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Back when we were first taught how to read, everything was always presented in a context. Of course, for a 5 yr old, the most familiar context was the family context. What could be more appropriate than Dick, Jane and Sally.
Dick was the explorer/risk taker, Jane was the voice of reason and Sally was the toddler who always broke the dishes, fell into the hole, had the dog jump up on her yada yada yada. You wonder why anyone would want to have one of those around anyway. Of course all of this advanced reading was presented to $$$MR. MARKET$$$ in first grade, when he already knew how to read the encyclopedia Brittanica in nursery school. So it goes.
Of course life does go full circle, and there’s something about that Sally that one would certainly find useful and beautiful someday.
Today I bought Sally Beauty Holdings (SBH) at 26.92. I will sell it in 4 – 6 weeks at 31.01. Here’s why I like SBH:
Look at this magnificent chart. SBH is up 60% in the last 52 weeks, yet its PE is only 23. Why is the stock going up so much? And so consistently?? This company is a money machine…that’s why!
Sally Beauty Holdings, Inc., through its subsidiaries, engages in the distribution and retail of professional beauty supplies primarily in North America, South America, and Europe. The company operates in two segments, Sally Beauty Supply and Beauty Systems Group. The Sally Beauty Supply segment operates a chain of cash and carry retail stores that provide various third-party branded and exclusive-label professional beauty supplies, including hair color products, hair care products, hair dryers and hair styling appliances, skin and nail care products, and other beauty items to retail consumers and salon professionals. This segment sells various third-party brands, such as Clairol, Revlon, and Conair, as well as a selection of exclusive-label merchandise. The Beauty Systems Group segment distributes professional brands of beauty products directly to salons and salon professionals through its sales force and professional-only stores. This segment operates stores under the CosmoProf service mark. It sells a range of third-party brands, such as Paul Mitchell, Wella, Sebastian, Goldwell, Joico, and TIGI. As of September 30, 2011, the company operated a multi-channel platform of 4,128 company-owned stores, 181 franchised stores, and 1,116 professional distributor sales consultants in the United States, Puerto Rico, Canada, Mexico, Chile, the United Kingdom, Ireland, Belgium, France, Germany, and Spain. Sally Beauty Holdings, Inc. was founded in 1964 and is headquartered in Denton, Texas (home of the Von Erich wrestling family).
Sally began with a single store in New Orleans in 1964. Alberto-Culver bought the business in 1969. Sally's CEO, Gary Winterhalter, has served in executive positions with Sally since 1996, when it was still part of that beauty care product maker and distributor. Sally split off and went public at the end of 2006. Since then, it's been expanding, while deleveraging. Sally has grown, largely through acquisitions. It entered Great Britain in the 1980s and expanded into other parts of Europe. In 2009, it entered Chile. Now it's eyeing other fast-growing Latin American markets, such as Argentina and Brazil. More than 80% of revenue comes from the U.S., though the company says it still has green-field expansion potential both domestically and abroad.
What’s the story here? When you boil it down, everyone wants to look good. Women will spend money to look better. It’s an inelastic, recession proof requirement. The economy just doesn’t matter. What matters is women want to look good. For many women, trips to the salon are nonnegotiable. But some will stretch out the intervals between visits when times are tough. But even when customers do delay a salon visit, many will shop at Sally Beauty retail stores for hair colorings and other products for in-between touch-ups at home. Women have to keep doing it. Even if there's a recession, you're not going to not do your coloring, or your straightener, or whatever mysterious things women do when guys aren’t around.
How do I know this? It’s in the numbers. Since 1990, the total revenues in the beauty supply industry has grown each and every year. That’s a 5% CAGR growth each and every year for over 21 years! For the last 10 years, Sally Beauty has grown their revenues each and every year for a 7% CAGR. You hear what I’m saying? There hasn’t been a year in the last 10 years where SBH did not grow their revenues! The EPS has followed suit with CAGR of 46% in the last 5 years. The very interesting thing is, sales are accelerating this year!!
It’s a machine..a machine I tell you. For the last 6 years, they’ve built almost 100 stores per year. These stores only require about $70,000 in capital and they can run their business on only about $85,000 in inventory. The stores start contributing positive gross margin in about 4 months and total payback is less than 2 years. With borrowing costs at an all time low, this is a MONEY MACHINE. Keep putting up stores, keep raking in the dough.
