Sally Beauty (SBH) Banks On Strategic Pillars, Innovation
Sally Beauty Holdings, Inc. SBH, a prominent player in the beauty industry, has set its sights on three main strategic goals to enhance its business. These pillars are making customers the center of attention, expanding its high-profit brands and driving innovation while making its operations more efficient.
Sally Beauty announced the launch of Happy Beauty Co., a unique new retail store concept that brings an engaging beauty experience to market with a value price point offering in the third quarter of fiscal 2023. Also, the company has made substantial investments to bolster its omni-channel platform and enhance its online presence.
However, Sally Beauty witnessed a contraction in the adjusted gross margin in the fiscal third quarter. The decrease in margin at Beauty Systems Group can be attributed to an unfavorable change in the sales mix between the segment stores and the expanded Regis partnership. Additionally, some distribution center costs were shifted from selling, general, and administrative expenses to the gross margin, further impacting the margin.
Shares of this Zacks Rank #3 (Hold) company have declined 12.5% in the past three months against the industry’s growth of 0.5%.
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Let’s Introspect
Sally Beauty is deeply committed to its customer-centric growth initiative, with a clear focus on expanding its customer base through innovative marketing strategies, unique product offerings and well-planned strategic endeavors.
In the third quarter of fiscal 2023, Sally Beauty effectively leveraged customer loyalty to bolster its bottom line. In addition, the rewards credit card offered by the company's Beauty Systems Group highlights the success of this customer-centric initiative.
As part of its expansion efforts, Sally Beauty's strategic rebranding of the Salon HQ platform to "Cosmo Prof Direct" demonstrates the company's commitment to evolving its customer offerings. The expansion of this platform across multiple states, encompassing more than 1,700 storefronts, underlines the significance of reaching new customers through innovative distribution channels.
A pivotal development in Sally Beauty's growth journey is the launch of "Happy Beauty Co." This new retail store concept offers customers a unique and engaging beauty experience with a value-driven price point. All the merchandise is priced under $10, with product offerings encompassing four key categories — Cosmetics & Facial Care, Bath & Body, Nails, and Hair, featuring third-party brands and the company’s owned brands.
This initiative also opens doors for collaboration with smaller vendors, fostering mutual growth opportunities, while offering customers fresh and compelling alternatives to premium-priced products.
The company's robust e-commerce strategy is yet another testament of staying competitive in the digital realm. With an emphasis on omni-channel integration and substantial investments in the digital space, Sally Beauty witnessed a 3% rise in global e-commerce sales to $83 million, constituting 8.9% of consolidated net sales in the third quarter of fiscal 2023.
Wrapping Up
For fiscal 2023, management expects comparable sales to grow in the 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 strategic initiatives.
Net sales for fiscal 2023 are anticipated to decline in the low-single digits, indicating an unfavorable impact owing to store closures net of expected sales recapture rates.
Management revised its fiscal 2023 adjusted operating margin guidance to the higher end of the original view. The metric is likely to be 9-9.4% compared with the 8.5-9.5% projected earlier.
Red-Hot Stocks to Consider
Here we have highlighted three better-ranked stocks, namely Skechers U.S.A., Inc. SKX, Five Below, Inc. FIVE and Crocs, Inc. CROX.
Skechers designs, develops, markets and distributes footwear. It currently sports a Zacks Rank #1 (Strong Buy). The expected EPS growth rate for three to five years is 28.3%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings suggests growth of 8.5% and 41.2%, respectively, from the year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 39.1%, on average.
Five Below is a specialty value chain retailer that provides a wide range of premium quality and trendy merchandise. The company currently has a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 22.1%.
The Zacks Consensus Estimate for Five Below’s current fiscal-year sales and earnings suggests growth of 15.7% and 19.2%, respectively, from the year-ago reported numbers. AEO has a trailing four-quarter earnings surprise of 27.9%, on average.
Crocs is one of the leading footwear brands with a focus on comfort and style. It currently has a Zacks Rank #2. CROX delivered an earnings surprise of 20.5% in the last reported quarter.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 12.9% and 11.2%, respectively, from the year-ago reported numbers. CROX has a trailing four-quarter earnings surprise of 19.9%, on average.
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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
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