Sally Beauty (SBH) AI Stock Analysis

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Sally Beauty

(NYSE:SBH)

71Outperform

Sally Beauty's overall stock score of 71 reflects its solid financial health and low valuation, countered by bearish technical indicators and macroeconomic challenges. The earnings call underscored consistent growth and profitability, but the flat guidance for Q2 highlights potential risks. Despite these challenges, the company's strategic initiatives and market positioning provide a stable foundation.

Positive Factors

Financial Performance

SBH has also made progress in deleveraging and is now below 2x leverage.

Product Expansion

The addition of Madison Reed helps add another premium option for Sally customers and could even attract new customers to the store.

Negative Factors

External Challenges

There are concerns about external factors such as tariff impact and low-end consumer pressure, which may affect pricing and sales.

Market Environment

Consistent execution against a tough beauty category and macro environment is reflected in consecutive quarters of positive comps in both retail and pro salon segments.

Sally Beauty (SBH) vs. S&P 500 (SPY)

Market Cap

$825.83M

Dividend YieldN/A

Average Volume (3M)2.38M

Price to Earnings (P/E)4.9

Beta (1Y)0.89

Revenue Growth0.57%

EPS Growth6.28%

CountryUS

Employees12,000

SectorConsumer Cyclical

Sector Strength58

IndustrySpecialty Retail

Share Statistics

EPS (TTM)1.67

Shares Outstanding101,954,445

10 Day Avg. Volume2,460,498

30 Day Avg. Volume2,383,950

Financial Highlights & Ratios

PEG Ratio0.77

Price to Book (P/B)N/A

Price to Sales (P/S)0.24

Price to Cash Flow (P/CF)6.50

P/FCF Ratio8.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$13.75

Price Target Upside72.96% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering4

Sally Beauty Business Overview & Revenue Model

Company DescriptionSally Beauty Holdings, Inc. (SBH) is a leading international specialty retailer and distributor of professional beauty supplies. It operates primarily in two business segments: Sally Beauty Supply and Beauty Systems Group (BSG). The company offers a wide range of beauty products, including hair color, hair care, skin care, and nail products, catering to both professional stylists and retail consumers. With thousands of stores worldwide, Sally Beauty provides an extensive selection of high-quality products from well-known brands as well as its own private label offerings.

How the Company Makes MoneySally Beauty Holdings generates revenue through the sale of beauty products and supplies via its two main business segments: Sally Beauty Supply and Beauty Systems Group. Sally Beauty Supply focuses on retail sales, targeting individual consumers and do-it-yourself beauty enthusiasts through its network of physical stores and online platforms. Beauty Systems Group, on the other hand, caters to professional stylists and salons, providing them with professional-grade products and equipment. Revenue is primarily driven by product sales, with additional income from private label brands that often offer higher margins. The company benefits from strategic partnerships with well-known beauty brands and leverages its distribution network to maintain a strong market presence. Additionally, Sally Beauty engages in promotional activities and loyalty programs to attract and retain customers, further supporting its revenue streams.

Sally Beauty Financial Statement Overview

Summary

Sally Beauty demonstrates stable profitability and efficient cash flow management with consistent margins, but faces challenges with revenue growth and high leverage.

Income Statement

Positive

Sally Beauty shows a stable gross profit margin of around 50% over recent years, indicating consistent cost management. However, the revenue growth has been stagnant, with minor fluctuations. The net profit margin is modest, reflecting competitive industry pressures. EBIT and EBITDA margins are stable, suggesting operational efficiency but limited top-line growth.

Balance Sheet

Positive

The debt-to-equity ratio is relatively high, indicating significant leverage, which could pose risks in volatile markets. However, the company has improved its equity base over the years, enhancing its equity ratio. Return on equity shows a positive trend, suggesting effective utilization of shareholder funds despite the leverage concerns.

Cash Flow

Positive

Sally Beauty demonstrates strong operating cash flow relative to net income, indicating good cash conversion efficiency. The free cash flow is positive and shows growth over the years, which supports financial flexibility. However, the capital expenditures indicate ongoing investments, which could impact future cash flow if not managed carefully.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
3.72B	3.72B	3.73B	3.82B	3.87B	3.51B
	Gross Profit
1.87B	1.89B	1.89B	1.92B	1.95B	1.72B
	EBIT
314.29M	282.73M	338.65M	265.29M	320.85M	166.01M
	EBITDA
395.97M	282.73M	441.06M	365.22M	423.05M	272.79M
	Net Income Common Stockholders
176.04M	153.41M	184.60M	183.55M	239.86M	113.25M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
37.42M	32.82M	123.00M	70.56M	400.96M	514.15M
	Total Assets
1.53B	2.79B	2.73B	2.58B	2.85B	2.90B
	Total Debt
1.64B	1.60B	1.68B	1.73B	1.94B	2.34B
	Net Debt
1.60B	1.49B	1.55B	1.66B	1.54B	1.83B
	Total Liabilities
2.09B	2.16B	2.22B	2.28B	2.57B	2.88B
	Stockholders Equity
-554.85M	628.53M	508.75M	293.64M	280.74M	15.44M
Cash Flow		Free Cash Flow
158.35M	145.36M	158.57M	57.25M	307.96M	316.03M
	Operating Cash Flow
228.97M	246.53M	249.31M	156.50M	381.86M	426.89M
	Investing Cash Flow
-55.02M	-108.91M	-99.78M	-102.42M	-76.02M	-123.78M
	Financing Cash Flow
-188.63M	-153.73M	-100.82M	-373.68M	-419.97M	139.76M

