Why Sally Beauty Stock Popped Today
Key Points
Sally Beauty's profits are rising as its sales stabilize.
New product categories could reignite growth.
- 10 stocks we like better than Sally Beauty ›
Shares of Sally Beauty Holdings (NYSE: SBH) rose on Monday after the specialty retailer reported progress toward achieving sustainable earnings growth.
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A renewed focus on profitability
Sally Beauty's net sales inched up 0.2% year over year to $935 million in its fiscal third quarter, which ended on June 30.
The beauty supplies seller is closing underperforming stores as it prioritizes profits. These efforts are beginning to bear fruit.
Comparable sales for the company's remaining Sally Beauty stores open for at least 14 months climbed 1.6%. E-commerce was a notable growth driver, with online sales up 11% to $110 million.
Sally Beauty's cost-reduction initiatives are also bolstering its profit margins. Its adjusted gross and operating margins improved to 52.4% and 9.3%, respectively, up from 52% and 9.2% in the year-ago quarter.
All told, the retailer's adjusted net earnings increased 4% to $54 million. And its adjusted earnings per share, boosted by stock buybacks, climbed 8% to $0.55.
Better still, Sally Beauty generated $62 million in free cash flow during the quarter, which is enabling it to pay down debt and buy back its shares.
"We delivered solid EPS growth and strong cash flow while continuing to invest in the initiatives that are reshaping our customer experience, expanding our reach, and strengthening our competitive position," CEO Denise Paulonis said.
New products should fuel growth
Management now sees full-year sales of roughly $3.7 billion and earnings per share of $2.04 to $2.08.
During a conference call with analysts, Paulonis said new categories, such as fragrances and men's products, should allow Sally Beauty to win more market share in the years ahead.
"As we enter the final quarter of fiscal 2026, we remain focused on investing behind the growth initiatives that position Sally Beauty Holdings to deliver sustainable, profitable growth and long-term shareholder value," Paulonis said.
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Joe Tenebruso 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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