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Sally Beauty Holdings, Inc. (SBH - Free Report) reported second-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales increased year over year, while earnings declined from the year-ago quarter’s level.
Q2 in Detail
Sally Beauty reported adjusted earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 37 cents. The metric declined from 47 cents reported in the year-ago quarter.
Consolidated net sales of $918.7 million beat the Zacks Consensus Estimate of $889 million. The metric inched up 0.8% year over year. Unfavorable currency rates hurt net sales by 80 basis points. Comparable sales grew 5.7%. The company operated 378 less stores compared with the year-ago quarter’s levels. At constant currency or cc, global e-commerce sales rose 9% to $87 million, reflecting 9.5% of consolidated net sales.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Consolidated gross profit came in at $468.3 million, up 0.6% from $465.3 million reported in the year-ago quarter. Adjusted gross margin was 50.7%, down 70 bps year over year. Adjusted operating earnings were $76.3 million, down from $90.2 million reported in the year-ago quarter. Adjusted operating margin contracted from 9.9% to 8.3% in the second quarter.
Adjusted selling, general and administrative expenses, excluding COVID-19 related net expenses and other expenses, amounted to $389.7 million, up $11.7 million. The increase can mainly be attributed to higher labor, accrued bonus and advertising costs. These were somewhat offset by savings from its distribution center consolidation and store optimization plan. As a percentage of sales, adjusted SG&A expenses came in at 42.4%, up from 41.5% posted in the prior-year quarter.
Segment Details
Sally Beauty Supply: Net sales in the segment inched up 0.8% to $530.2 million. Unfavorable foreign exchange had a negative impact of 90 bps on sales. The segment’s comparable sales grew 9.1%. Net store count at the end of the quarter was 3,143, lower by 356 stores from the year-ago quarter’s level. Segment e-commerce sales at cc increased 7% to $34 million, contributing 6.4% to the segment’s net sales.
Beauty Systems Group: Net sales in the segment inched up 0.7% to $388.5 million. Unfavorable foreign exchange had a negative impact of 50 bps on sales. The segment’s comparable sales grew 1.3%. Net store count at the end of the quarter was 1,341, down by 22 stores from the year-ago quarter’s levels. Total distributor sales consultants at the end of the quarter were 675 compared with 712 in the year-ago period. Segment e-commerce sales at cc rose 11% to $53 million, contributing 13.7% to the segment’s net sales.
Image Source: Zacks Investment Research
Other Financial Aspects
The Zacks Rank #3 (Hold) company ended the reported quarter with cash and cash equivalents of $61.6 million, long-term debt, including capital leases of $1,065.4 million and total stockholders’ equity of $425.9 million. During the second quarter, the company provided cash flow from operations of $24.7 million. Capital expenditures came in at $17.2 million during this time.
Fiscal 2023 Outlook
Management reaffirmed its fiscal 2023 view. Notwithstanding a prominent change in consumer behavior, comparable sales are anticipated to grow by low single digits year over year. The upside can be attributed to growth in key categories, expanded Regis distribution, sales transfer from store closures and new strategic initiatives.
For fiscal 2023, net sales are anticipated to decline by low-single digits, reflecting unfavorable impact owing to store closures net of expected sales recapture rates from optimization efforts. Net sales guidance also reflect anticipated impact from unfavorable currency rates. Gross margin is projected to remain over 50% while adjusted operating margin is likely to be in the range of 8.5-9.5%, inclusive of investment in-store labor.
SBH’s shares have fallen 30.5% in the past three months against the industry’s 5.7% growth.
Stocks to Consider
Here are three better-ranked stocks to consider — Build-A-Bear Workshop (BBW - Free Report) , DICK’S Sporting Goods (DKS - Free Report) and Ulta Beauty (ULTA - Free Report) .
Build-A-Bear Workshop, the leading and only national company, providing a make-your-own stuffed animal interactive retail-entertainment experience, currently sports a Zacks Rank #1 (Strong Buy). BBW has a trailing four-quarter earnings surprise of 17.4%, on average.
The Zacks Consensus Estimate for Build-A-Bear’s current financial-year sales and earnings suggests growth of 6.2% and 12.3%, respectively, from the year-ago reported number.
DICK’S Sporting, a major omni-channel sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS has an expected EPS growth rate of 5.4% for three to five years.
The Zacks Consensus Estimate for DICK’S Sporting’s current financial-year revenues and earnings suggests growth of 3% and 12.1%, respectively, from the year-ago reported figures. DKS has a trailing four-quarter earnings surprise of 10%, on average.
Ulta Beauty, a leading beauty retailer in the United States, carries a Zacks Rank #2 at present. The company has a trailing four-quarter earnings surprise of 26.2%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current financial year’s revenues and earnings suggests growth of 8.4% and 5.1%, respectively, from the year-ago reported figure. ULTA has an expected EPS growth rate of 12.3% for three to five years.
