Shares of Sally Beauty Holdings (NYSE: SBH) jumped as much as 19.2% early Tuesday, then settled to trade up around 8.5% as of 3:45 p.m. ET after the beauty products retailer's latest quarterly results technically arrived below expectations. Investors appear to be celebrating the company's otherwise resilient performance amid a difficult macroeconomic environment as inflation continues to fall.
A resilient quarter despite macro headwinds
For its fiscal fourth quarter of 2023, ended Sept. 30, Sally Beauty's net sales declined 4.3% year over year, to $921 million, including a comparable sales decline of 1.6%. That translated to non-GAAP (adjusted) net income of $45.7 million, or $0.42 per share. Analysts, on average, were modeling adjusted earnings of $0.46 per share on revenue of $930 million.
Nonetheless, Sally Beauty CEO Denise Paulonis noted the company's full fiscal-year results were in line with expectations laid out in the beginning of the year -- including a consolidated comparable sales increase of 1.4%. Sally beauty also generated operating cash flow of $116.5 million during the quarter.
"We drove a comparable sales gain, maintained healthy gross margins and generated strong cash flow from operations against a rapidly shifting backdrop," Paulonis stated, adding that the company is "executing well" on strategic priorities aimed at reaccelerating revenue growth and improving profitability.
What's next for Sally Beauty stock?
Looking ahead to the new fiscal year, Sally Beauty issued guidance calling for net sales and comparable sales to be roughly flat from fiscal 2023, assuming expected pressure on consumer spending offsets the positive impact of strategic growth initiatives. By comparison, Wall Street's consensus estimates called for modest growth of roughly 1.4% for the coming year.
It also certainly helped this morning that the broader market rallied after the latest Consumer Price Index (CPI) report indicated inflation has continued to moderate. Assuming encouraging inflation trends persist into the new year, it would have a significant positive impact on consumer-sensitive businesses like Sally Beauty.
I still prefer to watch this story unfold from the sidelines until I see more tangible signs of a return to sustained profitable growth, but it's hardly surprising to see Sally Beauty stock rebounding nicely in response today.
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Steve Symington 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.
