ZACKS·2025-12-18 15:21Core Insights - Sally Beauty Holdings, Inc. (SBH) and Coty Inc. (COTY) represent two distinct business models in the global cosmetics industry, with SBH focusing on specialty retail and professional beauty supply distribution, while COTY operates as a brand-driven manufacturer across various beauty categories [1][2] Business Models - Sally Beauty operates 4,422 stores globally, serving both DIY consumers and licensed professionals, with hair color being its largest and most resilient category [3] - Coty is a global beauty manufacturer with products sold in over 130 countries, with fragrance as its core strength and largest category [4] Growth Strategies - Sally Beauty emphasizes consistency and efficiency, achieving 1.3% consolidated comparable sales growth in Q4 fiscal 2025 and expanding gross margins to 52.2% [5][11] - Coty is pursuing a transformational approach, with mid-single-digit growth in its prestige fragrance category and ongoing integration of its fragrance operations [6] Digital Strategy - Sally Beauty's global e-commerce contributed 11.1% of net sales in Q4 fiscal 2025, focusing on profitability and customer lifetime value [7] - Coty has a larger digital presence, with e-commerce representing around 20% of sales, expanding partnerships in global e-commerce and social commerce [8] Financial Performance - Sally Beauty reported 1.3% comparable sales growth in Q4 fiscal 2025, generating $216 million in free cash flow and ending the year with a net leverage of 1.6x [10][11] - Coty experienced an 8% like-for-like revenue decline in Q1 fiscal 2026, with adjusted EBITDA falling 18% year over year [13] Outlook - Sally Beauty anticipates flat to modest comparable sales growth in fiscal 2026, supported by its core hair color category [12] - Coty expects a recovery in the second half of fiscal 2026, driven by fragrance launches and productivity savings [14] Consensus Estimates - The Zacks Consensus Estimate for Sally Beauty's fiscal 2026 EPS indicates an 8.4% year-over-year increase, while Coty's shows a 90.9% increase [15][16] Price Performance - Over the past year, Sally Beauty shares gained 24.3%, while Coty shares declined by 53.4% [18] - Sally Beauty trades at a forward P/E ratio of 7.14, while Coty's is at 7.23 [19] Investment Perspective - Sally Beauty is viewed as a more attractive near-term opportunity due to its focus on professional hair color and strong cash flow generation, while Coty remains in a transitional phase with higher volatility [20]