This company, primarily an owner, franchiser, and operator of beauty salons providing haircutting and styling, hair coloring and other services, has been grouped into beauty salon sector in personal care industry.
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%).
It seems that the demand for products/service of this company in the past several years has been declining as indicated by the continuingly decreased same store visit (down 3-5% annually). However, what caused more concerns is that this company has largely closed its salons in the past several years (3-4% annually).
The first six months of fiscal 2018 compared with the same period of 2017
Net sales decreased 2.5% attributable primarily to store closing (4.2%)
The same store revenue decreased 0.2% due to decrease of 3.2% in visit offset by increase of 3% in average ticket price.
The fiscal 2017 compared with 2016
Net sales decreased 5.5% attributable primarily to store closing (3.5%).
The same store revenue decreased 1.8% due to decrease of 5.2% in visit offset by increase of 3.4% in average ticket price.
Fiscal 2016 compared with fiscal 2015
Net sales decreased 2.5% attributable primarily to store closing (2.7%)
The same store revenue increased 0.2% due to increase of 3.1% in average ticket price offset by decrease of 2.9% in visit.
Its gross margin (including rent and store operation) has gone down from 10% to 9% since 2014 attributable to decreased sales and increased compensation expense offset by costs saving from closed stores. However, due to the slight increase of about 100 basis points in SG&A as percentage of sales (around 11%), its operating margin went down to about -2% in 2017.
Stock performance
This stock currently has a stock price/sales ratio of 0.5. We think that its stock is being relatively undervalued considering the saved expenses from its massively closing stores while uncertain on the stores visits.
