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1. Company Snapshot

1.a. Company Description

Sally Beauty Holdings, Inc.operates as a specialty retailer and distributor of professional beauty supplies.The company operates through two segments, Sally Beauty Supply and Beauty Systems Group.


The Sally Beauty Supply segment offers beauty products, including hair color and care products, skin and nail care products, styling tools, and other beauty products for retail customers, salons, and salon professionals.This segment also provides products under third-party brands, such as Wella, Clairol, OPI, Conair, and L'Oreal, as well as exclusive-label brand merchandise.The Beauty Systems Group segment offers professional beauty products, such as hair color and care products, skin and nail care products, styling tools, and other beauty items directly to salons and salon professionals through its professional-only stores, e-commerce platforms, and sales force, as well as through franchised stores under the Armstrong McCall store name.


This segment also sells products under third-party brands, such as Paul Mitchell, Wella, Matrix, Schwarzkopf, Kenra, Goldwell, Joico, and Olaplex.As of September 30, 2021, the company operated 4,777 stores, including 134 franchised units in the United States, Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom, Ireland, Belgium, France, the Netherlands, Spain, and Germany.It also distributes its products through full-service/exclusive distributors, open-line distributors, direct sales, and mega-salon stores.


Sally Beauty Holdings, Inc.was founded in 1964 and is headquartered in Denton, Texas.

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1.b. Last Insights on SBH

Negative drivers behind Sally Beauty Holdings' recent stock performance include declining customer traffic, which remains a concern for the company despite its customer-centric initiatives. Additionally, the company's focus on improving gross margins through lower distribution and freight costs may not be enough to offset the decline in customer traffic. Furthermore, the company's reliance on key metrics such as comparable sales and gross profit growth may be impacted by the current market conditions.

1.c. Company Highlights

2. Strong Q1 Results Drive Growth Expectations

The company reported a robust first quarter with total sales of $943 million, reflecting a 0.6% increase, and adjusted diluted earnings per share (EPS) of $0.48, exceeding guidance and growing 12% year-over-year. Gross margins expanded 50 basis points to 51.3%, driven by the benefits of the Fuel for Growth program. As Marlo Cormier noted, "We delivered healthy gross profit in the quarter, with adjusted gross margin expanding 50 basis points to 51.3% primarily attributable to higher product margin in both business segments." The company's ability to navigate macro volatility and rebound from the government shutdown was evident in its strong cash flow from operations of $93 million.

Publication Date: Feb -24

📋 Highlights
  • Q1 Total Sales:: Achieved $943 million, with 0.6% growth driven by 90 bps favorable foreign currency impact.
  • Adjusted EPS Growth:: Adjusted diluted EPS rose 12% to $0.48, exceeding guidance and prior-year results.
  • Gross Margin Expansion:: Adjusted gross margin expanded 50 bps to 51.3%, driven by Fuel for Growth program benefits.
  • Cash Flow Deployment:: Generated $93 million in operating cash flow, used for $20M debt paydown and $21M share repurchases.
  • Sally Core Color Growth:: Sally’s color category grew 8% YoY, supported by the "Save While You Skip the Salon" campaign.

Segment Performance

The Sally segment saw strengthened performance in December as the government reopened, with the core color category being a standout performer, achieving year-over-year growth of 8%. The company's initiatives, such as the Save While You Skip the Salon campaign, resonated with customers. BSG customers also recovered nicely in December after a slow period due to the government shutdown.

Guidance and Outlook

The company is raising the low end of its EPS guidance for fiscal 2026 and reiterating the rest of its full-year guidance. For Q2, the company expects adjusted diluted EPS to be in the range of $0.39 to $0.42 per share, with a comp growth expectation of 0.5% to 1.5%. The underlying momentum in Sally initiatives and continued strength in color on the BSG side are expected to drive growth.

New Categories and Initiatives

The company is making progress in new categories, including fragrance, which is expected to be in 2,000 stores shortly. The customer response to the high-end value offering has been positive. The Sally Ignited stores are also showing robust KPIs, with new and reactivated customers coming into those stores and higher average transaction value (ATV), units per transaction (UPT), and average unit retail (AUR) compared to the rest of the fleet.

Valuation

With a P/E Ratio of 8.52 and an EV/EBITDA of 7.25, the company's valuation appears reasonable. The ROE of 23.43% and ROIC of 9.17% indicate a strong return on equity and invested capital. Analysts estimate next year's revenue growth at 1.8%, and with the actual EPS coming in at $0.48 relative to estimates at $0.47, the company's growth prospects appear promising.