Sally Beauty Technical Analysis

Technical Analysis Sentiment

Negative

Last Price7.95

Price Trends

50DMA

8.91

Negative

100DMA

10.34

Negative

200DMA

11.32

Negative

Market Momentum

MACD

-0.29

Positive

RSI

39.30

Neutral

STOCH

37.17

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SBH, the sentiment is Negative. The current price of 7.95 is below the 20-day moving average (MA) of 8.53, below the 50-day MA of 8.91, and below the 200-day MA of 11.32, indicating a bearish trend. The MACD of -0.29 indicates Positive momentum. The RSI at 39.30 is Neutral, neither overbought nor oversold. The STOCH value of 37.17 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SBH.

Sally Beauty Risk Analysis

Sally Beauty disclosed 32 risk factors in its most recent earnings report. Sally Beauty reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Sally Beauty Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LZB	74 Outperform	$1.56B	12.98	12.40%	2.18%	1.81%	8.09%
LQDT	72 Outperform	$936.77M	40.06	13.48%	―	32.16%	27.32%
SBH	71 Outperform	$825.83M	4.86	29.39%	―	0.57%	6.28%
WEYS	65 Neutral	$279.24M	9.17	12.37%	3.59%	-8.73%	0.31%
WGO	61 Neutral	$872.15M	―	-0.45%	4.25%	-12.29%	-105.55%
OLPX	61 Neutral	$810.84M	41.64	2.27%	―	-7.77%	-68.65%
Sector *	59 Neutral	$6.44B	11.30	3.27%	4.27%	2.37%	-21.19%

* Consumer Cyclical Sector Average

Performance Comparison

SBH

Sally Beauty

7.95

-2.78

-25.91%

LZB

La-Z-Boy Incorporated

37.86

4.85

14.69%

LQDT

Liquidity Services

30.18

12.76

73.25%

WEYS

Weyco Group

28.05

1.60

6.05%

WGO

Winnebago Industries

31.04

-30.75

-49.77%

OLPX

Olaplex Holdings

1.18

-0.11

-8.53%

Sally Beauty Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -13.40% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Neutral

Sally Beauty Holdings reported solid Q1 results with consistent sales growth and improved profitability driven by strategic initiatives and strong e-commerce performance. However, the company faced challenges from foreign currency headwinds and a difficult macroeconomic environment, which influenced flat guidance for the second quarter.

Highlights

Consistent Sales Growth

The company reported a third consecutive quarter of positive top line performance in both Sally and BSG segments, with consolidated net sales of $938 million, representing an increase of 0.7%.

Improved Profitability

Adjusted operating margin increased by 50 basis points to 8.4%, and adjusted diluted EPS was up 10% to $0.43 compared to the prior year.

Successful Strategic Initiatives

The Fuel for Growth program delivered approximately $11 million in pretax benefits, contributing to gross margin and SG&A improvements.

Strong E-commerce Performance

Global e-commerce sales were $99 million, up 9% year-over-year, representing 11% of total net sales.

Introduction of K18 Brand

BSG announced the launch of the premium hair care brand K18 in all stores and e-commerce in the U.S. and Canada, expected on April 1.

Lowlights

Foreign Currency Headwinds

Net sales included a 60 basis point unfavorable impact from foreign currency, affecting overall sales growth.

Challenging Macroeconomic Environment

January was particularly affected by a harsh flu season, weather, wildfires, and political news, which led to a choppy start for fiscal Q2.

Flat Second Quarter Guidance

The company provided guidance for Q2 with comparable sales expected to be approximately flat, reflecting ongoing macroeconomic challenges.

Company Guidance

During the first quarter of fiscal 2025, Sally Beauty Holdings reported several positive metrics, reflecting continued business momentum in both the Sally and BSG segments. Comparable sales grew by 1.6%, marking the fifth and third consecutive quarters of positive comps for BSG and Sally, respectively. Despite a 60 basis point headwind from foreign exchange, consolidated net sales saw a 0.7% increase, reaching $938 million. The gross margin expanded by 60 basis points to 50.8%, attributed to reduced shrink and lower distribution costs. Operating margin improved by 50 basis points to 8.4%, while adjusted diluted EPS rose by 10% to $0.43. Sally's segment achieved a 1.7% increase in comparable sales, with e-commerce sales growing 18% year-over-year. BSG also exhibited strength with a 1.4% rise in comparable sales. Looking ahead, the company maintains its full-year guidance for comparable sales growth in the range of flat to up 2%, despite anticipating a flat comp in fiscal Q2 due to macroeconomic and environmental factors.

Sally Beauty Corporate Events

Business Operations and StrategyFinancial Disclosures

Sally Beauty Reports Strong Q1 Fiscal 2025 Results

Positive

Feb 13, 2025

Sally Beauty Holdings reported its first quarter fiscal 2025 results, showcasing a strong start with a 0.7% increase in consolidated net sales to $938 million, despite a 60 basis point unfavorable foreign currency impact. The company achieved a GAAP operating margin expansion to 10.7%, driven by strategic initiatives and operational efficiencies, including a significant reduction in operating costs and debt repayment. Additionally, Beauty Systems Group announced a distribution partnership with K18, set to launch in April 2025, enhancing their market presence in biotech-backed haircare products.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.