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Sally Beauty's (SBH) Q2 Earnings Beat Estimates, Sales Rise Y/Y
Sally Beauty Holdings, Inc. (SBH - Free Report) reported second-quarter fiscal 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net sales increased year over year, while earnings declined from the year-ago quarter’s level.
Q2 in Detail
Sally Beauty reported adjusted earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 37 cents. The metric declined from 47 cents reported in the year-ago quarter.
Consolidated net sales of $918.7 million beat the Zacks Consensus Estimate of $889 million. The metric inched up 0.8% year over year. Unfavorable currency rates hurt net sales by 80 basis points. Comparable sales grew 5.7%. The company operated 378 less stores compared with the year-ago quarter’s levels. At constant currency or cc, global e-commerce sales rose 9% to $87 million, reflecting 9.5% of consolidated net sales.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
Consolidated gross profit came in at $468.3 million, up 0.6% from $465.3 million reported in the year-ago quarter. Adjusted gross margin was 50.7%, down 70 bps year over year. Adjusted operating earnings were $76.3 million, down from $90.2 million reported in the year-ago quarter. Adjusted operating margin contracted from 9.9% to 8.3% in the second quarter.
Adjusted selling, general and administrative expenses, excluding COVID-19 related net expenses and other expenses, amounted to $389.7 million, up $11.7 million. The increase can mainly be attributed to higher labor, accrued bonus and advertising costs. These were somewhat offset by savings from its distribution center consolidation and store optimization plan. As a percentage of sales, adjusted SG&A expenses came in at 42.4%, up from 41.5% posted in the prior-year quarter.
Segment Details
Sally Beauty Supply: Net sales in the segment inched up 0.8% to $530.2 million. Unfavorable foreign exchange had a negative impact of 90 bps on sales. The segment’s comparable sales grew 9.1%. Net store count at the end of the quarter was 3,143, lower by 356 stores from the year-ago quarter’s level. Segment e-commerce sales at cc increased 7% to $34 million, contributing 6.4% to the segment’s net sales.
Beauty Systems Group: Net sales in the segment inched up 0.7% to $388.5 million. Unfavorable foreign exchange had a negative impact of 50 bps on sales. The segment’s comparable sales grew 1.3%. Net store count at the end of the quarter was 1,341, down by 22 stores from the year-ago quarter’s levels. Total distributor sales consultants at the end of the quarter were 675 compared with 712 in the year-ago period. Segment e-commerce sales at cc rose 11% to $53 million, contributing 13.7% to the segment’s net sales.
Image Source: Zacks Investment Research
Other Financial Aspects
The Zacks Rank #3 (Hold) company ended the reported quarter with cash and cash equivalents of $61.6 million, long-term debt, including capital leases of $1,065.4 million and total stockholders’ equity of $425.9 million. During the second quarter, the company provided cash flow from operations of $24.7 million. Capital expenditures came in at $17.2 million during this time.
Fiscal 2023 Outlook
Management reaffirmed its fiscal 2023 view. Notwithstanding a prominent change in consumer behavior, comparable sales are anticipated to grow by low single digits year over year. The upside can be attributed to growth in key categories, expanded Regis distribution, sales transfer from store closures and new strategic initiatives.
For fiscal 2023, net sales are anticipated to decline by low-single digits, reflecting unfavorable impact owing to store closures net of expected sales recapture rates from optimization efforts. Net sales guidance also reflect anticipated impact from unfavorable currency rates. Gross margin is projected to remain over 50% while adjusted operating margin is likely to be in the range of 8.5-9.5%, inclusive of investment in-store labor.
SBH’s shares have fallen 30.5% in the past three months against the industry’s 5.7% growth.
Stocks to Consider
Here are three better-ranked stocks to consider — Build-A-Bear Workshop (BBW - Free Report) , DICK’S Sporting Goods (DKS - Free Report) and Ulta Beauty (ULTA - Free Report) .
Build-A-Bear Workshop, the leading and only national company, providing a make-your-own stuffed animal interactive retail-entertainment experience, currently sports a Zacks Rank #1 (Strong Buy). BBW has a trailing four-quarter earnings surprise of 17.4%, on average.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Build-A-Bear’s current financial-year sales and earnings suggests growth of 6.2% and 12.3%, respectively, from the year-ago reported number.
DICK’S Sporting, a major omni-channel sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS has an expected EPS growth rate of 5.4% for three to five years.
The Zacks Consensus Estimate for DICK’S Sporting’s current financial-year revenues and earnings suggests growth of 3% and 12.1%, respectively, from the year-ago reported figures. DKS has a trailing four-quarter earnings surprise of 10%, on average.
Ulta Beauty, a leading beauty retailer in the United States, carries a Zacks Rank #2 at present. The company has a trailing four-quarter earnings surprise of 26.2%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current financial year’s revenues and earnings suggests growth of 8.4% and 5.1%, respectively, from the year-ago reported figure. ULTA has an expected EPS growth rate of 12.3% for three to five years.