Market Overview

Sally Beauty No Longer In The Eye Of This Beholder, D.A. Davidson Downgrades

Share:
Sally Beauty No Longer In The Eye Of This Beholder, D.A. Davidson Downgrades

A windblown Sally Beauty Holdings, Inc. (NYSE: SBH) is brushing out kinks. Citing hurricane impact, the company reported a 1.4-percent decline in same-store sales last quarter against Street expectations for a 1.1-percent rise.

The comps underperformance compounded top- and bottom-line misses and disappointing guidance, ultimately drawing out the cosmetics bears.

The Rating

D.A. Davidson analyst Linda Bolton Weiser downgraded Sally from Buy to Neutral and lowered her price target from $21 to $16.

The Thesis

With Sally reporting "disappointing" below-anticipated guidance for comps, gross margin expansion and SG&A expenses, Bolton Weiser said she doesn’t expect immediate improvement.

A forecast of net store closures coupled with enduring hurricane impacts in Puerto Rico justified decreases in 2018 estimates for:

  • same store sales from flat-to-up to flat-to-down;
  • operating profit from positive 2 percent to negative 4 percent;
  • earnings before interest, taxes, depreciation and amortization from $648 million to $609 million;
  • and earnings per share from $2.01 to $1.90.

“We project stability over the next few years, but we are concerned that slightly declining EBITDA could put downward pressure on share repurchase at some point,” Bolton Weiser said. “SBH has debt covenants that restrict repurchase at debt-to-EBITDA of 3.25x (currently 2.9x).”

Price Change

Sally shares plunged 3 percent on Davidson's report before rebounding to trade up on the day at $15.29.

Related Links:
Sally Beauty Gets A Rating Makeover, Morgan Stanley Downgrades
Will Amazon Buy Sally Beauty Supply?

Latest Ratings for SBH

DateFirmActionFromTo
Nov 2019DowngradesNeutralUnderperform
Jul 2019UpgradesUnderperformHold
Jun 2019MaintainsNeutral

View More Analyst Ratings for SBH
View the Latest Analyst Ratings

Posted-In: DA Davidson Linda Bolton Weiser Sally Beauty SupplyAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (SBH)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
KHCUBSMaintains31.0
RPAYCantor FitzgeraldMaintains18.0
CMSCredit SuisseDowngrades
PBCTStephens & Co.Maintains15.5
TTECCowen & Co.Initiates Coverage On50.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com