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Online Growth Aids Sally Beauty (SBH), High Costs Persist
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Sally Beauty Holdings, Inc. (SBH - Free Report) is benefiting from a growing e-commerce business. The beauty products provider benefits from strength in its strategic growth pillars and is undertaking prudent buyouts to fuel growth. However, the company faces escalated cost inflation and supply chain-related issues.
Let’s delve deeper.
Online Business Aids Growth
Sally Beauty is undertaking a number of efforts to augment its robust omnichannel platform. Robust investments to enhance the digital space are yielding. In fourth-quarter fiscal 2022, global e-commerce sales, at constant currency (cc), rose 30% to $90 million, contributing 9.3% to total consolidated net sales. In its last earnings call, management highlighted that e-commerce has started to comprise a bigger portion of the business as it continues to scale digital capabilities and utilize new tools and resources to fuel customer engagement. Sally Beauty Supply’s (SBS) e-commerce sales at cc grew 20% to $33 million, reflecting 6% of segment net sales. In the Beauty Systems Group (BSG), e-commerce sales at cc jumped 37% to $57 million, contributing 13.9% to the segment’s net sales.
Image Source: Zacks Investment Research
What Else is Driving Growth?
The Zacks Rank #3 (Hold) company is focused on its four strategic growth pillars to boost the top line. These include leveraging the digital platform, driving loyalty and personalization, undertaking product innovation and enhancing the supply chain. In this regard, the company is making progress in loyalty and personalization. During fiscal 2022, management made several product innovations in the Sally and BSG segments.
Beginning in fiscal 2023, Sally Beauty will leverage its omni-channel capabilities and modern retail infrastructure to aid growth. Management is on track to focus 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. Talking about store optimization, management has been piloting store closures in several markets to maximize the value of its large store portfolio and provide a seamless omni-channel experience to its customers.
Sally Beauty intends to strengthen its business on the back of strategic acquisitions. In September 2020, Sally Beauty’s subsidiary BSG acquired La Maison Ami-Co Inc. — a professional beauty products distributor in the Canadian province of Quebec. The deal augments its business in Quebec along with increasing the reach of BSG’s professional beauty products in its Chalut store network as well as full-service business.
Is All Rosy for Sally Beauty?
Sally Beauty continued to battle inflationary pressures and supply chain headwinds in the fourth quarter of fiscal 2022. The company reported adjusted earnings of 50 cents per share, down from 64 cents in the year-ago quarter. Consolidated net sales of $962.5 million dropped 2.8%. Comparable sales were in line with the year-ago quarter’s levels. The adverse impact of inflationary pressures influencing consumer behavior and supply chain challenges at Beauty Systems Group was a deterrent.
In the quarter, Sally Beauty’s consolidated gross profit came in at $463.5 million, down 7.5% from $501 million reported in the year-ago quarter. Adjusted gross margin contracted 60 basis points (bps) to 50.1% due to the sales mix shift between Sally Beauty and Beauty Systems Group and increased distribution and freight costs in both units. In fact, management expects the external environment to remain challenging in the future. Certainly, rising inflationary pressure has been altering consumer spending and increasing labor costs.
That being said, let’s see if the aforementioned upsides can help SBH counter these hurdles.
The company’s stock has gained 2.4% in the past six months compared with the industry’s 18.1% growth.
Dillard's, a retail department store operator, currently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of almost 144.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial year sales and earnings per share (EPS) suggests growth of 6.2% and 4.5%, respectively, from the year-ago period’s tally.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1. ROST has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Ulta Beauty currently carries a Zacks Rank #2 (Buy). ULTA has an expected EPS growth rate of 13.8% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 15.7% from the year-ago period. ULTA has a trailing four-quarter earnings surprise of 26.2%, on average.