3. NewsRoom

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Sally Beauty Bets on TikTok Shop to Strengthen Omnichannel Strategy

Mar -20

Source: zacks.com

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Sally Beauty Expands into Social Commerce with Launch on TikTok Shop

Mar -19

Source: prnewswire.com

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ArrowMark Colorado Holdings LLC Has $33.43 Million Stock Holdings in Sally Beauty Holdings, Inc. $SBH

Mar -15

Source: defenseworld.net

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Circana and Sally Beauty Holdings Announce Strategic Partnership to Optimize Supply Chain Operations

Mar -10

Source: globenewswire.com

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Sally Beauty Introduces COLORfest: A New Campaign of Self-Expression and Transformation through Color

Mar -09

Source: prnewswire.com

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American Century Companies Inc. Grows Stock Holdings in Sally Beauty Holdings, Inc. $SBH

Mar -09

Source: defenseworld.net

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Sally Beauty Holdings, Inc. (NYSE:SBH) Receives Consensus Recommendation of “Hold” from Analysts

Mar -05

Source: defenseworld.net

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Sally Beauty's Color Sales Rise 8%: Is the Growth Sustainable?

Mar -04

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

Sally Beauty Supply

Expected Growth: 1.0%

Sally Beauty Supply's 1.0% growth is driven by increasing demand for professional beauty products, expansion of e-commerce platform, and strategic partnerships with popular beauty brands. Additionally, the company's focus on omnichannel retailing, loyalty programs, and cost savings initiatives contribute to its steady growth.

Beauty Systems Group

Expected Growth: 1.0%

Beauty Systems Group's 1.0% growth is driven by increasing demand for professional beauty products, expansion of e-commerce channels, and strategic partnerships with key suppliers. Additionally, the segment benefits from Sally Beauty's strong brand recognition, loyalty programs, and investments in digital marketing, which enhance customer engagement and retention.

7. Detailed Products

Professional Beauty Products

A wide range of professional beauty products including hair color, hair care, skincare, and nail care products

Retail Beauty Products

A variety of beauty products for retail sale to consumers, including hair care, skincare, and nail care products

Beauty Supply Products

A range of products for beauty professionals, including hair dryers, flat irons, and other styling tools

Nail Care Products

A variety of nail care products, including nail polish, nail care tools, and nail art supplies

Hair Extension and Wig Products

A range of hair extension and wig products, including human hair and synthetic hair extensions

8. Sally Beauty Holdings, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Sally Beauty Holdings, Inc. operates in a moderately competitive industry with several substitutes available, including online retailers and specialty beauty stores. However, the company's strong brand recognition and loyalty programs help to mitigate the threat of substitutes.

Bargaining Power Of Customers

Sally Beauty Holdings, Inc. has a large customer base, but individual customers do not have significant bargaining power due to the company's diversified customer base and lack of concentration.

Bargaining Power Of Suppliers

Sally Beauty Holdings, Inc. has a moderate level of dependence on its suppliers, but the company's large scale and diversified supplier base help to mitigate the bargaining power of suppliers.

Threat Of New Entrants

The beauty industry has moderate barriers to entry, including regulatory hurdles and the need for significant capital investment. However, Sally Beauty Holdings, Inc.'s strong brand recognition and established distribution network make it difficult for new entrants to gain traction.

Intensity Of Rivalry

The beauty industry is highly competitive, with many established players and a high level of advertising and promotional activity. Sally Beauty Holdings, Inc. faces intense competition from online retailers, specialty beauty stores, and mass merchandisers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 76.71%
Debt Cost 5.95%
Equity Weight 23.29%
Equity Cost 11.38%
WACC 7.21%
Leverage 329.35%

11. Quality Control: Sally Beauty Holdings, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Sally Beauty Holdings

A-Score: 4.9/10

Value: 8.1

Growth: 4.6

Quality: 6.3

Yield: 0.0

Momentum: 6.5

Volatility: 3.7

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A-Score: 4.5/10

Value: 9.8

Growth: 2.4

Quality: 4.7

Yield: 0.0

Momentum: 10.0

Volatility: 0.0

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ThredUp

A-Score: 4.1/10

Value: 4.6

Growth: 4.9

Quality: 3.6

Yield: 0.0

Momentum: 10.0

Volatility: 1.3

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Qurate Retail

A-Score: 3.7/10

Value: 9.8

Growth: 1.2

Quality: 4.3

Yield: 3.0

Momentum: 1.5

Volatility: 2.3

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MarineMax

A-Score: 3.6/10

Value: 9.2

Growth: 3.7

Quality: 2.6

Yield: 0.0

Momentum: 3.0

Volatility: 3.0

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Revolve

A-Score: 3.3/10

Value: 2.5

Growth: 5.3

Quality: 6.8

Yield: 0.0

Momentum: 2.0

Volatility: 3.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

14.01$

Current Price

14.01$

Potential

-0.00%

Expected Cash-Flows