Why European Wax Center Stock Just Crashed 26%

Core Viewpoint - European Wax Center is facing significant challenges with growth, as evidenced by a sharp decline in stock price following earnings results that beat expectations on profit but missed on sales [1][5]. Financial Performance - Analysts had forecasted earnings of $0.08 per share on sales of $61.3 million for the second quarter, but the actual earnings were $6 million, or $0.12 per share, while sales were $59.9 million [2][3]. - Earnings grew by 6% year over year, despite only a 1% increase in sales [3]. Management Changes - The company announced a change in leadership, with David Willis stepping down as CEO and being replaced by David Berg, which raises concerns among investors [3][6]. Future Guidance - European Wax Center has revised its guidance for fiscal 2024, reducing the number of planned new shop openings from 80 to between 27 and 32, with 15 already opened [4]. - The revenue forecast has been cut to between $216 million and $221 million, and the same-store sales growth forecast has been adjusted from 2%-5% to 0.5% to negative 1.5% [4]. Market Sentiment - The decline in sales at existing locations, coupled with a reduction in new store openings, has led to negative sentiment regarding the stock [5]. - The company did not provide a GAAP forecast but indicated that adjusted income would be between $19 million and $22 million, translating to no better than $0.45 per share, which is still above Wall Street's forecast of $0.37 [6].