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Online Growth Aids Sally Beauty (SBH), High Costs Persist
Sally Beauty Holdings, Inc. (SBH - Free Report) is benefiting from a growing e-commerce business. The beauty products provider benefits from strength in its strategic growth pillars and is undertaking prudent buyouts to fuel growth. However, the company faces escalated cost inflation and supply chain-related issues.
Let’s delve deeper.
Online Business Aids Growth
Sally Beauty is undertaking a number of efforts to augment its robust omnichannel platform. Robust investments to enhance the digital space are yielding. In fourth-quarter fiscal 2022, global e-commerce sales, at constant currency (cc), rose 30% to $90 million, contributing 9.3% to total consolidated net sales. In its last earnings call, management highlighted that e-commerce has started to comprise a bigger portion of the business as it continues to scale digital capabilities and utilize new tools and resources to fuel customer engagement. Sally Beauty Supply’s (SBS) e-commerce sales at cc grew 20% to $33 million, reflecting 6% of segment net sales. In the Beauty Systems Group (BSG), e-commerce sales at cc jumped 37% to $57 million, contributing 13.9% to the segment’s net sales.
Image Source: Zacks Investment Research
What Else is Driving Growth?
The Zacks Rank #3 (Hold) company is focused on its four strategic growth pillars to boost the top line. These include leveraging the digital platform, driving loyalty and personalization, undertaking product innovation and enhancing the supply chain. In this regard, the company is making progress in loyalty and personalization. During fiscal 2022, management made several product innovations in the Sally and BSG segments.
Beginning in fiscal 2023, Sally Beauty will leverage its omni-channel capabilities and modern retail infrastructure to aid growth. Management is on track to focus 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. Talking about store optimization, management has been piloting store closures in several markets to maximize the value of its large store portfolio and provide a seamless omni-channel experience to its customers.
Sally Beauty intends to strengthen its business on the back of strategic acquisitions. In September 2020, Sally Beauty’s subsidiary BSG acquired La Maison Ami-Co Inc. — a professional beauty products distributor in the Canadian province of Quebec. The deal augments its business in Quebec along with increasing the reach of BSG’s professional beauty products in its Chalut store network as well as full-service business.
Is All Rosy for Sally Beauty?
Sally Beauty continued to battle inflationary pressures and supply chain headwinds in the fourth quarter of fiscal 2022. The company reported adjusted earnings of 50 cents per share, down from 64 cents in the year-ago quarter. Consolidated net sales of $962.5 million dropped 2.8%. Comparable sales were in line with the year-ago quarter’s levels. The adverse impact of inflationary pressures influencing consumer behavior and supply chain challenges at Beauty Systems Group was a deterrent.
In the quarter, Sally Beauty’s consolidated gross profit came in at $463.5 million, down 7.5% from $501 million reported in the year-ago quarter. Adjusted gross margin contracted 60 basis points (bps) to 50.1% due to the sales mix shift between Sally Beauty and Beauty Systems Group and increased distribution and freight costs in both units. In fact, management expects the external environment to remain challenging in the future. Certainly, rising inflationary pressure has been altering consumer spending and increasing labor costs.
That being said, let’s see if the aforementioned upsides can help SBH counter these hurdles.
The company’s stock has gained 2.4% in the past six months compared with the industry’s 18.1% growth.
3 Solid Retail Bets
We have highlighted three better-ranked stocks, Dillard's, Inc. (DDS - Free Report) , Ross Stores (ROST - Free Report) and Ulta Beauty (ULTA - Free Report) .
Dillard's, a retail department store operator, currently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of almost 144.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Dillard's current financial year sales and earnings per share (EPS) suggests growth of 6.2% and 4.5%, respectively, from the year-ago period’s tally.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1. ROST has an expected EPS growth rate of 10.5% for three to five years.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Ulta Beauty currently carries a Zacks Rank #2 (Buy). ULTA has an expected EPS growth rate of 13.8% for three to five years.
The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 15.7% from the year-ago period. ULTA has a trailing four-quarter earnings surprise of 26.2%, on average.