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Why Shares of Sally Beauty Holdings Surged Today

By Timothy Green – Updated Nov 8, 2018 at 1:51PM

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The top line is still under pressure, but the bottom line is starting to perk up.

What happened

Shares of Sally Beauty Holdings (SBH -1.73%) rose on Thursday after the beauty supplies retailer and distributor reported its fourth-quarter results. Despite a decline in same-store sales, the company managed to beat analyst estimates for both revenue and earnings. The stock was up about 20.2% at 1 p.m. EST on Thursday.

So what

Sally Beauty reported fourth-quarter revenue of $966 million, down 0.8% year over year but about $3 million higher than analysts were expecting. Same-store sales slumped by 0.2% overall, with flat same-store sales in the Sally Beauty Supply segment and a 0.8% same-store sales decline in the Beauty Systems Group segment. Global e-commerce sales surged 30.1% year over year.

A rising stock chart.

Image source: Getty Images.

Non-GAAP earnings per share (EPS) came in at $0.51, up 13.3% year over year and $0.04 better than the average analyst estimate. A lower tax rate, lower interest expense, and a reduced share count drove the company's earnings growth. GAAP operating income was down 7.7% year over year.

Now what

For fiscal 2019, Sally Beauty is expecting flat same-store sales, flat gross margin, and mid-single-digit growth in both GAAP and non-GAAP EPS. Lower interest expense from reduced indebtedness and a lower share count will help drive per-share earnings higher despite a lack of sales growth.

While Sally Beauty is still grappling with declining comps, earnings growth coupled with guidance calling for a sales-trend improvement was enough to send the stock soaring.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Sally Beauty Holdings, Inc. Stock Quote
Sally Beauty Holdings, Inc.
$13.07 (-1.73%) $0.23

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