Good afternoon, and welcome to the fourth quarter and fiscal year 2021 conference call for Leslie's, Inc. At this time, all participants are in a listen-only mode. Following the prepared remarks, management will conduct a question and answer session. If you should require any operator assistance during the conference call, please press star zero on the telephone keypad. As a reminder, this conference call is being recorded and will be available for replay later today on the company's website. I will now turn the call over to Caitlin Churchill, Investor Relations.
Thank you and good afternoon. I would like to remind everyone that comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. These statements speak as of today and will not be updated in the future if circumstances change. Please review the cautionary statements and risk factors contained in the company's earnings press release and recent filings with the SEC. During the call today, management will refer to certain non-GAAP financial measures. A reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was furnished to the SEC today and posted on the investor relations section of Leslie's website at ir.lesliespool.com. On the call today from Leslie's, Inc. is Michael Egeck, Chief Executive Officer, and Steve Weddell, Chief Financial Officer.
With that, I will turn the call over to Mike. Mike?
Thanks, Caitlin, and good afternoon, everyone. Thank you all for joining us. The format and cadence for this call will be a little different than our previous calls. The first thing to note is we have posted a brief deck on the Leslie's IR site to supplement our scripted comments, and we will be referring you to specific pages as we present. I'm gonna start by highlighting our key results and performance drivers for Q4 and the full year. Steve will then walk through our fourth quarter and full year financial results in detail, present our share repurchase program, and introduce our initial guidance for fiscal 2022. I'm going to walk through how we bridge our 2021 results to our 2022 guidance and explain why we believe we are uniquely set up to compete and win given the industry dynamics we see for the year.
With that, we'll get started. I'm pleased to report that our Q4 performance resulted in another record quarter and continued the strong results we have delivered throughout the year. Sales for the quarter were a record 409 million. Comp sales increased 16% for the quarter on a shifted calendar basis, and the two-year stack comp for the quarter was 40%. Gross profit for the quarter was a record $188 million, and margin rate expanded 190 basis points. Adjusted EBITDA for the quarter was a record $82 million. Moving to results for the full year, fiscal 2021 represented our 58th consecutive year of growth and produced all-time record sales, margin, and EBITDA. Sales for the year grew 21% to a record $1.343 billion.
Gross profit for the year grew 29% to a record 595 million, and gross margin rate improved 290 basis points. Adjusted EBITDA for the year grew 51% to a record 271 million, and EBITDA rate increased 380 basis points to 20%. In fiscal 2021, we generated 170 million in operating cash flow, up 64% from fiscal 2020, and ended the year with less than two turns of leverage. All this after increasing our investment in CapEx by 40% to support growth. Our commitment to disciplined capital allocation that drives total shareholder return, combined with our strong financial position and free cash flow generation and our confidence in our long-term growth prospects, are the drivers of the $300 million share buyback authorization we are pleased to announce today.
Our Q4 and full year results reflect the outstanding performance of our associates and vendor partners in managing constrained supply chains to meet strong consumer demand. This is also a testament to the organization's ability to manage a margin in the face of significant cost pressure and to continue to execute our growth initiatives at a high level while operating a direct-to-consumer business in the grip of a global pandemic. Our frontline associates have now been operating under COVID-19 protocols for more than 18 months. Their discipline, diligence, and dedication are a driving force in our performance. Now a few words on the industry. In 2021, the Leslie's business and the pool industry benefited from strong consumer demand. This demand was driven by the macro trends that accelerated with the onset of the pandemic, were further elevated by work from home, and which are showing no signs of slowing.
The numbers for pool construction and remodeling are a particularly good sign for us because when a pool is completed, our business of essential maintenance starts, and that annuity-like demand continues for the life of the pool. Against this background of robust demand, the competitive advantages derived from our integrated system of physical and digital assets working together with our strategic growth initiatives continue to win share. Our consumer file is showing strong, sustained growth. Total target file growth was 15% in the quarter and 18% for the full year. Q4 was our eighth straight quarter of double-digit file growth, driven by our digital marketing capabilities. We continue to achieve high ROI on our marketing spend and have increased our budget for 2022 by 30% to continue to drive this initiative.
Consumers are also responding well to our Leslie's Connect omni-channel capabilities, BOPUS, ship from store, ship to store, and BORIS. These capabilities allow us to utilize the inventory in our location network to effectively fulfill consumer orders in whatever manner they choose and to increase consumer retention. Leslie's Connect has enabled more than 30% of Leslie's digital orders since launching in February 2021. Our loyalty program, Leslie's Pool Perks, drove loyalty file growth of 14% in the quarter and 18% for the full year, as consumers continue to be drawn to the program's key benefits, a 5% rewards earn rate and free shipping. Our Pro initiatives are delivering solid results. The 10 converted and 3 new Pro locations we launched in 2021 continue to outperform, and we plan to convert 25 and build 5 new locations in 2022.
