S&P Global Ratings downgraded Leslie’s Poolmart Inc. (NASDAQ: LESL) to CCC- from CCC on Friday, citing heightened restructuring risk and liquidity pressures. The outlook remains negative, with S&P indicating a likely downgrade to selective default (SD) and a D rating on the company’s $756 million term loan facility within six months if a distressed transaction is completed.
Leslie’s faces mounting financial strain as its term loan trades at roughly 20 cents on the dollar, reflecting investor concerns over its debt structure. The company’s $250 million asset-based lending (ABL) facility, currently maturing in March 2027, would accelerate to December 2027 if the term loan is not refinanced before then. S&P projects a 7% revenue decline for fiscal 2026, following an 8.4% year-over-year drop in the third quarter ended July 4, 2026. Same-store sales fell 6.2% in the period, driven by reduced customer traffic, lower transaction volumes, and adverse weather conditions.
Liquidity stood at $207 million at the end of the third quarter, including cash and availability under the ABL facility. However, S&P forecasts a free operating cash flow deficit of about $19 million for fiscal 2026, after roughly $18 million in capital expenditures, and a trailing-12-month negative free cash flow of $6.5 million. The agency described the company’s liquidity as less than adequate.
Leslie’s has closed approximately 80 underperforming stores over the past year, including 74 in the first fiscal quarter of 2026, reducing its nationwide footprint to 943 locations. The company has withdrawn its full-year 2026 guidance and is engaged in discussions with stakeholders regarding potential modifications to its debt structure amid rising restructuring risks.