With 4,000 stores in the U.S. and 10 other countries, SBH sells beauty products to both individual consumers and to small and midsize salons. Sally's sales growth has been remarkably consistent, as its female customers are extremely reluctant to cut back on hair supplies. It's an industry that doesn't fluctuate a lot with the economy. With typical total customer purchase of $16, it's an affordable luxury. It sells high-end and professional hair care and makeup brands not always carried at large-box retailers. It also has more than 1,000 sales agents selling directly to large and small salons.
The customers love it!
“My visit was just yesterday. I got two professional hair conditioning treatment packs, some brunette pigmented shine glaze, and a big tooth shower comb all for about $6 out the door! I was a teeny bit disappointed to find a limited make up selection, but all the other cool beauty tricks, tools, & treasures definitely made up for it! I used most of the stuff I bought, so far the frizz is gone, my hair smells Uh-May-Zing, and is shiny & suuuuuuuper soft! SCORE!”
“For those who know what they like, and know where to get it, Sally is a great resource. Why spend more on false eyelashes from a department store? Same ones are available here, for so much less. Ditto on hair products, nail polishes, appliances, solutions, ideas, etc. The staff is friendly and honest here, and they have plenty of info on their products. Combine the low prices with their coupons /Sally card discount, and you'll be neck-deep in neat, fun products you'll dig. Located in a shopping complex that has a lot of things I like (Starbuck's, pet supplies, Hawaiian BBQ), I can definitely make some time to take advantage of some new trend in lip color.”
“I was greeted by a hello and a smile when I walked in the shop door. The staff members all helped me and different times (when I asked them, which seemed appropriate), and they all seemed friendly. The pricing was good for the quality of product they offer. They have a lot of stuff for hair care, skin care, and overall pampering. I will be going back as I get more creative with my future beauty endeavors!”
The numbers support this fact. Last quarter, Sally Beauty reported same store sales growth of 9.1% in Q2 2012 compared to 6% in the same quarter last year. Net sales were up 10.9% to $889.3 million, which equated to Q2 net earnings of $67.8 million or 35 cents per share, an increase of 34.6% compared to Q2 2011. Gross margin widened 20 basis points to 49.1%.
Their bottom line has topped ANAL-yst estimates for the last four quarters,
exceeding the consensus EPS Estimate by an average of 7.91% during that time.
Sally’s balance sheet is also solid. They have ample liquidity with strong cash flow and a revolving line of credit for $400 million that they have recently refinanced.
What the SBH earnings machine has going for it:
• Strong, Consistent Financial Track Record
• Significant Cash Flow Generation
• Experienced and Motivated Management Team
• Solid Growth Potential
• U.S. professional beauty supply marketplace, in distribution dollars, was roughly $8.4 billion in 2011
• Leading exclusive / full-service distributor in North America
• 1.2x sales of next largest competitor
• Largest open-line retailer/distributor in U.S. based on store count
• Competition is limited
• Further expansion of internet channel.
This stock epitomizes the word momentum. It has continuously performed since July of 2010. Even the downdrafts in August 2011 which sent SBH below $15 still didn’t push the stock below its 200 day MA.
SBH is expected to earn $1.36 in FY2012 and $1.59 in FY2013 according to the ANAL-ysts estimate and SBH is expected to earn 38 cents when they report on August 9th. This is the epitome of hilarity. Permit me to go powder my nose while I give you the real earnings ahead.
$$$MR. MARKET$$$ knows that SBH will earn $1.40 in 2012 and then crush it with earnings of $1.87 in 2013. Can’t lose can’t lose. Even if you take the $1.40 earnings in 2012 and multiply by today’s PE of 23, you get a stock price of $32.20 per share, which is higher than my sell target. Imagine where the stock will go in 2013 if you hang onto it (I won’t).
Here’s what the boss had to say:
“In summary, Sally Beauty Holdings had an excellent second quarter with strong sales performance and earnings growth. We reduced our long-term debt by $100 million lowering our debt ratios consistent with our capital structure objectives. As we head into the second half of the fiscal year, I’m optimistic that we will continue to deliver solid results and execute on our long-term objectives.”