Our Pro affiliate program is scaling rapidly. In November, we passed 1,000+ Pro affiliate agreements, and we continue to sign up new affiliates daily. For the year, our Pro affiliate partner sales increased 86%. The new and converted Pro locations, our expanding Pro affiliate program, and our dedicated Pro site helped grow our total Pro business, which we now define as all of our non-residential B2B business, 42% in the quarter and 44% for the full year. Our Pro business now accounts for about 15% of our total sales, but remains a small percentage of the approximately $2.4 billion Pro market. Moving to M&A. For the year, we completed 3 acquisitions that added 8 locations and expanded our operations into a 38-state.
In October, the first month of our fiscal 2022, we closed on the acquisition of B&L Pools, which operates 7 locations in the Greater Phoenix area. As we execute our integration playbook, the B&L locations are being rebranded as Leslie's. Their assortments are transitioning to the Leslie's model, and we are installing our proprietary AccuBlue water testing system. We continue to see a wealth of acquisition opportunities in the pool and spa industry, and we have staffed up to accelerate our ability to acquire and integrate businesses in 2022. With regard to residential white space, we added 16 new locations in 2021, including residential, Pro, and acquired. We ended the year with 952 total locations.
With regard to AccuBlue Home, we are encouraged that the initial production of version 1.0 sold out quickly in Q4 and that version 2.0 has completed the prototyping stage. However, we are experiencing delivery delays in key components, specifically microchips, which are impacting manufacturing. The number of devices we will be able to produce for this pool season is uncertain. Therefore, at this time, we are not planning any significant sales for this initiative in 2022. With regard to corporate governance, we published our inaugural ESG report in the quarter and have started work on our 2021 report.
I'm pleased to say that as part of our ESG efforts, and in recognition of the contributions of our frontline associates, we have raised our minimum starting wage for Leslie's full-time associates to $15 an hour, effective December 26, 2021, and we have instituted a stock grant program for our store managers. Also of note, our assortment of eco products now numbers more than 1,800, and sales for these products grew more than 40% in 2021. Now I'd like you to refer to the deck that we posted to the Leslie's IR site. On page 6, we bridge our 2021 sales growth in two different ways and also isolate the impact of some specific sales drivers. In the first bridge, we estimate the impact of total industry growth from new pool builds to be 2%.
The math we use is 110,000 new in-ground pools across a base of 5.5 million. We estimate that retail price inflation for the year was approximately 8%. The balance of the bridge, 11%, is the sales growth impact driven by our strategic growth initiatives. The second bridge illustrates the sales growth impact from our residential pool, Pro pool, and residential hot tub consumer groups. As you can see, we had good growth across all three groups, including our core residential pool consumer. We have fielded a number of questions in previous calls and meetings with regard to the impact of Tri-Chlor, above ground pools, and hot tubs on our total sales growth. On page six, we have broken out the impact for each by both price and volume.
I will also add that all three categories experienced acute supply chain disruptions that resulted in unmet demand for 2021. We could have sold more. Moving to page 7, we isolate the sales growth impact from each of our six strategic growth initiatives. As you'll recall from our earlier presentations, we guided that over time, each of these initiatives should contribute 100-300 basis points of growth per year. Clearly, our marketing capabilities resulted in an outsized impact from growing our consumer file. Our Pro initiative also outperformed, while Deepen Relationships, M&A, and Residential White Space performed within the range we had projected. AccuBlue Home had a-
Pardon the interruption. This is the operator. Please hang on as we reconnect Michael Egeck's line. Michael Egeck, your line is now back live.
Thank you. Sorry about that, everyone. I'm not sure why the line dropped. I'm not exactly clear where I stopped, but I'm gonna pick up with page seven and my comments on each of the strategic growth initiatives. Clearly, our marketing capabilities resulted in an outsized impact from growing our consumer file. Our pro initiative also outperformed, while deepen relationships, M&A, and residential white space performed within the range we had projected. AccuBlue Home had a successful launch that has not yet contributed meaningfully to sales. We are very pleased with how the initiatives and the teams leading them performed in 2021. Now I will turn it over to Steve to share more detail on our financial results, our $300 million share repurchase program, and our 2022 guidance. Steve.
Thank you, Mike, and good afternoon, everyone. As you can see from our earnings release, we reported record results for both the fourth quarter and full year of fiscal 2021. We're grateful for the contributions of our entire team as they continue to execute at a high level in the current environment. Before I get started, I'd like to share a few highlights. Momentum continued throughout the fourth quarter as we generated a calendar comp on a two-year stack basis of 40% compared to our prior guidance of the low 30s. We again beat guidance across the board and finished the year with sales growth of 21%, gross margin improvement of 290 basis points, and adjusted EBITDA growth of 50%, and we ended the year with cash of $345 million.
We also initiated guidance for fiscal 2022, which reflects double-digit sales and adjusted EBITDA growth, gross margin expansion, and earnings growth in the mid- to high teens. This is consistent with or better than our long-term growth algorithm. Finally, we announced today that we are introducing our first share repurchase program, which includes an authorization for up to $300 million. Our business generates robust cash flows, and even after considering an increase in investment in talent, capital expenditures, and M&A for fiscal 2022, we have excess cash to deploy towards share repurchases. I'll discuss our capital allocation priorities in more detail, but the takeaway from this action is that it reflects our confidence in our long-term growth prospects.
