026.
Note 12—Commitments & Contingencies
Contingencies
On September 8, 2023, a class action complaint for violation of federal securities laws was filed by West Palm Beach Police Pension Fund in the U.S. District Court for the District of Arizona against us, our former Chief Executive Officer and our former Chief Financial Officer. The complaint alleges that the defendants violated federal securities laws by issuing materially false and misleading statements that failed to disclose adverse facts about our financial guidance, business operations and prospects, and seeks class certification, damages, interest, attorneys’ fees, and other relief. On April 22, 2024, the defendants filed a motion to dismiss the complaint. That court granted that motion and dismissed the claims on July 14, 2025. The court allowed the plaintiff to file a second amended complaint. On August 13, 2025, the plaintiff filed the second amended complaint. On September 12, 2025, the defendants filed a motion to dismiss the second amended complaint. That motion is fully briefed and pending before the court. Due to the early stage of this proceeding, we cannot reasonably estimate the potential range of loss, if any. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
On March 13, 2024, March 14, 2024, and December 17, 2024, three derivative actions were separately filed in the U.S. District Courts for the Districts of Arizona and Delaware by John Clemens, Sally Flynn, and Ian Mednick, respectively, on behalf of the Company, and against its current and former officers and directors. Each of the three complaints include allegations similar to those in the securities class action, and allege that the defendant directors and officers harmed the Company by either making false or misleading statements, or allowing false or misleading statements to be made. The complaints seek the award of damages, costs, attorneys’ fees, and other declaratory relief. The two derivative actions pending in the U.S. District Court for the District of Arizona have been consolidated into a single proceeding. All of the derivative actions are stayed pending a decision on the motion to dismiss in the securities class action. Due to the early stage of these proceedings, we cannot reasonably estimate the potential range of loss, if any. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
We are subject to other litigation, claims, and other proceedings that arise from time-to-time in the ordinary course of business. We believe these actions are routine and incidental to the business. As of October 4, 2025, we had established reserves for claims that are probable and estimable and such reserves were not significant. While we cannot feasibly predict the outcome of these matters with certainty, we believe, based on examination of these matters, experience to date and discussions with counsel, that the ultimate liability, individually or in the aggregate, will not have a material adverse effect on our business, financial position, results of operations, or cash flows.
Our workers’ compensation insurance program, general liability insurance program, and employee group medical plan have self-insurance retention features of up t o $ 0.4 million per event. We had standby letters of credit outstanding in the amount of $ 11.7 million and $ 10.5 million as of October 4, 2025 and September 28, 2024, for the purpose of securing such obligations under our workers’ compensation self-insurance programs.
Vendor Guarantee
In August 2024, the Company entered into an amended agreement with one of its vendors in which the Company provided a guarantee of certain existing and future warranty obligations of the vendor’s products. In exchange for providing the guarantee, the Company was provided additional rebates on past and future purchases from the vendor. The amended agreement was retroactive to January 1, 2024 with a term of four years .
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Under the terms of the guarantee, the Company was required to reimburse the vendor for parts used for warranty work performed. The guarantee had no limitation on the maximum potential future payment of warranty costs under the agreement. The Company recognized a liability in accrued expenses associated with this guarantee at an estimated fair value of $ 10.7 million. The corresponding asset related to the expected discounts on future purchases is recorded in prepaid expenses and other current assets. The amortization of this balance would have been recorded as cost of goods sold during the term of the amended agreement. As of September 28, 2024, the liability related to the guarantee was $ 9.5 mi llion.
In November 2024, the Company and the vendor amended the agreement effective September 29, 2024 to eliminate the guarantee and reduce rebates on future purchases. As a result, the Company derecognized the warranty guarantee liability and the other current asset balance in the first quarter of fiscal 2025. Additionally, the Company received credit for $ 1.8 million of previous warranty-related expense which was recorded as a reduction to cost of goods sold.
Purchase Commitments
In addition to our lease obligations, we maintain future purchase commitments related to inventory and operational requirements.
The following table summarizes the future minimum purchase commitments as of October 4, 2025 (in thousands):
Amount
Thereafter
Total
Note 13—401(K) Plan
We provide for the benefit of our employees a voluntary defined contribution retirement plan under Section 401(k) of the Internal Revenue Code. The plan covers all eligible employees and provides for a matching contribution by us of 50 % of each participant’s contribution of up to 4 % of the individual’s compensation as defined. The expenses related to this plan wer e $ 1.5 million, $ 1.3 million, and $ 1.5 million in fiscals 2025, 2024 and 2023.
Note 14—Equity-Based Compensation
Equity-Based Compensation
2020 Omnibus Incentive Plan
In October 2020, we adopted the Incentive Plan, which was amended and restated by our shareholders at our 2024 Annual Meeting of Shareholders. The Plan provides for various types of awards, including non-qualified stock options to purchase Leslie’s common stock (each, a “Stock Option”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) which may settle in Leslie’s, Inc. common stock to our directors, executives, and eligible employees of the Company. As of October 4, 2025, we had 0.6 million shares of common stock available for future grants under the Incentive Plan.
As of October 4, 2025, the aggregate unamortized value of all outstanding equity-based compensation awards was $ 7.7 million, which is expected to be recognized over a weighted average period of 2.0 years.
