Sally Beauty Holdings Inc: Growth Needs More Color

Research evidence excerpt

Sally Beauty Holdings Inc: Growth Needs More Color

y has largely Quarterly EPS ($)

2026e 2026e 2027e 2027e

peaked as the comp outlook implies a deceleration (to 0.4% in 2H from 0.7% in 1H) Quarter 2025 Prior Current Prior Current

and given the EBIT beat today (~$73m vs. the Street at ~$70m), unchanged FY Q1 0.43 - 0.48a - -

Q2 0.42 - 0.44a - -

guidance implies a weaker earnings outlook embedded into the back-half of the year. Q3 0.51 0.56 0.53 - -

Further, given SBH’s higher exposure to a lower-income consumer, we believe Q4 0.55 0.60 0.59 - -

incremental pressure from elevated gas prices could create additional downside risk e = Morgan Stanley Research estimates, a = Actual Company reported data

to demand. Into FY'27, the debate increasingly shifts toward the ability to sustain

EBIT growth as savings benefits roll off, as achieving the higher-end of the LT 3–5%

EBIT growth framework would require sustained comp acceleration, where visibility

is limited.

1) Near-term, SBH is making incremental operational progress. Strategic

initiatives centered around personalization, category expansion, innovation/newness,

and Sally Ignited store refreshes should support demand through FY'26. That said,

we believe emerging headwinds to demand (i.e., increased promotional sensitivity

among stylists, consumers shifting toward lower-maintenance looks that require

lower visit frequency) are worth monitoring. In our view, these trends suggest the

pace of improvement may be moderating, particularly within BSG where comps

appear to be decelerating (averaging -0.3% in 1H'26).

Morgan Stanley does and seeks to do business with

While the FY'26 comp framework was kept unchanged, the consolidated ~flat 3Q companies covered in Morgan Stanley Research. As a result,