Today, I'll review our fourth quarter of fiscal 2021 performance, our performance for the full year of fiscal 2021, our guidance for fiscal 2022, and our capital allocation priorities. Before I turn to financial results for the fourth quarter, following is a quick reminder on the calendar shifts, which is consistent with prior quarter disclosures. In fiscal 2020, the 53rd week added approximately $18 million in sales and three million in adjusted EBITDA. Also, as a result of fiscal 2020 having 53 weeks, there were calendar shifts that impact our quarterly comparisons on a year-over-year basis in fiscal 2021. In the fourth quarter of fiscal 2021, we replaced a higher volume week at the end of June with a lower volume week at the end of September.
The combination of the 53rd week and the calendar shift negatively impacted fourth quarter comparisons to the prior year by approximately 38 million for sales, by approximately $11 million for adjusted EBITDA. I'll discuss the impact of these items on our fourth quarter and full year results as I review comparisons to prior year performance. Fourth quarter results. Our fourth quarter this year included 13 weeks and ended October 2, 2021. Total reported sales for the 13-week period increased 6.8% from the fourth quarter of fiscal 2020, which included 14 weeks. Our comparable sales growth on a reported or unshifted basis increased 10%. Using a realigned period for 2020 for comparability, our comparable sales growth on a shifted basis for the fourth quarter of 2021 increased 16.3%.
This increase is on top of comparable sales growth of 23.3% in the fourth quarter of fiscal 2020, and represents comparable sales growth on a two-year stack basis of 39.6%. We generated strong results across consumer types and continued to see strong performance in the core sanitizer and equipment product categories during the quarter. Retail price inflation remained elevated and primarily related to chemical products, channel management by major equipment manufacturers, higher input costs, and promotion management. Gross profit increased 11.3%, and gross margin rate increased by 190 basis points from 46.0%, from 44.1% in the prior year, primarily due to product margin improvements across our businesses and occupancy leverage, and partially offset by business mix.
SG&A increased 21.6%, driven primarily by our sales increase and investments to support our growth. Drivers of the increase over the prior year included higher equity-based compensation, executive transition costs, compensation accruals, and other one-time or non-comparable costs, which include public company costs. These increases were partially offset by lower sponsor management fees. Adjusted EBITDA increased by 2.4% or $1.9 million to 82.0 million compared to 80.1 million in the fourth quarter of fiscal 2020. After factoring in the fifty-third week and the calendar shift, adjusted EBITDA increased by 18.3% or $12.7 million when compared to fiscal 2020. Adjusted EBITDA on a reported basis as a percentage of sales was 20.0% compared to 20.9% in the prior year period.
Adjusted net income increased by 14.0% or $6.2 million to 50.5 million compared to 44.3 million in the prior year period. Now I'll turn to full year results. Total sales for the 52-week period increased 20.7% to $1.3 billion compared to $1.1 billion in the prior year. Our comparable sales growth on a reported or unshifted basis increased 21.5%. Using a realigned period in 2020 for comparability, our comparable sales growth on a shifted basis for fiscal 2021 increased 21.2%. This increase is on top of comparable sales growth of 18.0% in the prior year and represents comparable sales growth on a two-year stack basis of 39.1%.
Gross profit increased 29.2% to 595.2 million, compared to 460.7 million in the prior year. Gross margin rate increased by 290 basis points to 44.3%, primarily due to product margin improvements and occupancy leverage, and partially offset by business mix. SG&A increased 22.8% to 386.1 million, compared to 314.3 million in fiscal 2020. As we disclosed in our earnings release, the net impact of changes in equity-based compensation, costs related to equity offerings, executive transition and other costs, and the change in management fees increased SG&A by approximately $29 million in fiscal 2021 when compared to the prior year.
Excluding these items that are not indicative of our core operating performance, SG&A increased by 43 million or 14%. As a percentage of sales, SG&A decreased to 26.0% in fiscal 2021 compared to 27.5% in the prior year, a decrease of 150 basis points. Adjusted EBITDA increased by 48.0%- 270.6 million, and adjusted EBITDA as a percentage of sales increased 380 basis points to 20.2%. After factoring in the 53rd week, adjusted EBITDA increased by 50.6% or 90.9 million when compared to fiscal 2020. Adjusted diluted net income per share doubled to 0.85 per share compared to 0.42 per share in the prior year.
Before I move on, I'll comment on the impact of Tri-Chlor, our primary chlorine-based sanitizer. As shown on slide six of the presentation materials, Tri-Chlor sales grew by $70 million in fiscal 2021, with approximately 60% driven by price and 40% driven by volume. We had a more consistent supply of product than others in the industry, and then we leveraged our inventory position to better serve new and existing customers. Also, it's important to note that as a result of our efforts to procure and convert more pounds of Tri-Chlor during the year, we did experience an increase in costs related to Tri-Chlor. These cost increases were a key driver of the price component of our Tri-Chlor sales growth in fiscal 2021. Moving to the balance sheet.
