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Sally Beauty (SBH) Surges More Than 20% in a Year: Here's Why

Sally Beauty Holdings, Inc. SBH is benefiting from growing online business and strength in its Transformation Plan. The company is undertaking prudent buyouts to enhance growth. Owing to these upsides, shares of the Zacks Rank #2 (Buy) company have increased 23.5% in the past year against the industry’s 23.5% decline. The stock has comfortably outpaced the Zacks Retail and Wholesale sector’s decline of 17.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Online Business: Key Growth Driver

Sally Beauty has been undertaking efforts to augment its online business amid the pandemic. Robust investments to enhance the digital space have been yielding. In fourth-quarter fiscal 2021, global e-commerce sales contributed nearly 7.1% to the company’s total net sales. Online business reflected gains from a focus on digital capabilities as well as the implementation of strategic initiatives around fulfillment and customer engagement. The company’s Buy Online, Pick Up In-Store (BOPIS) service continues to drive growth. Sally U.S. and Canada stores contributed 34% to e-commerce sales during the fiscal fourth quarter. The company’s rapid delivery at Sally U.S. and Canada have been gaining traction. Sally Beauty completed the re-platforming of its website at the Beauty Systems Group (BSG) segment. The company introduced BOPIS and rapid delivery services across its BSG unit’s territories.

Prudent Acquisitions Driving Growth

Sally Beauty intends to strengthen its business on the back of strategic acquisitions. In September 2020, Sally Beauty’s subsidiary BSG acquired La Maison Ami-Co Inc. — a professional beauty products distributor in the Canadian province of Quebec. Per the deal, Sally Beauty acquired 10 La Maison Ami-Co stores. This transaction added 17 direct sales consultants and exclusive distribution rights of leading professional hair color and hair care brands like Wella Professional, Oribe and Goldwell across Quebec. The deal augments Sally Beauty’s business in Quebec and increases the reach of BSG’s professional beauty products in its Chalut store network as well as full-service business.

Transformation Plan on Track

Sally Beauty is on track with its efforts to get back on the growth trajectory. In this regard, management is focused on its Transformation Plan, as part of which it is progressing well with its four key goals — improving customers’ experience, strengthening e-commerce capacities, curtailing costs and enhancing retail fundamentals. In spite of the disruptions caused by the coronavirus outbreak, Sally Beauty is progressing well with the key objectives of its Transformation Plan. In its last earnings call, management highlighted that it is making significant progress in loyalty and personalization, which is related to the company’s digital strategy. In terms of innovation, the company has a strong pipeline of new products set to be launched in fiscal 2022. Further, the company is also undertaking prudent efforts to strengthen its supply chain and meet customers’ needs aptly. It is leveraging new capabilities and tools in service to recruit and retain customers. Sally Beauty is on track with its JDA implementation as part of its multi-year transformation program.

Strength in Sally Beauty’s ongoing transformation along with the aforementioned upsides are likely to keep its growth story going.

Hot Retail Bets

Some other top-ranked stocks are DICK'S Sporting Goods, Inc. DKS, Tractor Supply Company TSCO and Ulta Beauty, Inc. ULTA

Ulta Beauty, the leading beauty retailer, presently flaunts a Zacks Rank of 1. ULTA has a trailing four-quarter earnings surprise of almost 76%, on average. Shares of ULTA have rallied 23.8% in the past year.

The Zacks Consensus Estimate for Ulta Beauty’s fiscal 2022 sales and earnings per share (EPS) suggests growth of 6.9% and 5%, respectively, from the year-ago reported figure. ULTA has an expected EPS growth rate of 16.5% for three-five years.

Tractor Supply Company, a rural lifestyle retailer, currently carries a Zacks Rank of 2. TSCO has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of TSCO have rallied 42.2% in the past year.

The Zacks Consensus Estimate for Tractor Supply’s 2022 sales and EPS suggests growth of 3.6% and 0.7%, respectively, from the year-ago reported figure. DKS has an expected EPS growth rate of 10.2% for three-five years.

DICK'S Sporting Goods, a sporting goods retailer, currently carries a Zacks Rank of 2. DKS has a trailing four-quarter earnings surprise of 104.2%, on average. Shares of DKS have rallied 68.8% in the past year.

The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial year sales and EPS suggests growth of 27.8% and 151.6%, respectively, from the year-ago reported figure. DKS has an expected EPS growth rate of 11.7% for three-five years.


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