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Sally Beauty Holdings, Inc. SBH reported second-quarter fiscal 2021 results, with the top and bottom line beating the Zacks Consensus Estimate and increasing year over year. Notably, sales increased across both the segments. Well, the company is on track to grow customer engagement and loyalty. Also, its efforts to enhance digital operations and supply chain are yielding. However, management refrained from providing any formal guidance for fiscal 2021.
Q2 in Detail
Sally Beauty reported adjusted earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate of 14 cents. Also, the metric surged 148% year over year. The upside can be attributed to increased gross margin and sales.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
Consolidated net sales of $926.3 million beat the Zacks Consensus Estimate of $827.7 million. Also, the metric increased 6.3% year over year. The upside can be mainly attributed to positive impacts in the United States from improving consumer confidence as well as government stimulus payments. Also, lifting of pandemic-induced restrictions in salons was a reason. However, these were somewhat offset by the on-going pandemic-led store closures in parts of the company’s international locations as well as salon closures in California during January. Also, reduced store count compared with the year-ago quarter’s levels was a reason. That being said, positive impact of favorable foreign currency rates to the tune of nearly 90 basis points (bps) offered some respite. Consolidated same-store sales rose 6.5%, while global e-commerce sales surged 56%.
Consolidated gross profit increased 8.7% to $467.2 million from $429.8 million reported in the year-ago quarter. Further, consolidated gross margin expanded 110 bps to 50.4% on the back of reduced promotions in the Sally unit.
The Zacks Rank #4 (Sell) company reported SG&A expenses of $391.1 million, which increased $7.8 million in the quarter, including COVID-19 related net expenses to the tune of $29 million. Adjusted SG&A expenses, excluding COVID-19 net expenses, were $362.1 million down from $368.6 million reported in the year-ago quarter. As a percentage of sales, adjusted SG&A was 39.1%, down from the year-ago quarter’s reported figure of 42.3%.
Adjusted operating earnings increased to $112.1 million from $61.2 million reported in the year-ago quarter. Adjusted operating margin expanded from 7% to 12.1% in the quarter.
Sally Beauty Supply: Net sales in the segment increased 4.5% to $542.7 million mainly owing to positive impact in the U.S. from improving consumer confidence and government stimulus payments. These were countered by pandemic-led store closures in some international locations. Also, reduced number of stores compared with theyear-ago quarter’s level was a drag. Nonetheless, favorable foreign exchange impact of nearly 110 bps on sales. Further, global same store sales increased 4.9%.
Net store count at the end of the quarter was 3,625, lower by 76 stores from the year-ago quarter’s level.
Beauty Systems Group: Net sales in the segment increased 9.1% to $383.7 million. Lifting of pandemic-led restrictions across the United States and increased operating capacities in salons contributed to the upside. Foreign-currency translations had nearly 50 bps positive impact on results. Further, total same store sales grew 9.9%.
Net store count at the end of the quarter was 1,379, up by 5 stores from the year-ago quarter’s level. Total distributor sales consultants at the end of the quarter were 704 compared with 660 in the year-ago quarter.
Other Financial Aspects
The company ended the reported quarter with cash and cash equivalents of $408.3 million, long-term debt including capital leases of $1,389.5 million and total stockholders’ equity of $134.8 million.
In the quarter, cash flow from operations was $92.6 million, while capital expenditures amounted to $11.6 million.
Shares of Sally Beauty have surged 67.8% in the past three months compared with the industry’s growth of 4.3%.
Some Solid Retail Picks
MarineMax, Inc. HZO currently has an Earnings ESP of +4.86% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Five Below, Inc. FIVE, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 32.8%.
Tractor Supply Company TSCO which carries a Zacks Rank #2, has a long-term earnings growth rate of 9%.
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