Piper Jaffray Downgrades Sally Beauty To Hold Following Survey

Piper Jaffray’s Stephanie S. Wissink downgraded the rating for Sally Beauty Holdings, Inc. SBH from Overweight to Neutral, maintaining its $31 price target. She mentioned that the company’s shares had reached their fair value, a view that was reinforced by Piper Jaffray’s Women's Survey.

Proprietary Women's Survey Bodes Well For Specialty Formats

“Specialty retail formats are increasingly preferred by women in our proprietary surveys,” analyst Stephanie Wissink wrote. The Spring 2016 results indicted improvements both in the intent to spend as well as in dollar spending. The highest spending expectations were in make-up and fragrance, followed by skin, and then hair care and color.

What It Means For Sally Beauty

Stephanie added, however, that frequency in Sally Beauty’s core categories remained flat as compared to prior years, since the company has limited exposure to the highest growing, traffic driving categories. She cited strengthening loyalty at competitive specialty beauty retailers as a key risk for the SBS segment, since this would result in an increase in customer acquisition and retention costs.

“For investors that can look beyond 2016 and into the period when tactical drivers likely contribute, we would recommend maintaining holdings,” Stephanie commented. She believes that Sally Beauty would be able to sustain low-single-digit comps, although its new merchandising initiatives would “take time to influence the overall model performance.”