We finished fiscal 2021 with cash and cash equivalents of 345.1 million, compared to 157.1 million at the end of fiscal 2020, an increase of 188.0 million. We ended the year with inventory of 198.8 million, up 33% compared to 149.0 million at the end of the prior year. We expect inventory conditions in the industry to remain tight throughout fiscal 2022, particularly for chemicals and equipment.
We have an always-on procurement strategy at Leslie's, and our team continues to proactively work with our vendor partners to manage the flow of inventory as we continue to identify opportunities to strategically invest in inventory to meet heightened consumer demand. As a result, we anticipate our inventory balances to be higher throughout the coming year. With regard to debt, at the end of fiscal 2021, total funded debt was 806.0 million, compared to 1.2 billion at the end of fiscal 2020. The $395 million dollar reduction was due to the repayment of our senior unsecured notes in connection with our IPO and quarterly amortization payments on our outstanding term loan. As of fiscal 2021, funded debt divided by adjusted EBITDA totaled 3.0x, and net debt divided by adjusted EBITDA totaled 1.7x.
During the fourth quarter, our debt rating was upgraded by S&P to BB- from B+, and by Moody's to Ba3 from B1. Now let me turn to guidance for fiscal 2022. Before I get to the guidance figures, I wanna remind everyone of the natural seasonality within our business. Our primary selling season occurs during our fiscal third and fourth quarters, which span April through September. In 2021, the first half of the fiscal year accounted for approximately 25% of our annual sales, while the third quarter represented approximately 45% and the fourth quarter represented approximately 30%. We will continue to invest in our business throughout the year, including in operating expenses, working capital, and capital expenditures related to our growth initiatives.
While these investments drive performance during our primary selling season, they reduce our earnings and cash flow during the first half of our fiscal year. Fiscal 2022 ends on October 1, 2022, and includes 52 weeks. For fiscal 2022, we're providing the following annual guidance. We expect sales of 1,475 million-1,500 million, representing an increase of 10%-12% compared to fiscal 2021. This growth rate compares to our long-term growth algorithm of mid- to high-single digits. Strong industry fundamentals, expected inflation, and momentum behind our growth initiatives support our sales guidance. Today, we also provided guidance for gross profit. We expect gross profit of 655 million-665 million, which implies a small improvement to gross margins when compared to fiscal 2021.
This compares to our long-term growth algorithm of flat to positive 25 basis points per year and follows a 290 basis point improvement in gross margins in fiscal 2021. We continue to see opportunities to improve margins in each of our businesses. As a result of our structural advantages, our relationships with leading industry suppliers, our proprietary brand strategies, and our vertical integration in both manufacturing and distribution. We continue to expect some headwind on margins from business mix related to higher growth in our pro pool business. We also expect inflation in the mid-single digits. We will continue to pass those cost increases through to consumers. We expect adjusted EBITDA of 295 million-305 million, representing an increase of 9%-13% compared to fiscal 2021.
This growth rate compares to our long-term growth algorithm of low double digits, and it's important to note that we will continue to execute against opportunities to leverage our operating costs and reinvest to drive growth in each of our businesses. We expect net income of 170 million-180 million and adjusted net income of 180 million-190 million. We expect diluted adjusted earnings per share of 0.94-1.00, representing an increase of 11%-18% compared to fiscal 2021. This compares to our long-term growth algorithm of mid- to high-teens earnings growth. We estimate a diluted share count of 190 million-192 million shares, and this range incorporates a reduction of approximately three million related to share repurchases.
Finally, I'd like to provide an update on capital allocation. Our capital allocation priorities are as follows. Our first priority is capital structure, and we finished the year in a solid position. We had net debt divided by adjusted EBITDA of 1.7 times. We had 345 million of cash on hand and a $200 million revolving credit facility. Also, our first debt maturity is our revolver in 2025. Our second priority is to invest in growth, and this has two parts. The first is capital expenditures. In fiscal 2022, we expect to increase our level of investment by approximately 50% over fiscal 2021 levels. Our investments will focus on new residential and pro locations, distribution infrastructure, and merchandising and information technology projects. The second part is related to M&A.
We plan to continue to focus on acquiring high quality, market-leading businesses to better serve new and existing consumer types. We have a robust pipeline of opportunities, and our sales guidance has approximately 30 million in sales attributed to M&A. Our final priority is return of excess cash to shareholders. We're in a unique position, a high growth company with strong cash flow generation and modest maintenance capital requirements. Today, we announced our first share repurchase program as our board of directors approved a $300 million share repurchase authorization. This action is consistent with our balanced and disciplined approach to capital allocation, our commitment to driving shareholder value, and demonstrates our confidence in our long-term growth prospects. We expect to opportunistically repurchase shares when we believe they are trading at a discount to intrinsic value.
In summary, the full year and fourth quarter of fiscal 2021 were record periods, and we drove strong financial results throughout our P&L. Our entire organization continues to execute against our key growth initiatives. With the great partnership of our long-term vendors, we're successfully navigating the tight supply chain in this environment of heightened consumer demand. We will continue our relentless focus on enhancing our consumers' experience and executing our initiatives to continue to drive growth and market share gains. With that, I'll hand it back over to Mike. Thank you.
