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Sally Beauty Holdings, Inc. (SBH - Free Report) is focused on driving growth, courtesy of strength in strategic pillars. The beauty products provider’s Happy Beauty Co concept looks promising. However, softness in consumer spending remains a hurdle on the way.
Let’s delve deeper.
Factors Favoring Sally Beauty
Sally Beauty is focused on its three key strategic initiatives, which include enhancing customer centricity, growing high-margin-owned brands and carrying out innovations while increasing the efficiency of operations and optimizing its capabilities. With regard to customer-centric efforts, the company is focused on acquiring new customers via marketing programs, differentiated product offerings and strategic initiatives. In the first quarter of fiscal 2024, the company generated 77% of sales from 16 million Sally U.S. and Canada loyalty members. Also, the BSG Rewards credit card purchases contributed 8% to sales.
Talking about innovation, the company has an impressive pipeline of innovation in the Sally Beauty segment. The company’s broad-based store optimization program helped in increasing productivity and profitability by delivering an engaging omnichannel experience for customers. Also, the Fuel for Growth initiative keeps Sally Beauty well-positioned to capture gross margin and SG&A gains while undertaking growth and returning shareholders’ value. Management is on track to capture pre-tax benefits of $20 million from the program in the fiscal 2024.
Sally Beauty is progressing with Happy Beauty Co., a unique new retail store concept that brings an engaging beauty experience to market with a value price point offering. Happy Beauty offers quality beauty at great prices in an accessible, fun and expressive environment. With a strong record of product and brand development, the company is exercising this muscle to bring compelling value alternatives to well-known premium-priced products to customers. At the end of the fiscal 2023, management had 10 pilot stores in operation, which delivered impressive results.
Image Source: Zacks Investment Research
What’s Hurting Sally Beauty?
Sally Beauty continues to battle tough macroeconomic challenges that have been exerting pressure on consumer spending. Management is battling soft customer traffic and inflationary pressures. The unfavorable impact of store closures from the Store Optimization Program has been hurting the company for a while.
Rising selling, general and administrative (SG&A) expenses continue to hurt the company. In the fiscal first quarter, Sally Beauty’s adjusted SG&A expenses increased due to labor costs, rent expenses and other costs associated with strategic initiatives. Management expects fiscal 2024 SG&A dollars to be up modestly on increased labor costs and investments in upper funnel marketing and other expenses associated with strategic growth initiatives.
SBH’s above-mentioned upsides are likely to offer respite. Shares of the Zacks Rank #3 (Hold) company have gained 23.5% in the past six months compared with the industry’s 25.1% growth.
The Zacks Consensus Estimate for Deckers’ current fiscal year earnings and sales indicates growth of 38.6% and 15.7%, respectively, from fiscal 2024’s reported figures. DECK's trailing four-quarter average earnings surprise is 32.1%.
The Gap, Inc. (GPS - Free Report) is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Gap’s current financial-year sales indicates growth of 0.2% from the year-ago reported actuals.
Abercrombie & Fitch Co. (ANF - Free Report) is a specialty retailer of premium, high-quality casual apparel. The company carries a Zacks Rank #2 (Buy). ANF delivered a 5.7% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings suggests growth of 5.6% and 9.2%, respectively, from the year-ago reported numbers. ANF has a trailing four-quarter average earnings surprise of 715.6%.
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Sally Beauty's (SBH) Growth Pillars & Happy Beauty Co. Solid
Sally Beauty Holdings, Inc. (SBH - Free Report) is focused on driving growth, courtesy of strength in strategic pillars. The beauty products provider’s Happy Beauty Co concept looks promising. However, softness in consumer spending remains a hurdle on the way.
Let’s delve deeper.
Factors Favoring Sally Beauty
Sally Beauty is focused on its three key strategic initiatives, which include enhancing customer centricity, growing high-margin-owned brands and carrying out innovations while increasing the efficiency of operations and optimizing its capabilities. With regard to customer-centric efforts, the company is focused on acquiring new customers via marketing programs, differentiated product offerings and strategic initiatives. In the first quarter of fiscal 2024, the company generated 77% of sales from 16 million Sally U.S. and Canada loyalty members. Also, the BSG Rewards credit card purchases contributed 8% to sales.
Talking about innovation, the company has an impressive pipeline of innovation in the Sally Beauty segment. The company’s broad-based store optimization program helped in increasing productivity and profitability by delivering an engaging omnichannel experience for customers. Also, the Fuel for Growth initiative keeps Sally Beauty well-positioned to capture gross margin and SG&A gains while undertaking growth and returning shareholders’ value. Management is on track to capture pre-tax benefits of $20 million from the program in the fiscal 2024.
Sally Beauty is progressing with Happy Beauty Co., a unique new retail store concept that brings an engaging beauty experience to market with a value price point offering. Happy Beauty offers quality beauty at great prices in an accessible, fun and expressive environment. With a strong record of product and brand development, the company is exercising this muscle to bring compelling value alternatives to well-known premium-priced products to customers. At the end of the fiscal 2023, management had 10 pilot stores in operation, which delivered impressive results.
Image Source: Zacks Investment Research
What’s Hurting Sally Beauty?
Sally Beauty continues to battle tough macroeconomic challenges that have been exerting pressure on consumer spending. Management is battling soft customer traffic and inflationary pressures. The unfavorable impact of store closures from the Store Optimization Program has been hurting the company for a while.
Rising selling, general and administrative (SG&A) expenses continue to hurt the company. In the fiscal first quarter, Sally Beauty’s adjusted SG&A expenses increased due to labor costs, rent expenses and other costs associated with strategic initiatives. Management expects fiscal 2024 SG&A dollars to be up modestly on increased labor costs and investments in upper funnel marketing and other expenses associated with strategic growth initiatives.
SBH’s above-mentioned upsides are likely to offer respite. Shares of the Zacks Rank #3 (Hold) company have gained 23.5% in the past six months compared with the industry’s 25.1% growth.
Key Picks
Deckers Outdoor Corporation (DECK - Free Report) is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal year earnings and sales indicates growth of 38.6% and 15.7%, respectively, from fiscal 2024’s reported figures. DECK's trailing four-quarter average earnings surprise is 32.1%.
The Gap, Inc. (GPS - Free Report) is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Gap’s current financial-year sales indicates growth of 0.2% from the year-ago reported actuals.
Abercrombie & Fitch Co. (ANF - Free Report) is a specialty retailer of premium, high-quality casual apparel. The company carries a Zacks Rank #2 (Buy). ANF delivered a 5.7% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings suggests growth of 5.6% and 9.2%, respectively, from the year-ago reported numbers. ANF has a trailing four-quarter average earnings surprise of 715.6%.