Sally Beauty Shuts Stores, Withdraws Guidance Amid Coronavirus

COVID-19 has derailed economic activities worldwide. In response to the pandemic, retailers are either shutting down stores or trimming work hours. Incidentally, several retailers have chosen to withdraw their guidance, unable to ascertain the possible impact of the deadly virus on their performance. The latest to join the list is Sally Beauty Holdings, Inc. (NYSE:SBH)

The beauty retailer has temporarily shut down all stores in the United States and Canada, till at least Apr 9. Also, the company is reprioritizing its transformation plans to speed up digital programs, delaying non-capital expenditures and improving cost structure. Consequently, management withdrew its guidance for fiscal 2020, given the business uncertainty stemming from the pandemic.

Well, this move has been undertaken by many other retailers, including Ulta Beauty (NASDAQ:ULTA) , Nordstrom (NYSE:JWN) and American Eagle Outfitters (NYSE:AEO) , who also announced store closures due to the COVID-19 outbreak. The coronavirus, which originated in China, has spread enormously, infecting more than 350,000 people worldwide and the death toll has crossed 16,000. While the virus outbreak has jeopardized the global economy, the retail sector (in particular) remains under pressure due to supply-chain bottlenecks, reduced traffic, an increasing number of store closures and limited hours of working.



Incidentally, Sally Beauty had already closed many namesake and Cosmo Prof stores over the past week, though it continued operating through a contactless pickup model wherever permissible. However, the growing spread of the virus and the intensity of the situation caused the company to close all retail and wholesale stores. Nonetheless, some stores will transform into the curbside model, per government regulations. This will help customers place orders and arrange for a seamless contactless pick up from stores.

Also, all shoppers can keep purchasing online through the company’s app as well as sallybeauty.com, and sallybeauty.ca. Cosmo Prof and Armstrong McCall customers can also shop through cosmoprofbeauty.com. Apart from this, management announced measures to protect employees and improve the company’s financial flexibility. As part of these measures, it has drawn $395 million under its $500-million credit facility, which expires in July 2022.

In its last earnings call, Sally Beauty anticipated fiscal 2020 sales to increase 1-2%. Same-store sales were expected to grow 0.5-1.5%. Further, the company envisioned adjusted earnings growth at the lower end of low-to-mid- single digits range. However, for now, management has withdrawn this guidance and refrained from providing any update on the same.

We note that shares of this Zacks Rank #4 (Sell) company have plunged 50% in the past three months compared with the industry’s decline of 43.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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