EWCZ vs. SBH: Which Beauty Retail Stock is a Better Buy Now?

Core Insights - European Wax Center (EWCZ) and Sally Beauty Holdings (SBH) target different segments within the beauty and personal care industry, with EWCZ focusing on a service-driven model through franchised waxing centers, while SBH emphasizes retailing professional-grade beauty products [1][2] European Wax Center (EWCZ) - EWCZ is developing a data-rich, digital-first marketing platform to enhance guest acquisition, introducing new tools in Q1 2025 to measure advertising effectiveness and reduce cost per acquisition [3] - The company is enhancing franchisee profitability and operational support by expanding the franchisee support team and increasing engagement with the learning management system by 50% [4] - EWCZ is adopting a disciplined expansion strategy, targeting underpenetrated areas for new center openings in 2026, supported by improved market planning tools and a rigorous site approval process [5] - Despite strategic advancements, EWCZ faces rising SG&A costs and elevated interest expenses, leading to a projected net reduction in center count for 2025 [6] - EWCZ's stock gained 54.8% over three months, outperforming SBH's 27.2% gain, reflecting strength in its digital and franchise model [9][16] - The Zacks Consensus Estimate for EWCZ's 2025 earnings per share (EPS) indicates a year-over-year growth of 35.6%, with estimates remaining unchanged at 61 cents [12] Sally Beauty Holdings (SBH) - SBH is focused on enhancing customer centricity, accelerating high-margin owned brand growth, and improving operational efficiency, with global e-commerce sales reaching $94 million in Q2 fiscal 2025, a 6% increase [7] - The company is executing a brand refresh starting May 2025 to enhance its position as a beauty destination, with positive feedback from initial store updates in Orlando [8] - Operational excellence is a priority for SBH, with the Fuel for Growth program delivering $20 million in pre-tax savings in the first half of fiscal 2025, and adjusted SG&A declining by $11 million in Q2 [10] - Despite these efforts, SBH is navigating a challenging macro environment with cautious consumer spending and softness in hair care categories [11] - The Zacks Consensus Estimate for SBH's fiscal 2025 EPS suggests a year-over-year growth of 3.6%, with estimates remaining unchanged at $1.75 [14] Comparative Analysis - EWCZ's forward P/E ratio is 7.51X, higher than SBH's 5.52X, indicating a market premium for EWCZ's growth potential [17] - EWCZ is better positioned for long-term growth due to its franchise-based model and digital marketing execution, while SBH's strengths in owned brands and cost control may be limited by softer category trends [19]