Sally Beauty Holdings (SBH US) – encouraging 2Q results

Company: Sally Beauty Holdings (SBH US)

QMG product view: POSITIVE (US52.33 – Retailers of cosmetic & toilet goods)

Event: Q2 15 Results

Highlights:

  • Revenue: $937.8m (+2% yoy)
  • Operating income: $130.5m (+4.2% yoy)
  • Operating margin: +38bps to 16%
  • Same store sales growth of 5.9% versus 2.2% in Q2 14

QMGI comment:

This is an encouraging set of Q2 results from Sally Beauty Holdings (+3%), with EPS growth topping market estimates ($0.39 vs. $0.36) and consolidated same store sales growth of 2.8% in Q2 15. Our data highlights continued strength across US retailers of cosmetic and toilet goods, with margin growth of +197bps and sales growth of 9.7% yoy  (driven by strong volumes +8.7% yoy) – all of which are ahead of the trailing 3-year average. Additionally, while pricing power remains limited, costs remain under control (-0.9% yoy), aiding margin growth. With approximately 80% of SBH’s stores/distribution outlets located in the USA, QMG’s product data provides detailed insight on SBH’s sales and margin trends. We see scope for upgrades with consensus sales forecast sitting below QMG’s product level data (QMG +9.7% vs. cons +3.3%) and a similar trend is evident in margin growth (QMG +197bps vs. cons +0.11bps). With the shares trading at a slight premium to historic multiples, this implies that the upside to consensus earnings from QMG’s observations is not yet reflected in the share price. We retain our positive view on SBH in our US focus list.

Retailers of cosmetic & toilet goods (US52.33) – Price/Cost/volume

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