Thanks, Steve. Let's go to page 12 of the deck. As we think about our 2022 performance, the first point I wanna make is that every piece of data that we have tells us that the macro trends driving consumer demand in the pool industry should continue into 2022 and for the next several years. Pool build and hot tub backlogs driven by ongoing investment in the home and backyard, migration to the Sun Belt, the desire for a healthy outdoor lifestyle, a heightened sense of safety and sanitization, and hybrid and full-time work from home schedules. All these macro trends support a forecast for healthy ongoing consumer demand. Against this favorable industry backdrop, we are confident that we can grow the Leslie's business faster than the industry across our consumer types and across our growth initiatives. On page 13 is the bridge to our 2022 guidance.
We are expecting new pool builds to contribute 2% to our 2022 growth. We are forecasting inflation at 5%, and we are expecting our strategic growth initiatives to drive an additional 5% of sales growth. We also expect strong growth to continue across all three of our consumer types, residential pool, pro pool, and residential hot tub. Moving to page 14. We are forecasting that each of our strategic growth initiatives, with the exception of AccuBlue Home, will drive 100-300 basis points of total sales growth, which is in line with our long-term view. Page 15 of the deck lays out the primary challenges facing the industry for the 2022 pool season, and importantly, how Leslie's is positioned to mitigate and/or benefit from each of them.
Your takeaway should be that we feel confident that we are well-positioned to compete and win in this environment. Then on page sixteen, we would be remiss in not taking this opportunity to reinforce the Leslie's value proposition. There are three key pillars that make Leslie's unique and that highlight our compelling competitive position and growth prospects. Number one, we operate in one of the most advantaged consumer products industries. It's large, over 11 billion. It has annuity-like demand because once a pool is built, it has to be maintained. It has predictable growth. The installed pool base has now grown every year for 51 years.
Number two, we have built a consumer-centric, integrated ecosystem of physical and digital assets that is unmatched in scale and reach, and that allows us to provide total pool and spa care solutions to all consumers, whatever their needs and wherever, whenever, and however they want to engage with us. None of our competitors have that capability. Number three, despite being the largest direct-to-consumer brand in the industry, we have significant white space opportunities across all the consumer types we serve and all the channels in which we operate. We have new capabilities and talent to address these opportunities and multiple early-stage strategic growth initiatives. Finally, we have a pipeline of disruptive information that only Leslie's can bring to the pool and spa consumer.
To wrap up, we are pleased with our record results for the quarter and year, and we're encouraged by the durable demand we are seeing from our consumers, the strength of the macro industry trends supporting that demand, and the momentum we have across our strategic growth initiatives. In a unique and advantaged industry, Leslie's is uniquely positioned and advantaged to win. We hope that the presentation and expanded data sets for this call help make that point. Finally, our confidence in 2022 is expressed in our guidance at the high end of our long-term growth algorithm and in our share repurchase program. We look forward to sharing our results throughout the year. With that, I will hand it back to the operator for Q&A.
Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star and two. A friendly reminder for questioners to please limit yourself to one question, and if you have a follow-up, please rejoin the queue. The first question comes from Ryan Merkel with William Blair. Please go ahead.
Hey, guys. Thanks for taking the questions and all the details in the deck. Very helpful. I guess, Mike, first off, last quarter, you mentioned select stock-outs of chlorine tabs and equipment. I guess a two-part question, did that impact the current quarter? Then how are you feeling about inventory of key items as you head into next season? I think we're all pretty interested in chlorine tabs, sort of the price and volume commitment. How are you feeling about that?
Yeah. If you'll remember, Ryan, you know, we quoted a comp for tabs in Q3 of 100%. Then we said that we wouldn't be able to maintain that in Q4 given the scarcity of supply. We did see a deceleration in that comp. The comp on chlorine tabs for Q4 was 38%. A deceleration based completely on supply. Despite that, we're very pleased with the 16% comp given the lower rate of sales in chlorine tabs. With regard to next year, you know, we are. As Steve mentioned, we have a always-on procurement strategy for key items. We have definitively procured more Tri-Chlor for next year. It is rolling from our manufacturers and our tolling operations, and we should be at above last year's levels in the next week or so.
With regard to equipment, I'm gonna say that our equipment partners, they're doing a great job in getting their supply chains back to speed. We feel very good with regard to our position in key equipment SKUs, and also in Tri-Chlor tabs. Now, all that being said, demand also remains very strong. There's not a lot of slack in supply chains yet, but we are in better shape and we'll be in better shape for the pool season than we were in Q4.
Got it. That's great to hear. My second question on the 2022 outlook. Your sales guide is a little bit above your long-term average, but EBITDA growth is more in line. Is there anything to call out there why you wouldn't see a little bit more fall through on the higher sales?
Yeah, it has to do with our growth investments. Steve might expound on this a little bit more, but you know, we're in a position where we're generating a lot of cash. We have the ability to invest in the business. Those investments are paying off. As we look into 2022, we wanna make sure that we're taking the opportunities available to us to set us up not only for growth and profitability in 2022, but also on a go-forward basis.
Yeah, that's exactly right. I mean, we manage our expenses very carefully, Ryan, and we have to balance the leverage opportunities against our investment opportunities to drive growth. That's what you're seeing in 2022. Our recognition of momentum against the growth initiatives, we have an opportunity to lean in. We're gonna do just that in 2022.
