Sally Beauty (SBH) Down 3.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Sally Beauty (SBH). Shares have lost about 3.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sally Beauty due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sally Beauty Raises Low End of FY26 EPS View on Q1 Earnings Beat

Sally Beauty reported fiscal first-quarter 2026 results, wherein the top line came slightly below the Zacks Consensus Estimate, while the bottom line beat the Zacks Consensus Estimate, and both increased year over year.

SBH’s Q1 Performance: Key Metrics and Insights

Sally Beauty’s adjusted earnings were 48 cents per share, which came above the Zacks Consensus Estimate of 47 cents. The metric increased 12% from 43 cents per share in the year-ago period.

The company reported consolidated net sales of $943 million compared with the Zacks Consensus Estimate of $944 million. The metric increased 0.6% from $937.9 million posted in the year-ago period. Consolidated comparable sales remained flat year over year.

Global e-commerce sales grew 11% to $111 million, forming 11.7% of total net sales.

Sally Beauty’s Margin & Cost Details

The company’s adjusted gross margin expanded 50 basis points to 51.3%. Adjusted selling, general and administrative expenses rose to $404 million, up $6 million from last year.

Adjusted operating earnings were $80 million, which came at the higher end of the management’s guidance. The adjusted operating margin was at 8.5%.

SBH’s Sales Insights by Segments

Sally Beauty Supply: Net sales in this segment rose 1.2% year over year to $531.6 million. Comparable sales climbed 0.1%, and the operating margin declined by 50 basis points to 14.7%. The segment’s gross margin expanded 20 basis points to 59.8%.

Beauty Systems Group: Net sales declined 0.2% to $411.6 million. Comparable sales were down 0.2%, while the operating margin expanded 90 basis points to 13.1%, supported by a 50-basis-point improvement in gross margin to 40.2%.

Sally Beauty’s Financial Health Snapshot

SBH ended the fiscal first quarter with cash and cash equivalents of $157.2 million, long-term debt, including capital leases of $842.5 million and total stockholders’ equity of $823.6 million.

In the fiscal first quarter, cash flow from operations was $93 million, with free cash flow of $57 million. The company used cash to repay $20 million of term loan B debt and repurchased 1.4 million shares for $21 million, ending the quarter with net debt leverage of 1.5x.

What to Expect From SBH in the Future?

The company raised the lower end of its fiscal 2026 EPS guidance, while reiterating the rest of the outlook.

Management expects consolidated net sales of $3.71-$3.77 billion and comparable sales growth expected to be flat to up 1%. The adjusted operating earnings are anticipated to come in the range of $328-$342 million. Management now envisions adjusted diluted EPS of $2.02-$2.10 compared with the earlier view of $2.00-$2.10. Free cash flow is projected at $200 million, with roughly half allocated to capital expenditures of about $100 million.

For the second quarter of fiscal 2026, consolidated net sales are guided to be $895-$905 million, with comparable sales growth of 0.5-1.5%. Adjusted operating earnings are projected at $68-$71 million, with SG&A returning to a more normalized quarterly pattern and stable expense trends over a two-year period. Adjusted diluted EPS is expected to be 39-42 cents for the second quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -9.16% due to these changes.

VGM Scores

At this time, Sally Beauty has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sally Beauty has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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Sally Beauty Holdings, Inc. (SBH): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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