Sally Beauty Holdings, Inc. SBH reported third-quarter fiscal 2022 results, with the top line beating the Zacks Consensus Estimate and the bottom line missing the same. Both net sales and earnings declined year over year.
During the quarter, management witnessed pressure on net sales as inflation and supply-chain-related challenges persisted. That said, Sally Beauty continues to focus on its four strategic growth pillars. These include leveraging the digital platform, driving loyalty and personalization, undertaking product innovation and enhancing the supply chain.
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Q3 in Detail
Sally Beauty reported adjusted earnings of 55 cents per share, which missed the Zacks Consensus Estimate of 59 cents. The metric declined from 68 cents reported in the year-ago quarter.
Consolidated net sales of $961.5 million beat the Zacks Consensus Estimate of $944.2 million. However, the metric dropped 6% year over year, with an impact of unfavorable foreign currency translation of 130 basis points (bps) on consolidated net sales. Comparable sales fell 3.6% owing to persistent inflationary pressures, supply chain challenges and tough year-over-year comparison. The company operated 149 fewer stores compared with the year-ago quarter’s levels.
The company’s global e-commerce sales came in at $81 million, reflecting 8.4% of consolidated net sales.
Consolidated gross profit came in at $490.2 million, down 4.7% from $514.4 million reported in the year-ago quarter. Consolidated gross margin expanded 70 basis points to 51%, backed by improved product margins at Sally Beauty and Beauty Systems Group. This was somewhat offset by increased distribution and freight costs.
Adjusted selling, general and administrative (SG&A) expenses, excluding COVID-19-related net expenses, came in at $389.7 million, up $4 million from the year-ago quarter’s figure, led by higher labor costs. These were somewhat offset by reduced accrued bonus, variable and advertising costs. As a percentage of sales, adjusted SG&A expenses stood at 40.5%, up from 37.7% reported in the year-ago quarter.
Adjusted operating earnings were $100.6 million, down from $128.7 million reported in the year-ago quarter. Adjusted operating margin contracted from 12.6% to 10.5% in the third quarter.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
Sally Beauty Supply: Net sales in the segment fell 8.5% to $551.7 million. Unfavorable foreign exchange had a negative impact of 200 bps on sales. The segment’s comparable sales fell 5%. Net store count at the end of the quarter was 3,468, lower by 143 stores from the year-ago quarter’s level. Segment e-commerce sales came in at $33 million, reflecting 6% of segment net sales.
Beauty Systems Group: Net sales in the segment decreased 2.4% to $409.7 million. Further, the segment’s comparable sales moved down 1.6%. Net store count at the end of the quarter was 1,361, down by six stores from the year-ago quarter’s level. Total distributor sales consultants at the end of the quarter were 700 compared with 724 in the year-ago period. Segment e-commerce sales stood at $48 million, reflecting 11.6% of segment net sales.
Other Financial Aspects
The company ended the reported quarter with cash and cash equivalents of $101.3 million, long-term debt (including capital leases) of $1,083.9 million and total stockholders’ equity of $295.9 million.
During the third quarter, the company provided cash flow from operations of $52 million. Capital expenditures came in at $23.1 million during this time.
Tax 2022 Outlook
Taking into account the impact of continued inflationary pressures and unfavorable foreign currency translations, management revised its fiscal 2022 guidance.
For fiscal 2022, net sales are anticipated to decline by almost 2% year over year, including an unfavorable impact from foreign currency exchange rates of roughly 70 bps. Earlier, the metric was expected to be flat to drop 2% year over year in fiscal 2022.
Net store count is anticipated to decline by 90 stores, reflecting management’s focus on optimizing the store portfolio. Adjusted gross margin is likely to expand by nearly 50 bps year over year. The adjusted operating margin is envisioned to come in at approximately 10.5%. Earlier, management envisioned the adjusted operating margin to be approximately 11%.
The Zacks Rank #4 (Sell) company’s shares have fallen 9.6% in the past three months compared with the industry’s 9.2% decline.
3 Hot Retail Stocks
Here we have highlighted three better-ranked stocks, namely, UltaBeauty ULTA, Tractor Supply Company TSCO and Dollar Tree DLTR.
Ulta Beauty, which operates as a retailer of beauty products, has a Zacks Rank #2 (Buy). Ulta Beauty has a trailing four-quarter earnings surprise of 49.8%, on average. ULTA has an expected EPS growth rate of 10.7% for three-five years. you can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 10.4% from the year-ago reported number.
Tractor Supply Company, the largest rural lifestyle retailer in the United States, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 12.4%, on average.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial year sales and EPS suggests growth of 10.7% and 11.4%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 10.1% for three-five years.
Dollar Tree operates discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three-five years.
The Zacks Consensus Estimate for Dollar Tree’s current financial year revenues and EPS suggests growth of 6.7% and 40.5%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
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Sally Beauty Holdings, Inc. (SBH): Free Stock Analysis Report
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