Sally Beauty (SBH) is Poised on Partnerships, Product Expansions
Sally Beauty Holdings, Inc. SBH has been concentrating on its key strategic objectives, which encompass improving operational efficacy, supported by a continued focus on cost efficiencies. Also, the company realized benefits from its stores and distribution centers through optimization efforts.
Sally Beauty’s most recent initiative, focused on enhancing the customer experience, is the introduction of the Happy Beauty Co. value concept, which was unveiled in the third quarter of fiscal 2023. Happy Beauty was conceived to deliver high-quality beauty products at exceptional prices within an accessible, enjoyable and expressive setting. All the items in this range are priced under $10 and span four essential categories — cosmetics and facial care, bath and body products, nail care, and hair care.
Also, in the third quarter of fiscal 2023, Sally Beauty successfully utilized customer loyalty as a powerful tool to enhance its financial performance. Furthermore, the achievements of this customer-centric approach are underscored by the reward credit card program provided by the company's Beauty Systems Group.
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The company entered an exclusive retail partnership after the fiscal third quarter with XMONDO Color, a hair color line under the XMONDO Hair brand founded by the hairstylist and social media sensation, Brad Mondo. The collaboration signifies a major step in the beauty industry and demonstrates Sally Beauty's commitment to providing customers with innovative and sought-after brands.
Continuing in the same vein, Sally Beauty has introduced the third extension to its bondbar product line. This line of bonding solutions initially debuted in October 2022 and received an enthusiastic response. Additionally, the company is introducing four bonding products, including a pioneering shampoo and three versatile styling products, which are the first of their kind in the market.
Stressed With Margins
In the fiscal third quarter, Sally Beauty experienced a decline of 10 basis points in the adjusted gross margin. This reduction in the margin within the Beauty Systems Group can be ascribed to an unfavorable shift in the sales mix between the segment stores and the expanded Regis partnership.
Furthermore, the inclusion of certain distribution center costs into the gross margin, which were previously part of selling, general, and administrative expenses, affected the margin.
Wrapping Up
For fiscal 2023, management anticipates low-single-digit year-over-year growth in comparable sales. This positive outlook is attributed to growth in key product categories, the expanded distribution through the Regis partnership, sales transferring from store closures, and the successful implementation of strategic initiatives.
However, net sales for fiscal 2023 are expected to decline in a low-single-digit percentage. This decline reflects an adverse impact, primarily driven by store closures, net of expected sales recapture rates.
Notably, management has revised its guidance for the fiscal 2023 adjusted operating margin at the higher end of the earlier provided range. The adjusted operating margin is expected between 9% and 9.4%, as opposed to the previously stated 8.5% to 9.5%.
Shares of this Zacks Rank #3 (Hold) company have declined 39% in the past six months as compared with the industry’s decline of 14.9%.
Red-Hot Stocks to Consider
A few better-ranked stocks are Urban Outfitters, Inc. URBN, Abercrombie & Fitch Co. ANF and G-III Apparel Group GIII.
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings and sales indicates growth of 84.6% and 9% from the year-ago period’s reported figures. URBN has a trailing four-quarter average earnings surprise of 19.2%.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF delivered a significant earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 10.4% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 724.8%.
G-III Apparel Group is a manufacturer, designer and distributor of apparel and accessories. The company currently sports a Zacks Rank #1. GIII delivered a significant earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for G-III Apparel Group’s current fiscal-year earnings and sales indicates growth of 11.6% and 7.9% from the year-ago period’s reported figures. GIII has a trailing four-quarter average earnings surprise of 526.6%.
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