Product and Service

Companies included in beauty salon sector in personal care industry primarily are owners, franchisers, and operators of beauty salons providing hair-cutting and styling, hair coloring and other services.

 

Demand for Product and Service

As indicated by the typical company data, the demand for salon service has been declining largely in the past several years accompanied by the raising service price.  

The Sector

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend
  1. Generally, demand for salon service seems to be declining in the past several years as indicated by the declining customers’ visits according to typical company data.
  2. Increasing closure of stores have been seen in this sector as a way for companies to save expense and increase cash flow.
  3. The trend of increased average spending per visit, probably as a result of rising service price, seems to be continuing.
Causes behind the trend
  1. Slowing growth of income in currently untraditional economy recovery may be behind the declining visits to salons.
  2. The slowing down traffic across retail industry is also probably responsible declining visits to salons.
  3. Labor costs increased as minimum wage goes up.
Industry Future
  1. Supported by favourable factors from macro-economy and demography, demand in this sector may bounce back up. However, it may be dragged by increasing salon operating costs and price.

Numbers

General Financial Performance of Companies In the Sector

It seems that demand for products and service of companies in this sector, according to the typical company data, has been declining as indicated by the continuingly decreased same store visit (down 3-5% annually). Some company continuingly closed its salons in the past several years (3-4% annually). If the closed stores have been included the performance in same stores sale may probably be worse.
As the unprofitable stores were closed, the decreasing gross margin, from the typical company data, seems to be offset to some extent. The current typical gross margin is about 9% in 2017. The typical operating margin is now at about -2% with a SG&A as percentage of sales of about 11%.
The typical average stock Price/sales ratio is: 0.5 (interest/EBITDA ratio of 42%).

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