“In summary we had a great second quarter, and when someone with our strong first quarter results, our year-to-date performance is outstanding. For the first six months of fiscal 2012, net sales are up 10% driven by same store sales growth of 8.1%.”
“Our consolidated gross margin is up 70 basis points with operating margin expansion of 160 basis points over the prior year. I anticipate this performance will continue and lead us to another six months of stronger results. The expectations that came out of that same report basically are same 4% or 5% growth for the next five years, I don’t know that I want to go out that far predicting industry growth. But we’ve always exceeded the industry growth, and I expect that we will – going forward I certainly hope so. And the industry is, as I’ve said and shown all you in many charts for years is a very consistent and stable industry. Historically, it has grown 3% to 5% over the last 27 years; though the 4% or 5% expectation for the next five years is certainly in line with history, and personally I would say that, I’m pretty comfortable that, that will be inline with what happens.”
“I think, as we said in our – kind of our earlier remarks, we are certainly considering other uses of cash. We publically talked about that, our sweet spot in terms of our leverage is between 2 to 2.5 times, and we’re right now at the midpoint of that. So we are actively having dialogue in terms of – what are some of the other uses of cash in terms of any kind of shareholder friendly activities, whether it be in the form of the share repurchase or dividend program.”
“We are also opening rapidly, as I mentioned a few minutes ago in France and we’re going to continue there. We believe we can have literally in the 100 of stores in France and we're somewhere in the 30s right now. So a lot of the expansion will be outside the U.S. and we continue to work very hard and getting a foothold in more of the South American countries which once we get that foothold I think we could open a lot of stores very quickly.”
“We continue to open a lot of stores in Chile, we started with a small base of 16 stores, but we basically doubled that and they’re all, they do extremely well. As Mexico we continue to open about 20% new stores on our base in Mexico.”
“But I want to make it clear, just that our priority first and foremost is to grow the business. And we still believe there’s plenty of organic runway to grow as well as acquisition footprint, both in Europe as well as in the North America footprint on BSG.”
Oh they’re going to grow the business all right and as long as women’s hair is turning grey, I’m gonna be putting some green in my wallet.
I am HUGE!
$$$MR. MARKET$$$
Dick was the explorer/risk taker, Jane was the voice of reason and Sally was the toddler who always broke the dishes, fell into the hole, had the dog jump up on her yada yada yada. You wonder why anyone would want to have one of those around anyway. Of course all of this advanced reading was presented to $$$MR. MARKET$$$ in first grade, when he already knew how to read the encyclopedia Brittanica in nursery school. So it goes.
Of course life does go full circle, and there’s something about that Sally that one would certainly find useful and beautiful someday.
Today I bought Sally Beauty Holdings (SBH) at 26.92. I will sell it in 4 – 6 weeks at 31.01. Here’s why I like SBH:
Look at this magnificent chart. SBH is up 60% in the last 52 weeks, yet its PE is only 23. Why is the stock going up so much? And so consistently?? This company is a money machine…that’s why!
Sally Beauty Holdings, Inc., through its subsidiaries, engages in the distribution and retail of professional beauty supplies primarily in North America, South America, and Europe. The company operates in two segments, Sally Beauty Supply and Beauty Systems Group. The Sally Beauty Supply segment operates a chain of cash and carry retail stores that provide various third-party branded and exclusive-label professional beauty supplies, including hair color products, hair care products, hair dryers and hair styling appliances, skin and nail care products, and other beauty items to retail consumers and salon professionals. This segment sells various third-party brands, such as Clairol, Revlon, and Conair, as well as a selection of exclusive-label merchandise. The Beauty Systems Group segment distributes professional brands of beauty products directly to salons and salon professionals through its sales force and professional-only stores. This segment operates stores under the CosmoProf service mark. It sells a range of third-party brands, such as Paul Mitchell, Wella, Sebastian, Goldwell, Joico, and TIGI. As of September 30, 2011, the company operated a multi-channel platform of 4,128 company-owned stores, 181 franchised stores, and 1,116 professional distributor sales consultants in the United States, Puerto Rico, Canada, Mexico, Chile, the United Kingdom, Ireland, Belgium, France, Germany, and Spain. Sally Beauty Holdings, Inc. was founded in 1964 and is headquartered in Denton, Texas (home of the Von Erich wrestling family).
