3 Reasons Why Sally Beauty (SBH) Is A Hot Investment Pick

Sally Beauty Holdings, Inc. (NYSE:SBH) appears to be a solid bet, given the company’s strong efforts to remain on growth trajectory. We expect the company to continue gaining from its focus on transformation plan, well-chalked buyouts and efforts to attract shoppers.

Backed by these upsides, shares of this Denton, TX-based company have gained approximately 11% against the industry’s decline of 2.2% in the past six months.



All said, let’s delve deeper into the major factors, which have been driving this Zacks Rank #1 (Strong Buy) stock.

Transformation Plan: Bodes Well

Sally Beauty is on track with its transformation plan that aims at cost reduction. The company initiated this plan in April 2018 to curtail costs and increase focus on its core products, like hair color and hair care. As part of the transformation plan, the company launched box colors and a new Sally Beauty Loyalty Program in all its Sally Beauty Supply stores. Also, it launched “ion” — a private label electrical appliance brand — across the Beauty Systems Group network.

In the third quarter, Sally Beauty reviewed freight expenses to achieve significant cost savings, and launched two new color lines — Arctic Fox and Wella ColorCharm Paints — to strengthen its hair product offerings. In sync with this, the company’s Beauty Systems Group segment recently inked a deal with Swedish vegan hair care brand, Maria Nila.

Of late, the company declared that Beauty Systems Group has introduced new hair care lines from Guy Tang and Pravana. Also, Beauty Systems Group launched the new re-formulated hair color line Koleston Perfect. In addition, Sally Beauty Supply launched a new color line – Good Dye Young. All these exciting product launches will help the company to cement its position.

Efforts to Attract Shoppers

The company has launched the Sally Beauty Loyalty Program and a point-of-sale system for the Sally Beauty Supply and Beauty Systems Group segments. Notably, Sally Beauty is set to pilot the first phase of a multi-year JDA supply-chain platform in fiscal 2019, which will help augment merchandising capabilities. Additionally, to boost digitalization, Sally stores will pilot “endless aisle” during the first quarter of fiscal 2019. Under this, out-of-stock products can be ordered via a store iPad and it will be delivered at the customers’ doorstep.

Furthermore, the company is making efforts to enhance its digital platform by updating its e-commerce and mobile commerce capabilities for enhancing customer’s shopping experience. To this end, management plans to revamp Sally’s e-commerce site. For first-quarter fiscal 2019, the company is on track with redesigning its e-commerce sites for both segments. Also, it is focused on training store associates and creating brand awareness among them.

Acquisitions: On Track

Sally Beauty has completed more than 35 acquisitions over the last 10 fiscals. The latest being the takeover of certain H. Chalut Ltee assets by the company’s BSG. With this, the company expanded its business for the first time in Quebec province. This acquisition included 21 stores, 40 distributor sales consultants, one warehouse and distribution rights for certain professional brands in Quebec.

We expect all the aforementioned factors to consistently boost the company’s performance and help it remain in investors’ good books.

Other Stocks to Consider

Dick's Sporting Goods, Inc. (NYSE:DKS) delivered average positive earnings surprise of 25.5% in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Office Depot, Inc. (NASDAQ:ODP) delivered average positive earnings surprise of 11.9% in the trailing four quarters and carries a Zacks Rank #2.

Five Below, Inc. (NASDAQ:FIVE) delivered average positive earnings surprise of 9.1% in the trailing four quarters. It has a long-term earnings growth rate of 30% and a Zacks Rank #2.

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