Sally Beauty Down to Strong Sell


On Jan 4, 2014, Zacks Investment Research downgraded Sally Beauty Holdings Inc. (SBH) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Sally Beauty has witnessed sharp downward estimate revisions over the last 60 days. The primary reason behind this was the company’s lackluster performance in the past few quarters. This specialty retailer and distributor of professional beauty supplies delivered negative earnings surprises in the last four quarters with an average miss of 4.6%.   

After a decent earnings surprise trend in the last few years, Sally Beauty missed the Zacks Consensus Estimate four consecutive times. A fall in domestic retail traffic and the failure to repeat the success of 2012 led to comparatively muted quarterly performances in the recent past.

On Nov 18, Sally Beauty posted fourth-quarter fiscal 2013 earnings per share of 38 cents that missed the Zacks Consensus Estimate by a penny. Moreover, net sales of $906.4 million increased year over year but fell short of the Consensus Estimate.

Sally Beauty provided sales guidance for fiscal 2014 with same store sales growth in the range of 1% to 3%. The company is anticipating a gradual but definite sales improvement in the domestic retail business due to the initiatives undertaken by it to counter the softness.

However, analysts are somewhat apprehensive, as reflected by the downward estimate revision. For 2014, the Zacks Consensus Estimate decreased 4.6% to $1.66 per share while for 2015, it fell 4.5% to $1.90 per share over the last 60 days.

Other Stocks to Consider

Not all retail stocks are performing as poorly as Sally Beauty. Barnes & Noble, Inc. (BKS), Marinemax Inc. (HZO) and Big 5 Sporting Goods Corp. (BGFV) are more favorably positioned with a Zacks Rank #2 (Buy).

Read the Full Research Report on BGFV
Read the Full Research Report on SBH
Read the Full Research Report on BKS
Read the Full Research Report on HZO

Zacks Investment Research

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