Beauty Stocks Plummeting: Could Sally Beauty Be the Next Victim?

Dallas, Texas – Sally Beauty Holdings, Inc., headquartered in Dallas, Texas, is a key player in the cosmetics and beauty care industry. With over 4,500 stores globally, Sally Beauty caters to both consumers and professionals through its “Sally Beauty” chain of stores and “Beauty Systems Group” division. The company has strategically developed its own brands, securing high margins, and holds exclusive distribution agreements with many top brands in the industry. Notably, Sally Beauty boasts 16 million loyalty members, contributing to a significant portion of its sales in the United States and Canada.

Sally Beauty has set forth strategic goals that could potentially lead to substantial financial improvements in the coming years. One of its key goals includes cost-saving initiatives that could amount to $50 million in fiscal year 2025 and $120 million in 2026. With approximately 105 million shares outstanding, these cost-saving measures could have a positive impact on the company’s bottom line, potentially increasing earnings per share.

The beauty industry continues to thrive as consumers increasingly focus on their appearance, driven by the rise in selfies, videos, and video calls. In a move to expand its reach, Sally Beauty recently partnered with DoorDash, enabling same-day delivery through DashPass. This partnership enhances Sally Beauty’s competitive edge, especially against online retail giants like Amazon, known for their rapid delivery services.

Analysts project that Sally Beauty Holdings could earn $1.87 per share in 2024, with revenues expected to reach $3.72 billion. Earnings estimates for 2025 and 2026 show further growth potential, indicating that Sally Beauty shares are trading at an undervalued multiple of just 6 times earnings. Despite potential downside risks, including a slowdown in the U.S. economy and competitive threats, the company’s current valuation presents an opportunity for investors.

Overall, Sally Beauty Holdings remains an intriguing investment opportunity, particularly following a recent pullback. With its strong market position, strategic cost-saving initiatives, and growth prospects, the company stands poised for potential upside in the future. As always, investors should consider consulting a financial advisor before making any investment decisions.