Skip to main content

Market Overview

RayJay Stays Bearish On Sally Beauty After Q1 EPS Beat

Share:
RayJay Stays Bearish On Sally Beauty After Q1 EPS Beat

Sally Beauty Holdings, Inc. (NYSE: SBH) looked pretty after its first-quarter earnings report Tuesday: a 57-cent bottom line beat a 53-cent estimate, same-store sales rose marginally and the stock closed up 3.7 percent.

But the salon supplier couldn’t sway the Street's bears.

The Analyst

Raymond James analyst Joseph Altobello maintained an Underperform rating on Sally Beauty.

The Thesis

Altobello conceded progress in key areas, including Sally’s first positive comps in over two years. But the comparison period was unimpressive, and domestic margin improvements were offset by weakness in Europe, the analyst said in a Tuesday note. 

Additionally, a sales decline prompted a miss of top-line estimates, and inventory investments led to a 50-percent decline in operating cash flow and two-thirds decline in free cash flow. The beauty systems group segment also suffered gross margin erosion due to category mix shift, the vendor funding schedule and boosts in promotional activity.

“While we recognize management’s ongoing efforts to accelerate growth and improve profitability by redeploying its ample cash flow back into the business after years of underinvestment, we remain concerned with the company’s ability to drive traffic within its Sally segment in a challenging retail environment,” Altobello said. 

While firmly bearish on the stock, the analyst said he's watching the expanding membership base for Sally’s loyalty program and a recently initiated supply chain modernization strategy.

Price Action

Sally Beauty shares were down 4.36 percent at $18 at the time of publication Wednesday. 

Related Links:

Sally Beauty Supply Holds More Risk Than Reward, Jefferies Says In Downgrade

4 Reasons Why Sally Beauty Was Hit With A BofA Downgrade

Latest Ratings for SBH

DateFirmActionFromTo
May 2021Morgan StanleyMaintainsEqual-Weight
Mar 2021OppenheimerDowngradesOutperformPerform
Feb 2021Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for SBH
View the Latest Analyst Ratings

 

Related Articles (SBH)

View Comments and Join the Discussion!

Posted-In: Joseph Altobello Raymond JamesAnalyst Color Earnings News Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
PHXSeaport GlobalInitiates Coverage On
AFCGLake StreetInitiates Coverage On29.0
OSSNoble Capital MarketsUpgrades7.0
NCNOGabelli & Co.Upgrades
HAECJS SecuritiesUpgrades
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.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
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