Core Insights - Sally Beauty Holdings, Inc. (SBH) reported fiscal first-quarter 2026 results with top line slightly below and bottom line above Zacks Consensus Estimates, both metrics increased year over year [1] Financial Performance - Adjusted earnings were 48 cents per share, exceeding the Zacks Consensus Estimate of 47 cents, marking a 12% increase from 43 cents per share in the prior year [2] - Consolidated net sales reached $943 million, slightly below the Zacks Consensus Estimate of $944 million, reflecting a 0.6% increase from $937.9 million in the year-ago period [3] - Global e-commerce sales grew 11% to $111 million, accounting for 11.7% of total net sales [3] Margin and Cost Analysis - Adjusted gross margin expanded by 50 basis points to 51.3% [4] - Adjusted selling, general and administrative expenses rose to $404 million, an increase of $6 million from the previous year [4] - Adjusted operating earnings were $80 million, at the higher end of management's guidance, with an adjusted operating margin of 8.5% [4] Segment Performance - Sally Beauty Supply segment net sales increased by 1.2% year over year to $531.6 million, with comparable sales climbing 0.1% and operating margin declining by 50 basis points to 14.7% [5] - Beauty Systems Group segment net sales decreased by 0.2% to $411.6 million, with comparable sales down 0.2%, but operating margin improved by 90 basis points to 13.1% [5] Financial Health - At the end of the fiscal first quarter, cash and cash equivalents were $157.2 million, long-term debt was $842.5 million, and total stockholders' equity was $823.6 million [6] - Cash flow from operations was $93 million, with free cash flow of $57 million; the company repaid $20 million of term loan B debt and repurchased 1.4 million shares for $21 million, resulting in a net debt leverage of 1.5x [6] Future Outlook - The company raised the lower end of its fiscal 2026 EPS guidance to $2.02-$2.10 from the previous $2.00-$2.10, while expecting consolidated net sales of $3.71-$3.77 billion and comparable sales growth to be flat to up 1% [7][8] - For Q2 fiscal 2026, consolidated net sales are projected to be $895-$905 million with comparable sales growth of 0.5-1.5%, and adjusted EPS is expected to be 39-42 cents [9]

Core Viewpoint - The company maintains a positive outlook for FY25E despite a muted retail sales trend in 2025, with a projected sales growth of likely mid-single digits (MSD) and net profit growth, supported by store expansion and strong e-commerce performance [2][3][4]. Financial Performance - In 1H25, the company's sales increased by 5% to RMB 3.16 billion, while net profit rose by 5.5% to RMB 604 million, aligning with estimates [5]. - The operating cash flow saw a 22% year-over-year decline, and inventory increased by 28% year-over-year, but these figures are considered manageable [5]. - The gross profit (GP) margin and operating expenses (opex) were weaker than estimates, but this was offset by better-than-expected other income and a lower tax rate [5]. Retail Sales Trends - Retail sales growth in 2025 is described as muted, with same-store sales growth (SSSG) at 0% in 1H25, primarily due to a weak macro environment and warm winter [2]. - However, retail sales growth turned positive in 4Q24 compared to negative growth in 3Q24, aided by government stimulus and e-commerce efforts [2][3]. Strategic Initiatives - The company opened around 100 new stores in 1H25, representing a 4.4% year-over-year growth, which is an acceleration compared to 1.8% in 2H24 [3]. - E-commerce sales growth continues to outperform offline sales, indicating a shift in consumer purchasing behavior [2][3]. - Management is focused on enhancing customer experience and brand equity, which is expected to gradually increase customer satisfaction and repeat purchase rates [3]. Future Guidance - The company has reiterated its FY25E guidance for positive sales and net profit growth, with a long-term target of RMB 10 billion in retail sales and a 15%+ net profit margin [3][4]. - The forecast includes a 5% sales growth and a 6% net profit growth for FY25E, despite a slight downward revision in profit estimates for FY25E, FY26E, and FY27E [4][5]. Valuation and Investment Outlook - The company maintains a "BUY" rating and has raised the target price to HK$ 18.68, based on a 10x FY25E P/E ratio [4]. - The current trading P/E is 8x FY25E, below the 8-year average of 9x P/E, with an attractive dividend yield of 9% [4].