Leslie's didn't file for bankruptcy because of a soft summer. It filed because of a spectacular year, four summers ago, that everyone involved agreed to treat as the new floor.
On September 30, Leslie's, the pool-supply chain founded in 1963, filed for Chapter 11 in the Southern District of Texas. The company listed $1.21 billion in liabilities against $722.2 million in assets. The prearranged plan wipes out about $685 million of debt, roughly 90% of what it owed, and hands majority ownership to a group of its lenders. Another 76 stores will close, on top of the roughly 80 it shut earlier this year. It had 943 locations in 38 states as of July.
The explanation in the filing coverage is the one you'd expect. A softer summer season. Customers more sensitive to price. Fewer people walking into stores. Amazon, Walmart, Costco, Home Depot and Lowe's all selling the same chlorine.
All true. All beside the point. Leslie's has had soft summers and big-box competition for decades. What it hadn't had before was a balance sheet and a footprint built for its best year.
The year everybody believed
In fiscal 2022, Leslie's sold $1,562.1 million of pool supplies, up 16.3%, with comparable sales up 10.6% and net income of $159.0 million. The year before it had done $1,342.9 million. Locked-down households had spent two summers in their backyards, and plenty of them bought or refurbished pools.
The company's guidance for the following year called for sales of $1.56 billion to $1.64 billion. Read that range carefully. Its bottom was the peak. The plan didn't assume the boom would keep compounding, which would have looked reckless. It assumed something that sounded conservative: that the new level would hold.
Fast forward to this year's third quarter. Sales of $458.5 million, down 8.4%. Comparable sales down 6.2%. Adjusted EBITDA of $55.7 million against $81.6 million a year earlier. Nine-month sales of $790.4 million, down 7.3%. A company that grew into its peak is now shrinking out of it, carrying the obligations it took on while it was there.
And the bull case wasn't stupid. Leslie's sells consumables. More pools in the ground should mean more chemicals, filters and repairs for years. An installed base is about as good an argument for durable demand as a retailer ever gets. That is exactly what makes this kind of mistake dangerous. The record year never looks like a fluke from the inside. It looks like the reward for doing things right, with a plausible story about why it will last.
Where the peak hides
Most owners would say they don't extrapolate a great year. They'd be right about the forecast and wrong about the commitments.
The peak gets into a company through denominators. Leverage looks comfortable because debt is measured against peak earnings. A new lease pencils out because the comparable stores are doing peak volume. The extra management layer is affordable because margins are at a high. The acquisition price is fine because it's a reasonable multiple of this year's EBITDA. Nobody decides to bet on the record year continuing. They just make five sensible decisions, each benchmarked to the most recent number, and the bet gets made for them.
Then the cause of the record fades, earnings go back toward trend, and every one of those ratios gets worse at once. The debt didn't change. The leases didn't change. The denominator did.
Nobody decides to bet on the record year continuing. They make five sensible decisions benchmarked to it, and the bet gets made for them.
Mark the year to its cause
The discipline I'd propose is simple to state and uncomfortable to practice. Call it the peak haircut. Whenever a year comes in well above trend, three questions come before any long commitment.
What caused it, in one sentence, and is that cause still operating? Not "strong execution," which every year has. The specific external thing: lockdowns, a competitor's exit, a pricing window, a supply shortage that let you charge more, a single large customer's buying cycle. If the sentence names something temporary, the year is partly a windfall, and windfalls don't service debt.
What do your commitments look like at the haircut number? Take the average of your last four or five years, or the record year less whatever the one-off cause plausibly added, and rerun the leverage covenant, the lease coverage and the fixed payroll against it. If the company only works at the peak, you've learned something the peak was hiding.
Which commitments can you unwind within twelve months? This is the sorting rule. Irreversible commitments get sized to the haircut. Reversible ones can ride the peak.
Sizing commitments after a record year
Commitment | Reversible within 12 months? | Size it to |
|---|---|---|
Term debt, dividend recaps | No | The haircut number |
Leases and new locations | Rarely | The haircut number |
Acquisitions | No | The seller's trend, not your peak multiple |
Permanent management layers | Slowly, and expensively | The haircut number |
Bonuses, one-time distributions | Yes | The peak |
Inventory, debt paydown, cash reserve | Yes | The peak |
The rule: spend a record year on things you can take back. Commit the trend.
None of this means sitting on a good year. It means spending it on the things that don't need it to repeat. Paying down debt in a peak year is the single best use of a windfall, and it's the one most companies skip because the balance sheet looks fine at peak earnings.
What this means for owners right now
Plenty of businesses are having an unusual year in 2026. Some are selling into a pull-forward of demand. Some are enjoying pricing power that came from a competitor's trouble or a supply squeeze. Some have one customer buying at a pace that won't last. In every one of those companies, someone is about to sign a lease, refinance a loan or approve a hire against this year's number.
The useful question isn't how to sustain the record. It's what the company is committing to on the assumption that it will.
Leslie's lenders now own the business. They didn't lend against a bad year. They lent against a good one, and so did the people who signed the leases. The record year is the most persuasive number in any company, which is exactly why it deserves a haircut before anyone builds on it.
Sources. Chapter 11 terms and CEO statement from Leslie's announcement of September 30, 2026; liabilities, assets, store counts and fiscal 2026 sales from TheStreet and Pool Magazine; fiscal 2021 and 2022 results and fiscal 2023 guidance from Leslie's fiscal 2022 earnings release filed with the SEC.