All right. Makes sense. Thanks. I'll pass it on.
Thanks, Ryan.
Thanks, Ryan.
The next question comes from Simeon Gutman with Morgan Stanley. Please go ahead.
Hey, guys. Thanks for the time. This is actually Hannah Pittock on for Simeon. First, a general question on the competitive landscape. It feels like the industry is consolidating at a somewhat accelerated pace. Is that what you're seeing? Can you comment at all on the M&A pipeline?
Yeah. There's a fair amount of activity in M&A, I would say. I'm not sure if it's accelerating. We're certainly looking to accelerate our action in the space because it remains still really highly fragmented. As we've quoted before, 8,000 independent specialty retailers out there are actually the market leaders, when combined, in the space with just over, I would say, 50%-55% share. Lots of opportunity, some acceleration, and for us, we'll be looking to accelerate more.
Makes sense. Maybe a quick follow-up. Could you walk through the drivers that got you to the 2% sales growth from pro pools next year, given how much growth you saw this year and where it's kinda currently sitting with sales penetration? Could that be conservative potentially?
Well, look, every time we quote an initial guide, it's gonna be a range. One thing we're committed to is making sure that we deliver on our guidance. That's a long way of saying that we believe there's some conservatism in there, but we also believe it's prudent given we're still operating in a global pandemic, and there are still isolated challenges with the supply chains.
Makes sense. Thank you.
Before we proceed with the next question, a friendly reminder to all questioners to please limit yourselves to one question. If you have follow-up, please rejoin the queue. The next question comes from Steven Forbes with Guggenheim Securities. Please go ahead.
Good evening. I wanted to focus on the outlook for unit growth. If I add up the number of locations, M&A, pro, residential targets, I think it's per slide 14 here, I think you're guiding to 50 net new locations next year or mid-single digit unit growth. I guess, is that correct? Then any color on the cadence of openings and then also how the pipeline for each one of those sort of opportunities is expected to sort of evolve as we look out here, maybe over a multi-year time period.
Yeah. Steven, I'll start with that, and Steve may add on. You know, we've said before we believe there is an opportunity for stores in 200 underserved pro markets. In the residential space, 700. The numbers you're adding up for total new locations is right in the range that we are thinking. There's a lot of opportunity out there. In terms of pacing, what's important for us is to get new locations that we plan in a year open for the pool season. We really target to get those new locations up and running in the March, April timeframe. That being said, you know, the best time to get retail space is when it's available. Also an always on strategy in terms of looking for good locations.
In general, we really look to get set up for the season in the March, April timeframe.
Yeah. The only thing I would add is you think about for pro store conversions, obviously best time to do that is off-season. Right now is a great time to be completing those. From an M&A perspective, it's opportunistic, right? As we get opportunities to close on, we'll do so and not necessarily have a point in time at which we will try to close them by. As Mike talked about for new stores, typically do open those in March or April of each year to hit the season. Obviously we're looking at long-term locations across the company to serve consumers.
Thank you.
The next question comes from Garik Shmois with Loop Capital. Please go ahead.
Hey, thanks. Thanks for taking my question, and thanks for all the detail. The 5% retail inflation outlook, just curious if that assumes new pricing in fiscal 2022, or is it really a function of carrying over pricing that you secured last year?
Yeah, Garik Shmois, I'm gonna say it's a combination of both. Clearly it's a forecast. You know, I'll note that it's not a cost forecast, it's a retail price forecast. You know, like anything we're gonna forecast, we're trying to be as accurate as we can, but also certainly a certain amount of conservatism in how we think about pricing going forward. I mean, there's a lot of inflation currently in the market. We did see a slight slowdown in retail price inflation from Q3 into Q4, and 5% is how we're thinking about next year.
Great. Thank you.
The next question comes from Liz Suzuki with Bank of America. Please go ahead.
Great. Thank you. I was hoping you could actually expand on the competitive environment a little bit in residential pool. There's been some recent M&A of one of your larger commercial competitors acquiring a residential pool chain. I mean, do their markets overlap with yours, and does this present any potential margin pressure? Are some of those 35 locations you expect to add from bolt-on acquisitions likely to be more on the residential side or the pro side?
Yeah. Liz, good question. Yeah, we're, you know, aware of the acquisition that you're talking about. We're quite familiar with both companies. The acquired company, really good guys, strong operators. It's a regional business in Florida, and it has a heavy distribution component, which I think makes sense for the acquirer. Competition is all good. Our business in that region is quite strong. I'm gonna assume theirs is as well. We have not seen any additional franchising activity or any unusual pricing activity since the announcement of the deal. In terms of new locations, we're gonna focus on about five pro locations and at least 10 residential locations for 2022.
Yeah. That's for new store openings. From an M&A perspective, I think the focus is across the board, right? We'll look at residential pool stores, we'll look at hot tubs, we'll look at pro opportunities as well. As Mike talked about, the biggest opportunity out there is the 8,000 you know, single store operators, if you will, or mom and pop. Certainly a lot of opportunities in the pipeline in that area.