Sally began with a single store in New Orleans in 1964. Alberto-Culver bought the business in 1969. Sally's CEO, Gary Winterhalter, has served in executive positions with Sally since 1996, when it was still part of that beauty care product maker and distributor. Sally split off and went public at the end of 2006. Since then, it's been expanding, while deleveraging. Sally has grown, largely through acquisitions. It entered Great Britain in the 1980s and expanded into other parts of Europe. In 2009, it entered Chile. Now it's eyeing other fast-growing Latin American markets, such as Argentina and Brazil. More than 80% of revenue comes from the U.S., though the company says it still has green-field expansion potential both domestically and abroad.
What’s the story here? When you boil it down, everyone wants to look good. Women will spend money to look better. It’s an inelastic, recession proof requirement. The economy just doesn’t matter. What matters is women want to look good. For many women, trips to the salon are nonnegotiable. But some will stretch out the intervals between visits when times are tough. But even when customers do delay a salon visit, many will shop at Sally Beauty retail stores for hair colorings and other products for in-between touch-ups at home. Women have to keep doing it. Even if there's a recession, you're not going to not do your coloring, or your straightener, or whatever mysterious things women do when guys aren’t around.
How do I know this? It’s in the numbers. Since 1990, the total revenues in the beauty supply industry has grown each and every year. That’s a 5% CAGR growth each and every year for over 21 years! For the last 10 years, Sally Beauty has grown their revenues each and every year for a 7% CAGR. You hear what I’m saying? There hasn’t been a year in the last 10 years where SBH did not grow their revenues! The EPS has followed suit with CAGR of 46% in the last 5 years. The very interesting thing is, sales are accelerating this year!!
It’s a machine..a machine I tell you. For the last 6 years, they’ve built almost 100 stores per year. These stores only require about $70,000 in capital and they can run their business on only about $85,000 in inventory. The stores start contributing positive gross margin in about 4 months and total payback is less than 2 years. With borrowing costs at an all time low, this is a MONEY MACHINE. Keep putting up stores, keep raking in the dough.
With 4,000 stores in the U.S. and 10 other countries, SBH sells beauty products to both individual consumers and to small and midsize salons. Sally's sales growth has been remarkably consistent, as its female customers are extremely reluctant to cut back on hair supplies. It's an industry that doesn't fluctuate a lot with the economy. With typical total customer purchase of $16, it's an affordable luxury. It sells high-end and professional hair care and makeup brands not always carried at large-box retailers. It also has more than 1,000 sales agents selling directly to large and small salons.
The customers love it!
“My visit was just yesterday. I got two professional hair conditioning treatment packs, some brunette pigmented shine glaze, and a big tooth shower comb all for about $6 out the door! I was a teeny bit disappointed to find a limited make up selection, but all the other cool beauty tricks, tools, & treasures definitely made up for it! I used most of the stuff I bought, so far the frizz is gone, my hair smells Uh-May-Zing, and is shiny & suuuuuuuper soft! SCORE!”
“For those who know what they like, and know where to get it, Sally is a great resource. Why spend more on false eyelashes from a department store? Same ones are available here, for so much less. Ditto on hair products, nail polishes, appliances, solutions, ideas, etc. The staff is friendly and honest here, and they have plenty of info on their products. Combine the low prices with their coupons /Sally card discount, and you'll be neck-deep in neat, fun products you'll dig. Located in a shopping complex that has a lot of things I like (Starbuck's, pet supplies, Hawaiian BBQ), I can definitely make some time to take advantage of some new trend in lip color.”
“I was greeted by a hello and a smile when I walked in the shop door. The staff members all helped me and different times (when I asked them, which seemed appropriate), and they all seemed friendly. The pricing was good for the quality of product they offer. They have a lot of stuff for hair care, skin care, and overall pampering. I will be going back as I get more creative with my future beauty endeavors!”
The numbers support this fact. Last quarter, Sally Beauty reported same store sales growth of 9.1% in Q2 2012 compared to 6% in the same quarter last year. Net sales were up 10.9% to $889.3 million, which equated to Q2 net earnings of $67.8 million or 35 cents per share, an increase of 34.6% compared to Q2 2011. Gross margin widened 20 basis points to 49.1%.
