Why Sally Beauty Stock Jumped 11% Today – Motley Fool

What happened

Shareholders of Sally Beauty (NYSE:SBH) beat the market on Thursday, as shares rose 11% by 12:45 p.m. EST. The beauty supply retailer reported solid quarterly earnings while forecasting more gains in the new fiscal year that just began.

So what

Sales through late September, which marks the end of Sally Beauty’s fiscal year, rose 3% in the fourth quarter, management reported in a filing with the Securities and Exchange Commission today. Comparable-store sales were up 2.1%, beating the forecast that executives issued back in August.

Image source: Getty Images.

The beauty products retailer noted strength in its e-commerce channel, and profitability held steady despite increased cost pressures.

In a press release, management highlighted the company’s improving sales and finances over the past year. “We rebounded strongly from last year’s pandemic challenges,” CEO Denise Paulonis said, “while generating strong profitability and cash flow and reducing our debt levels by over $400 million.”

Now what

Investors were just as happy to hear Sally Beauty’s optimistic outlook for fiscal 2022, which began in early October. Sales should rise by between 3% and 4% despite a modest decline in the store count, according to executives.

That prediction implies slightly faster comps growth than the company has targeted over the long term. Gross profit margin should rise slightly, too, and edge past management’s goal of 50% of sales.

The combination of improving financial trends and strong growth shows that Sally Beauty can generate solid profits even in a period of rising costs and supply chain challenges. Those gains aren’t dependent on a growing physical-store footprint, either. As a result, Sally Beauty might have more room to expand revenue in 2022 and beyond

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Source: https://www.fool.com/investing/2021/11/11/why-sally-beauty-stock-jumped-11-today/

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