Great. Thank you.
The next question comes from Jonathan Matuszewski with Jefferies. Please go ahead.
Great. Hey, Mike, hi there. Great quarter and helpful supplemental presentation. My question's a two-parter. Is there a specific assumption embedded in your 2022 sales guidance regarding pool utilization, whether it's flat or up or down relative to 2021? You know, another factor that's gonna drive chemical sales is this growing awareness, you know, regarding cleanliness and recognition that backyard pools have been, you know, historically under-sanitized. Is there a way, any data you're seeing that can frame, you know, what percentage of pools are still under-sanitized, even after the last two years? Thanks.
Yeah. Thanks, Jonathan. I'll take a crack at the first part of that question, and then we can talk about data on under-sanitized pools. The assumption in our sales guidance is that utilization of pools in 2022 by pro customers, meaning the commercial side, and also residential, is that it should be similar to 2021. Now we do that because there's a lot of unknowns around the pandemic, but we do feel that people use their pools more in both 2020 and 2021. We were really glad to see that in 2021. I think it speaks to the stickiness of the new behavior as people invest in their homes and their backyards and in hot tubs and in pools. We're modeling flat.
We think that might be a little conservative, but we definitely don't see it reducing. Steve, we had some data on under-sanitization. I cannot recall it off the top of my head. I'm not sure if you do.
Yeah. It was more along the commercial lines and a significant level of under-sanitization. One of the opportunities we talked to is getting water tested more frequently, right? Doing a consistent 10-point test. The AccuBlue in our stores, the opportunity with AccuBlue Home is getting that water tested more frequently, because we do believe that many bodies of water are under-sanitized. It's an education process that our store associates go through with consumers on a regular basis. It's the opportunity to kind of sell that in that total solution. No specific metrics on kind of a quarterly or annual basis that I'm aware of.
Gotcha. Thanks very much. Helpful.
The next question comes from Andrew Carter with Stifel. Please go ahead.
Hey, thanks. Good evening. I wanna just come back to the gross margin guidance because it seems relatively muted in terms of where you stand. I mean, you're going to have pricing essentially matching what your inflation is, which should be a benefit. I would assume the private label program would gain additional penetration next year. If you don't mind, also could you update us where the private label penetration is overall as well as for chemicals? Thanks.
I'll start with the second part of that in terms of private label penetration. You know, we ended 2020 at about 55%. We were looking for growth of, you know, 150-200 basis points a year, maybe as much as 300 based on our assortment planning. I will tell you in 2021, we did not get there in terms of that kind of lift for the year. That was really driven by a very strong equipment business where our actual private label penetration is lower. Still definitely on track for our long-term goal there, which is to get up over 70%, by say 2025. Feel good about that. This year was a little skewed by equipment sales, and particularly by the situation in Texas.
Steve, you wanna talk about margins?
Yeah, it's a great question on margins. Again, the equation that we talk about from a long-term algorithm has a few components, right? Structurally, we have unique advantages in our industry. The size of the POs that we write, the relationships that we have with our vendor partners, number one. Our ability to grow as Mike just talked about from a proprietary brand strategy. Then vertical integration for manufacturing and distribution. When you think about what we saw in 2021, we see some continuation of that into 2022, which is we will find opportunities to increase rate kind of across our product categories and across our businesses. There may be some margin headwind from a Tri-Chlor perspective as we procure more pounds.
Some of those pounds come at higher prices. Those higher priced pounds are still profitable from a dollar perspective, but may have a rate impact. That will be a headwind. Overall, we believe rate across the business will be up again. We'll have occupancy leverage, which should be to our benefit. The final component is growth in businesses like our Pro Pool business that will be a business mix headwind. Overall, you know, pleased to be in a position to have guided for gross margin positive and inside our long-term growth algorithm despite the fact that we were up 290 basis points last year.
Thanks. I'll pass it on.
The next question comes from David Bellinger with Wolfe Research. Please go ahead.
Hey, guys. Thanks for taking the question. It's in regard to the 300 million buyback program announced tonight. You're clearly seeing continued momentum in the business, much improved cash flows, but you were also dealing with all these supply chain issues, concerns around inventories, and also you talked about a much greater potential for acquisitions into next year. Just why now in terms of pulling the trigger on repurchases versus, you know, building inventories or growing the customer base further? And do you expect to be active in the market immediately in Q1 just given where shares are trading today?
Yeah. I think the way to think about what you described as trade-offs is to reiterate Steve's point. You know, Leslie's is a very unique business in that we're both a growth business and we generate really significant and strong cash flow. We're in a very fortunate position not having to make trade-offs between investing in growth or potentially returning money to shareholders. That's the reason for the share authorization from the board. When we think about how it'll be deployed, as Steve said, we're gonna be opportunistic. You know, if the question is, do you think this stock is currently undervalued? I would say yes, we do. We'll be opportunistic in how we deploy those share repurchase program by looking at the opportunities over time.
We're not looking to do anything within any specific timeframe. Other than to do it when it has the best return for us.
Great. Thanks for that. Appreciate it.
