Poolmart Figures Just Don’t Add Up

I read the (June 7) article on Leslie’s Poolmart and have several comments I would like to share with you:

Opening 500 stores by the end of the decade would require 317 more stores than they have presently, or 63 stores per year. They normally open them in the wintertime, a 180-day period, requiring one new store opening every three days! Brian McDermott (Leslie Poolmart’s chief executive) says they will open only 40 stores next year. If that is true, they will be 23 stores behind in 1996. They told Forbes magazine in a recent article that those 500 stores will gross $500 million. The stores they have opened since 1988 have averaged $677,000 (in sales per store annually), down from the 1988 average of $863,000. But even if by some miracle they found that many good locations, they couldn’t possibly average $1 million apiece, especially for the ones opened in the last three years of the century.

Montgomery Securities projected earnings of 80 cents to 85 cents (per share of stock), which was announced at the time of the stock sale. The actual earnings per share were 19 cents in 1991. Yet, the article says: “Leslie’s sales and earnings fell about 5% short of what had been expected.” No wonder the market has no confidence in these people.

Since I unwillingly sold the company in 1988, they have opened 93 stores, increased business by $63 million, sold $28 million worth of stock, added approximately $20 million worth of debt, both long- and short-term, and have increased profits by only $500,000. That’s an awful lot of investors’ cash and risk for very little return. In my view, they are dangerously overextended, and I suggest that to keep their word on the 500 stores would be financial suicide.

PHILIP LESLIE

Simi Valley