LESL

Leslie's Inc($LESL) Directors Buy Massively as Stock Plunges 86%: Value Signal or Survival Risk?

05/14/2025 20:09

Board members of Leslie's Inc ($LESL) have stepped up with significant share purchases as the stock hit historic lows. SEC filings on May 13 revealed that Director John Strain acquired 150,000 shares ($118,500), Susan Ofarrell purchased 31,500 shares ($25,200), and Maile Naylor bought 12,000 shares ($9,960). Notably, these directors paid approximately $0.80 per share on average, investing after the company's stock had plummeted over 86% from $5.76 in June 2024. Leslie's, a specialty retailer of pool and spa care products, has faced severe business challenges in recent quarters. In Q2 2025, the company reported revenue of $177.1 million, down 6.1% year-over-year, with a net loss of $51.3 million, worsening from a $34.6 million loss in the same period last year. Adjusted EBITDA deteriorated to -$36.1 million, compared to -$19.3 million in the prior-year period. These financial difficulties have been reflected in the market, with the stock steadily declining, particularly after February 18, 2025, when Bank of America Global Research dramatically cut its price target from $2.65 to $1.40 and downgraded the stock from 'buy' to 'underperform.' The BoA report cited "muted free cash flow generation limiting LESL's ability to pay down debt." However, this insider buying mirrors a similar pattern of substantial insider purchases from late August to early September 2024, when CFO Scott Justin Bowman acquired 100,000 shares ($258,000) and Officer John Strain purchased 120,000 shares ($303,600), along with several directors making additional acquisitions. While market reaction was initially positive, the stock resumed its downward trajectory after the November earnings report, where the company projected an annual adjusted loss per share of 20-21 cents. What's particularly striking about the recent insider buying is that it occurred at an extremely depressed valuation, with the stock trading below $1. Notably, John Strain made his second major purchase in eight months, potentially signaling strong conviction in the company's long-term value. Strain, previously an officer and now a director, holds both positions through the Strain Family Revocable Trust. Leslie's operates over 1,000 locations across the United States, providing pool and spa maintenance products and services. However, the company has been hit by unfavorable weather conditions and reduced consumer spending, impacting customer traffic and sales. With a market capitalization of $163.5 million and a high debt level of $1.11 billion, its financial flexibility remains constrained. For fiscal year 2025, the company forecasts revenue between $1,304 million and $1,370 million, net income between -$10 million and $5 million, and adjusted earnings per share between -$0.01 and $0.07. This outlook reflects ongoing business challenges but suggests gradual improvement as the year progresses. Wall Street analysts generally maintain a 'hold' rating on $LESL, with a median 12-month price target of $2.75, implying significant upside potential from current levels. However, stock recovery may remain limited until performance improvements materialize. Significant insider buying often serves as a powerful signal that company insiders believe the stock is undervalued. Cluster buying patterns (multiple insiders purchasing simultaneously) are typically interpreted as an even stronger indicator. Nevertheless, investors should consider Leslie's high debt levels, deteriorating profitability, and challenging industry environment holistically. Ultimately, Leslie's insider purchases suggest a substantial disconnect between the company's internal valuation and its current market price. However, whether this positive signal translates into actual financial performance improvement will depend on upcoming quarterly results. As the summer season is crucial for the pool industry, the company's Q3 2025 performance will be a critical indicator of its recovery potential.

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