U.S. Markets open in 6 hrs 20 mins

Sally Beauty Up on Transformation Plan Despite Weak SBS Unit

Zacks Equity Research

Sally Beauty Holdings, Inc. SBH has been gaining from its Transformation plan, which aims at improving customer experience, strengthening e-commerce capacities, curtailing costs and enhancing retail fundamentals. Notably, shares of the company have gained 47.2% in the past three months against the industry’s decline of 5.6%.

 

 

However, sluggishness in the Sally Beauty Supply (SBS) segment along with escalated costs is affecting it.

Let’s delve deeper.

Growth Efforts

As part of the Transformation plan, the company is focused on innovation and product expansion. Some of the recent launches of Sally Beauty are My Black Is Beautiful, All About Curls, the exclusive lines of Mo Knows Hair and Vernon Francois, and Kuul color line.

These apart, its efforts to modernize supply chain, speed up the rollout of Oracle-based point-of-sale systems and revitalize BSG’s e-commerce site bode well. Keeping in these lines, it is on track to complete the rollout of POS systems at 4,200 stores in the United States and Canada by March 2020.

Further, the company’s BSG segment revamped its e-commerce site to enhance online shopping experience. Additionally, Sally Beauty implemented the store fulfillment module of JDA and started full testing within a small subset of Beauty Systems Group stores in the West.

Moreover, the company is undertaking prudent acquisitions and partnerships to strengthen brands. In this context, it acquired certain assets of H. Chalut Ltee as well as the distribution rights for Joico in the Boston area and Paul Mitchell in the Hawaiian market.

Hurdles

A continued decline in the Sally Beauty Supply segment’s sales has been impacting the company for a while now. Notably, the segment’s sales dipped 0.8% to $571.9 million in the fourth quarter of fiscal 2019 due to lesser stores than the prior-year quarter, continued hurdles in Europe and foreign-currency headwinds. Persistence of such factors is likely to affect Sally Beauty. 

This apart, management expects SG&A expenses to grow in fiscal 2020, owing to an increase in wages in key markets, and higher investment in marketing and technology. This may weigh on the bottom line in the near future.

Bottom Line

All said, we expect Sally Beauty’s growth initiatives to offset the hurdles. This is likely to help the Zacks Rank #3 (Hold) stock keep putting up its stellar show.

Don’t Miss These Better-Ranked Retail Stocks

Office Depot ODP, with a Zacks Rank #2 (Buy), has a long-term growth rate of 11.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Michaels Companies MIK, with a Zacks Rank #2, has a long-term growth rate of 7%.

Burlington Stores BURL, with a Zacks Rank #2, has a long-term growth rate of 15.9%.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.