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Sally Beauty (SBH) Likely to Put Up a Decent Show in Q3

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With restrictions to check the coronavirus outbreak being lifted, a number of retailers are reopening their stores globally. In this context, Sally Beauty Holdings, Inc. (SBH - Free Report) stated that it has reopened all its retail and wholesale stores across the United States, the U.K., Canada as well as the European Union. Moreover, the company envisions reopening few stores in some parts of Mexico and South America over the coming 60 days.

Sally Beauty is witnessing robust consumer as well as professional demand since its stores reopened. The company expects enterprise-wide sales to come in at $348 million for June, which suggests 9% increase from the year-ago period’s reported figure. Moreover, the metric suggests 33% increase on a sequential basis. For the third quarter of fiscal 2020, management anticipates enterprise-wide revenues to amount $705 million.

With consumers avoiding crowded places and limiting their visits to brick-and-mortar stores as a precautionary measure, online retail is seeing a spurt in sales. Sally Beauty continues to witness significant growth in its online business across all regions even when majority of its stores have been reopening. In fact, management expects to report triple-digit e-commerce growth across all segments in the fiscal third-quarter. Consolidated estimated digital growth for the quarter under review is 278% year over year, per the release.

Following the news, shares of Sally Beauty rose nearly 3% on Jul 6. Notably, shares of this Zacks Rank #1 (Strong Buy) company have surged 49.3% in the past three months compared with the industry’s growth of 30%.

Sally Beauty has enhanced its e-commerce capabilities significantly, thanks to coronavirus-induced store closures. In March, the company launched digital operations in Canada along with ship-from-store in 16 stores across the region. The company expanded its ship-from-store as well as same-day delivery options in the United States. It also revamped its French and German digital sites to aid business in the United Kingdom.

Sally Beauty has undertaken a number of measures to improve its financial position amid the coronavirus outbreak. The company has moderated its near-term rent payments and significantly reduced its marketing as well as back-office expenses. The company has made certain adjustments to its capital investment plans. Apart from these, Sally Beauty has an undrawn capacity on its asset-based line of credit amounting to $200 million. Additionally, management expects its cash on hand to be more than $815 million as of Jun 30.

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