Here’s Why Sally Beauty (SBH) Stock Surged More Than 70% YTD

Growing online business and strength in its Transformation Plan are favoring Sally Beauty Holdings, Inc. SBH. Also, the company’s efforts to enhance customers’ experience coupled with prudent acquisitions are encouraging. Owing to these upsides, shares of this Zacks Rank #1 (Strong Buy) company have surged 72.5% so far this year compared with the industry’s 7.4% growth. Also, the stock has comfortably outpaced the Zacks Retail and Wholesale sector’s decline of 2.5%.

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Online Business: A Key Driver

Sally Beauty is undertaking a number of efforts to augment its online business amid the coronavirus outbreak. In fact, robust investments to enhance the digital space have been yielding. Notably, its global e-commerce sales surged 56% year over year during the second quarter of fiscal 2021. Management, in its last earnings call, highlighted that nearly 40% of its e-commerce sales for Sally U.S. and Canada were fulfilled by stores during the quarter. This reflects in the company’s combined strength in store portfolio and enhanced digital capabilities. In January 2021, Sally Beauty unveiled its partnership with salesforce.com for the implementation of cloud-based enhancements to augment shopping experience of salon professionals and beauty enthusiasts.

In November 2020, Sally Beauty unveiled the countrywide launch of the Buy Online, Pick Up In-Store (BOPIS) service. The company’s BOPIS service is focused on establishing a connection between in-store and online shopping experiences. The BOPIS facility will help customers reserve products online and pick them up from stores. During the second half of 2021, the company expects to add another convenience option for its Beauty Systems Group (BSG) customers along with the rollout of BOPIS, which is likely to be launched in June. Further, management expects to start offering highly-competitive same-day delivery options for both Sally and BSG customers beginning June. Also, Sally beauty is on track to replatform the BSG digital storefront. This will help the company enhance its digital engagement with the stylists.

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Acquisitions Driving Growth

Sally Beauty intends to strengthen its business on the back of strategic acquisitions. In September 2020, Sally Beauty’s subsidiary BSG acquired La Maison Ami-Co Inc. — a professional beauty products distributor in the Canadian province of Quebec. Sally Beauty expects the deal to augment its business in Quebec along with increasing the reach of BSG’s professional beauty products in its Chalut store network as well as full-service business. In December 2017, Sally Beauty’s BSG had acquired certain H. ChalutLtee assets. This enabled the company to expand its business for the first time in Quebec province and provide BSG a footprint in Canada. Some other notable acquisitions are wholesale distribution rights for Joico in the Boston area and Paul Mitchell in the Hawaiian market by the company’s BSG.

Other Factors Favoring Sally Beauty

Sally Beauty is on track with its efforts to get back on growth trajectory. In this regard, management is focused on its Transformation Plan, as part of which, it is progressing well with its four key goals — improving customers’ experience, strengthening e-commerce capacities, curtailing costs and enhancing retail fundamentals. In spite of disruptions caused by the coronavirus outbreak, Sally Beauty completed key objectives of its Transformation Plan in fiscal 2020.

Moreover, the company intends to be committed toward its transformation endeavors during fiscal 2021. By the end of the year, management expects to complete the remaining elements of the plan that includes implementation of JDA, re-platforming its BSG e-commerce site and focusing on loyalty program among others. Moreover, the company completed the launch of new private label rewards credit card program at both Sally Beauty and BSG as a part of its transformation plan. During the fiscal second quarter, purchases from its loyalty members at Sally U.S. and Canada contributed more than 72% to total sales. We believe that focus on its Transformation Plan along with the aforementioned growth endeavors is likely to help Sally Beauty stay in investors’ good books.

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