European Wax Center's Q4 2024: Conflicting Signals on Store Closures, Franchisee Agreements, and Consumer Trends

These are the key contradictions discussed in European Wax Center's latest 2024 Q4 earnings call, specifically including: Store Closure Strategy, Franchisee Economic Agreement, and Consumer Behavior and Strategic Adaptations:



Store Closures and Unit Economics:
- European Wax Center expects 40 to 60 centers to close this year, with 10 to 12 new centers opening.
- The closures are due to declining transactions, profitability pressures, and franchisee challenges, exacerbated by a challenging macro environment.

Marketing and Brand Engagement:
- The company is enhancing its marketing infrastructure and data analytics to improve guest engagement and drive traffic to centers.
- This effort aims to better target new guests and improve frequency among non-core guests, as core guest retention remains strong.

Leadership Changes and Strategic Focus:
- European Wax Center appointed new executives, including Tom Kim as CFO, Katie Mullen as Chief Commercial Officer, and Chris Andrews as Chief Information and Digital Officer.
- The new leadership is focused on driving marketing and digital transformations, aimed at supporting long-term growth and infrastructure improvements.

Profitability and Cost Management:
- Gross margin improved by 190 basis points to 74.3%, driven by cost savings and a higher mix of royalty and marketing fees.
- The company continues to manage costs effectively, with expectations of modest gross margin expansion in 2025.