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Bear of the Day: Sally Beauty (SBH)

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Sally Beauty Holdings, Inc. (SBH - Free Report) is still seeing soft traffic in its U.S. retail stores. This Zacks Rank #5 (Strong Sell) recently missed on the earnings estimate for the 4th quarter in a row.

Sally Beauty sells beauty supplies at 4,500 stores around the world. It offers 6,000 products for hair, skin and nails. It also sells 9,800 professionally branded beauty products through its Beauty Systems Group stores, targeted towards professional beauticians and salons.

Another Earnings Miss

On Nov 14, Sally Beauty reported its fiscal fourth quarter and full year 2013 results. After a decent earnings surprise track record over the last few years, it has suddenly strung together four misses in a row.

It missed by just a penny, reporting $0.38 compared to the Zacks Consensus of $0.39. Once again, the weakness in the quarter could be attributed to the softness in the U.S. retail segment which saw same store sales decline.

The Sally Beauty Supply segment saw sales up 0.2% to $556.1 million in the quarter. Same store sales declined 1.5% versus growth of 3.8% in the year ago quarter. Fiscal 2012 was a record-breaking year, however.

Gross profit margin in the Sally Beauty Supply segment expanded by 10 basis points due to improvement in the international business.

The Beauty Systems Group segment was stronger, with sales up 6.9% to $350.3 million.

Analysts Concerned About Fiscal 2014

Sally gave sales guidance for Fiscal 2014 with same store sales growth in the range of 1% to 3%. The company is expecting a "gradual" sales improvement in the U.S. retail business due to changes it made in response to the softness.

But the analysts were not impressed. 8 estimates were lowered in the last week for Fiscal 2014.

The Fiscal 2014 earnings estimate has fallen to $1.67 from $1.74.

All is not entirely grim, however. While the estimates were cut, that is still earnings growth of 12.5% compared to Fiscal 2013.

Shares recently bounced off their recent low as investors are betting that a turnaround is in store.

But if you don't want to wait for the U.S. retail numbers to improve, which could take several quarters, then you might want to consider one of its peers such as Ulta (ULTA - Free Report) .

Ulta is a Zacks Rank #2 (Buy) and is expected to see 26% earnings growth next year.

[In full disclosure, the author of this article owns shares of ULTA.]

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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