Their bottom line has topped ANAL-yst estimates for the last four quarters,
exceeding the consensus EPS Estimate by an average of 7.91% during that time.
Sally’s balance sheet is also solid. They have ample liquidity with strong cash flow and a revolving line of credit for $400 million that they have recently refinanced.
What the SBH earnings machine has going for it:
• Strong, Consistent Financial Track Record
• Significant Cash Flow Generation
• Experienced and Motivated Management Team
• Solid Growth Potential
• U.S. professional beauty supply marketplace, in distribution dollars, was roughly $8.4 billion in 2011
• Leading exclusive / full-service distributor in North America
• 1.2x sales of next largest competitor
• Largest open-line retailer/distributor in U.S. based on store count
• Competition is limited
• Further expansion of internet channel.
This stock epitomizes the word momentum. It has continuously performed since July of 2010. Even the downdrafts in August 2011 which sent SBH below $15 still didn’t push the stock below its 200 day MA.
SBH is expected to earn $1.36 in FY2012 and $1.59 in FY2013 according to the ANAL-ysts estimate and SBH is expected to earn 38 cents when they report on August 9th. This is the epitome of hilarity. Permit me to go powder my nose while I give you the real earnings ahead.
$$$MR. MARKET$$$ knows that SBH will earn $1.40 in 2012 and then crush it with earnings of $1.87 in 2013. Can’t lose can’t lose. Even if you take the $1.40 earnings in 2012 and multiply by today’s PE of 23, you get a stock price of $32.20 per share, which is higher than my sell target. Imagine where the stock will go in 2013 if you hang onto it (I won’t).
Here’s what the boss had to say:
“In summary, Sally Beauty Holdings had an excellent second quarter with strong sales performance and earnings growth. We reduced our long-term debt by $100 million lowering our debt ratios consistent with our capital structure objectives. As we head into the second half of the fiscal year, I’m optimistic that we will continue to deliver solid results and execute on our long-term objectives.”
“In summary we had a great second quarter, and when someone with our strong first quarter results, our year-to-date performance is outstanding. For the first six months of fiscal 2012, net sales are up 10% driven by same store sales growth of 8.1%.”
“Our consolidated gross margin is up 70 basis points with operating margin expansion of 160 basis points over the prior year. I anticipate this performance will continue and lead us to another six months of stronger results. The expectations that came out of that same report basically are same 4% or 5% growth for the next five years, I don’t know that I want to go out that far predicting industry growth. But we’ve always exceeded the industry growth, and I expect that we will – going forward I certainly hope so. And the industry is, as I’ve said and shown all you in many charts for years is a very consistent and stable industry. Historically, it has grown 3% to 5% over the last 27 years; though the 4% or 5% expectation for the next five years is certainly in line with history, and personally I would say that, I’m pretty comfortable that, that will be inline with what happens.”
“I think, as we said in our – kind of our earlier remarks, we are certainly considering other uses of cash. We publically talked about that, our sweet spot in terms of our leverage is between 2 to 2.5 times, and we’re right now at the midpoint of that. So we are actively having dialogue in terms of – what are some of the other uses of cash in terms of any kind of shareholder friendly activities, whether it be in the form of the share repurchase or dividend program.”
“We are also opening rapidly, as I mentioned a few minutes ago in France and we’re going to continue there. We believe we can have literally in the 100 of stores in France and we're somewhere in the 30s right now. So a lot of the expansion will be outside the U.S. and we continue to work very hard and getting a foothold in more of the South American countries which once we get that foothold I think we could open a lot of stores very quickly.”
“We continue to open a lot of stores in Chile, we started with a small base of 16 stores, but we basically doubled that and they’re all, they do extremely well. As Mexico we continue to open about 20% new stores on our base in Mexico.”
“But I want to make it clear, just that our priority first and foremost is to grow the business. And we still believe there’s plenty of organic runway to grow as well as acquisition footprint, both in Europe as well as in the North America footprint on BSG.”
Oh they’re going to grow the business all right and as long as women’s hair is turning grey, I’m gonna be putting some green in my wallet.
I am HUGE!
$$$MR. MARKET$$$
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