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Stock Options
Stock Options granted under the Incentive Plan generally expire ten years from the date of grant and consist of Stock Options that vest upon satisfaction of time-based requirements. The following tables summarize our Stock Option activity under the Incentive Plan (in thousands, except per share amounts):
Year Ended
October 4, 2025
September 28, 2024
Number of Options
Weighted Average
Exercise Price
Number of Options
Weighted Average
Exercise Price
Outstanding, Beginning
Granted
Exercised
Forfeited/Expired
Balance, Ending
Vested and exercisable as of October 4, 2025
October 4, 2025
Aggregate intrinsic value of Stock Options outstanding
Unamortized value of unvested Stock Options
Weighted average years that expense is expected to be recognized
Weighted average remaining contractual years outstanding
Restricted Stock Units and Performance Units
RSUs represent grants that vest ratably upon the satisfaction of time-based requirements. PSUs represent grants potentially issuable in the future based upon the Company’s achievement of certain performance conditions. The fair value of our RSUs and PSUs are calculated based on the Company’s stock price on the date of the grant.
The following table summarizes our RSU and PSU activity under the Incentive Plan (in thousands, except per share amounts):
Year Ended
October 4, 2025
September 28, 2024
Number of RSUs/PSUs
Weighted Average
Grant Date Fair Value
Number of RSUs/PSUs
Weighted Average
Grant Date Fair Value
Outstanding, Beginning
Granted (1)
Vested
Forfeited
Balance, Ending
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(1) During the year ended October 4, 2025, 45,000 PSUs were granted subject to the Company achieving certain adjusted sales and adjusted EBITDA performance targets on a cumulative basis during fiscal years 2025, 2026, and 2027. The criteria are based on a range of performance targets in which participants may earn between 0 % to 200 % of the base number of awards granted. The weighted average grant date fair value of the PSUs was $ 48.80 . The Company assesses the attainment of target payout rates each reporting period. Equity-based compensation expense is recognized for awards deemed probable of vesting.
For the year ended September 28, 2024, the Company granted 20,000 PSUs subject to the Company achieving certain adjusted net income and sales performance targets on a cumulative basis during fiscal years 2024 and 2025. The criteria are based on a range of these performance targets in which participants may earn between 0 % to 200 % of the base number of awards granted. The weighted average grant date fair value of the PSUs was $ 108.60 . The Company assesses the attainment of target payout rates each reporting period. Equity-based compensation expense is recognized for awards deemed probable of vesting.
October 4, 2025
Unamortized value of unvested RSUs/PSUs (in thousands) :
Weighted average period (years) expense is expected to be recognized
During the fiscal years ended October 4, 2025 and September 28, 2024 equity-based compensation expens e was $ 6.2 million and $ 8.6 million. Equity-based compensation expense is reported in SG&A in our consolidated statements of operations .
Note 15—Earnings (Loss) Per Share
The following is a reconciliation of basic weighted average common shares outstanding to diluted weighted average common shares outstanding (in thousands, except per share amounts):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Numerator:
Net (loss) income
Denominator:
Weighted average shares outstanding - basic
Effect of dilutive securities:
Stock Options
RSUs
Weighted average shares outstanding - diluted
Basic (loss) earnings per share
Diluted (loss) earnings per share
The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings (loss) per share because the effect of including such shares would have been antidilutive (in thousands):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Stock Options
RSUs
Total
Note 16 —Segment Reporting
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We manage our business activities on a consolidated basis and operate as a single operating segment. We derive our revenue in the United States by providing pool related goods and services to our customers through a variety of channels. The accounting policies of our operating segment are the same as those that are described in Note 2 – Summary of Significant Accounting Policies.
Our chief operating decision maker (“CODM”) is our chief executive officer , who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income to assess financial performance and allocate resources . The CODM does not review assets in evaluating the results of our operating segment, and therefore such information is not presented.
The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM (in thousands):
Year Ended
October 4, 2025
September 28, 2024
September 30, 2023
Sales
Less:
Cost of merchandise and services sold (1)
Store labor and fringe
Merchant fees
Direct store expense
Marketing
Information technology
Other segment expense (2)
Impairment
Interest expense
Income tax expense
Segment net (loss) income
(1) Included within cost of merchandise and services sold and other segment expenses is depreciation and amortization expense of $ 19.3 million, $ 18.1 million, and $ 17.8 million in fiscal years 2025, 2024, and 2023, respectively, as described in Note 2, Summary of Significant Accounting Policies.
(2) Included within other segment expense are items related to corporate payroll and bonus expense and general and regional administrative expenses.
Note 17 —Subsequent Events
On November 25, 2025, subsequent to the October 4, 2025 balance sheet date, management committed to a plan to close approximately 80-90 U.S. stores that were identified as underperforming stores and one distribution center. The store closures are expected to be substantially completed by the end of first fiscal quarter of 2026. As the decision was made after the reporting date, no adjustments have been made to the accompanying financial statements. We expect to incur approximately $ 12.0 million to $ 20.0 million in one-time costs in the first quarter of 2026, primarily related to asset impairments and inventory write downs.
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