European Wax Center(US:EWCZ)2025-05-14 13:02Financial Data and Key Metrics Changes - System wide sales for Q1 fiscal 2025 reached $225.9 million, a 2.1% increase from $221.4 million in the previous year, driven by the shift in the Easter holiday and payment timing [6][23] - Same store sales grew by 70 basis points, but adjusting for the Easter shift, it would have been approximately flat [23] - Adjusted EBITDA increased by 7.2% to $18.8 million from $17.5 million, with an adjusted EBITDA margin rising to 36.5% from 33.7% [25] - Adjusted net income rose by 10.3% to $9.5 million from $8.6 million [26] Business Line Data and Key Metrics Changes - Total revenue decreased by approximately $400,000 or 90 basis points to $51.4 million, primarily due to lower retail and wholesale product revenue [24] - The company ended Q1 with 1,062 centers, representing a 1% growth year over year, with five gross openings and ten closures, resulting in five net center closures [22] Market Data and Key Metrics Changes - The company is experiencing stable trends in mature center transactions year to date, with expectations for flat to positive same store sales growth [29][82] - The macroeconomic environment remains uncertain, but the core guest base has shown resilience [81] Company Strategy and Development Direction - The company aims to focus on driving sales, improving profitability, and reigniting unit growth, emphasizing the importance of a strong marketing engine and franchisee support [9][10][19] - A more sophisticated development approach is being implemented, focusing on profitable expansion and identifying underpenetrated trade areas for future growth [18] - The company is actively exploring alternative sourcing options to mitigate tariff impacts on product costs [31][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertain consumer backdrop and supply chain environment but remains confident in the fundamentals of the business model [7][28] - The outlook for 2025 is reiterated, with expectations for system wide sales between $940 million and $960 million, and same store sales expected to be flat to positive 2% [30][34] Other Important Information - The company has made significant progress in assembling a new executive team to execute strategic priorities [20] - The marketing strategy is being refined to better target high-value guests and improve guest engagement [12][14] Q&A Session Summary Question: Can you talk about the game plan going forward and the potential tariff impact? - Management is pleased with progress and sees stability in the business, with no material changes in promotional activity expected [41][44] - The company is actively exploring alternative sourcing options to manage tariff exposure [46][47] Question: What are you hearing from franchisees regarding center closures? - Franchisees are passionate about the brand, and the company is focused on building strong partnerships to improve profitability and minimize closures [50][52] Question: Can you provide insight into the increase in capital investment? - The increase is primarily due to inflationary pressures rather than fundamental changes in the business model [60] Question: What are the key themes for the upcoming franchise convention? - The convention will cover a full situation assessment, opportunities, and a plan to maximize potential [62] Question: How do you prioritize marketing and franchisee execution? - The primary focus is on the marketing funnel and franchisee execution, with ongoing efforts to improve guest experience and profitability [100][101] Question: What is the strategy for dealing with higher input prices due to tariffs? - The company is evaluating all options, including potential price adjustments, but aims to manage costs effectively without compromising the brand [112]