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Sally Beauty's (SBH) Robust E-commerce Business Bodes Well

Sally Beauty Holdings, Inc. SBH looks well positioned on the back of its robust growth-oriented strategies. In this context, the company’s solid e-commerce business is yielding. Also, Sally Beauty’s prudent acquisitions along with robust transformational initiatives bode well.

Analysts are optimistic regarding the stock’s performance. The Zacks Consensus Estimate for fiscal 2020 earnings improved 12% to $1.12 per share in the past 30 days. We note that shares of Sally Beauty have surged 51.4% in the past three months compared with the industry’sgrowth of 39.4%.

E-commerce Business: A Key Driver

Sally Beauty’s continued focus on enhancing its digital capabilities are yielding. The company’s e-commerce sales increased 28% year over year in the second quarter of fiscal 2020. The uptick can be attributed to increased consumer demand on digital platforms, which provided it a cushion amid coronavirus-led store closures. Following store closures induced by the pandemic, Sally Beauty increased its e-commerce capabilities significantly. In March, the company launched digital operations in Canada along with ship-from-store in 16 stores across the region. The company expanded its ship-from-store as well as same-day delivery options in the United States. Sally Beauty also replatformed its French and German digital sites to aid business in the United Kingdom.

Efforts to Enhance Consumer Experience

Sally Beauty is undertaking several initiatives to enhance customer shopping experience. The company successfully implemented the first phase of a multi-year JDA supply-chain platform in first-quarter fiscal 2019. As part of this, the company has launched five elements. The modules launched until now include SKU setup, demand planning, space planning, EDI and perpetual inventory.

Further, Sally Beauty had rolled out Oracle-based point-of-sale (POS) systems to nearly 2500 stores in the first quarter of fiscal 2020. Apart from these, the company is focusing on enhancing areas such as merchandising, BSG store operations, marketing, e-commerce, digital product as well as planning and allocation by adding new management and talent. In relation to digital strategies, the company implemented Order Management System across its network. Notably, Sally Beauty is reducing ‘order to customer’ timing and improving flexibility of shopping option.

Wrapping Up

Sally Beauty has been majorly affected by temporary store closures amid the coronavirus outbreak. Nevertheless, the company has undertaken a number of measures to improve its financial position amid the crisis. In this regard, Sally Beauty moderated its near-term rent payments and significantly reduced marketing as well as back-office expenses. The company also made certain adjustments to its capital investment plans. Further, Sally Beauty is on track with reopening stores and implementing curbside pickup options as coronavirus-induced restrictions are being relaxed in many states.

We believe that all aforementioned upsides will continue to help this Zacks Rank #3 (Hold) company stay in investors’ good books.

Top 3 Retail Picks

Dollar General DG which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 12.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big Lots BIG, which sports a Zacks Rank #1,has a long-term earnings growth rate of 7.1%.

The Kroger KR, which sports a Zacks Rank #1,has a long-term earnings growth rate of 5.5%.

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