Why Sally Beauty Holdings Inc Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sally Beauty Holdings Inc  (NYSE: SBH  ) were getting dumped today, falling as much as 11% and finishing down 7.5% after a posting a disappointing earnings report and announcing its CEO succession plan.

So what: The beauty-products retailer saw revenue tick up 2.4% in its second quarter to $919.5 million, but that was short of analyst estimates at $932.8 million. Profits also missed, coming in at $0.36 against expectations of $0.39 as CEO Gary Winterhalter noted "extremely unfavorable weather" in the quarter. Still, the company managed to deliver a 1% gain in same-store sales, and Winterhalter said warm weather locations saw positive traffic, which bodes well for the company as a whole going forward.

Now what: Separately, the company also announced its CEO succession plan, saying it had appointed Christian Brickman as its new COO and president and that Brickman would replace Winterhalter as CEO one year from now. Winterhalter has been CEO since 2006, during which time the stock has tripled, so investors may be reluctant to see him go, but he will remain as chairman of the board through January 2018. Though Sally Beauty missed estimates in the quarter, I wouldn't be too concerned with the performance, as many retailers blamed poor weather for slow traffic, and the company still managed to grow comps during the period, which shows resilience and organic strength.

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