The next question comes from Rudy Yang with Berenberg Capital Markets. Please go ahead.
Hey, guys. Thanks for taking my question. Just regarding cost inflation for next year and if it possibly grows higher than you anticipated, can you just comment on how much you believe you can continue to pass on costs before witnessing a reduction in demand volumes, just especially given that your competitors typically offer competitive prices for similar products?
Yeah. Rudy, it's a good question. You know, as we've said before, the pool industry has a long history of passing costs through. That continued in 2021, and you could see it in our margin performance. We believe that is still gonna be the case into 2022. We haven't seen anything that would tell us differently. But yeah, there's some, you know, pretty strong price increases in the market currently. As you can imagine, we watch it every day, but currently we're not seeing any resistance.
The next question comes from Peter Keith with Piper Sandler. Please go ahead.
Hey, good afternoon. It's Bobby Friedner on for Peter. Thanks for taking my questions. First just wanted to circle back up on gross margin. Steve, you said you expect it to be up for the full year. Just wondering if you'd give any color as to the shape of gross margin expansion as you progress through the year. You know, should the year-on-year gains be kind of uniform through the year, or is there any first half, second half kind of nuance?
Yeah, it's a good question. I think when you think about we do have seasonality impacts from a margin perspective, as you think about just the leverage on fixed costs in the first half of the year versus the back half. Beyond that, I think the guidance is on an annual basis and don't have anything further to define increases on a quarter-to-quarter basis.
Okay. That makes sense. There's one other separately. Looking at, you know, your digital marketing strategies, you know, the company has placed increased focus on this in the past months. Just wondering if you could give any updates on this front and are there any related KPIs to call out that are trending in the right direction?
I'm not sure, Peter, we wanna say a lot more than we have. Obviously a very competitive situation, but as I did mention in my remarks, you know, we continue to see really favorable ROIs on our digital spend. Favorable to the point that we'll wanna continue to invest as long as we can maintain those. We've set ourselves up to do that in 2022 by taking our marketing budget, and specifically it's the digital marketing budget, which is predominant media we use, up 30% for the year.
Okay, sounds good. Thanks, Mike.
Yeah.
The next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.
Thank you. Good afternoon, everyone. As you think about AccuBlue and the home version, I think, which launched in June of 2021, nearly a third of the active members are new customers. Can you broadly talk about the initial response to that version one? Does it increase your enthusiasm for when you launch number two, which we understand is delayed by equipment shortages? What's your expectation there? Thank you.
Yeah, Dana, thanks for this question. We're very encouraged by the response to AccuBlue Home version one. As you said, you know, as we put in the deck, you know, about a third of the customers for it are new. Two-thirds are obviously already Leslie's customers. We're just seeing a really nice response. It's a subscription model, as you know, and it's been very sticky to date. Very encouraged by that. At the same time, you know, we're leaning into these first few thousand customers. We've got focus groups in flight. We have a real nice feedback mechanism from the users, and we're continuing to learn and refine both how consumers use the device and how we might remove any pain points that they have in using it.
You know, one of the big updates we've done recently is to get the pool score on the app that wasn't available in the first release, and now we've updated that app for all the current users. All good there. I'm really encouraged by version 2.0 and equally disappointed in the challenges we're having around securing components. There's nothing in version one, nothing in version two that would quell our enthusiasm for the potential. We said in an earlier call, we didn't think supply chain component delays would impact us, and we were wrong. Yeah, that's disappointing. Our enthusiasm for the long-term potential of AccuBlue Home is very, very high.
One more, any comments on the start of this first quarter, anything to keep in mind in framing fiscal 2022? Thank you.
Yeah. Thanks, Dana. Not gonna comment on performance in the current quarter. We've got a few weeks left in the quarter, and we'll report in the coming months.
Thank you.
The next question comes from Peter Benedict with Baird. Please go ahead.
Hey, guys, thanks. Good job on that deck. A lot of good information. Just as we think about 2022 and the outlook, obviously positive on the top line and with profits. As we think about maybe the cadence, I mean, last year in the second quarter, you did have the Texas storm. Steve, I know you're not gonna necessarily get into specific quarters, but how should we be thinking about that? It's a low volume quarter. That was a big event. Just to level set things, assuming there'd be some softer, you know, growth rates in that quarter. Just wanna give you an opportunity to address that if you want.
Sure. We talked about it Q2 that we thought Texas was approximately a $10 million impact overall. When you think about the overall year at a $230 million increase in sales, fairly small, right? I'm comparing Q2 to the total year. You know, again, our first half from a EBITDA perspective, we've talked about historically, you know, being roughly kind of flat, breakeven, if you will. Profits really come in kinda the second half of the fiscal year. Not gonna provide any further detail than that typical seasonality that we see. I don't see any reason why there'd be material deviation on a quarter-over-quarter basis.
Gotcha. Okay. Thank you very much.
This concludes the question and answer session. I would like to turn the conference back over to Michael Egeck for any closing remarks.
Thank you, operator, and thank you all for joining us today on our Q4 earnings call. Be safe and find time to enjoy your family and friends this holiday season. If you can, preferably do it with a pool involved. Thanks very much. Bye.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.