Sally Beauty's (SBH) fiscal 2027 guidance implies limited margin expansion, with continued cost efficiencies needed to offset inflation and ongoing reinvestments rather than support incremental leverage, Morgan Stanley said in a Wednesday research report.
The company's fiscal Q4 results reinforced the improving sales trends, with better comparable sales providing greater visibility into its path toward 1% to 3% long-term sales growth, but sustaining low-single-digit percentage comps depends on its Beauty Systems Group segment returning to positive growth, analysts wrote.
With the Fuel for Growth cost-savings program concluding, future margin improvement increasingly depends on continued productivity initiatives and stronger sales leverage, according to the note.
Morgan Stanley reiterated its underweight rating on the stock and raised its price target to $19 per share from $13.
Shares of Sally Beauty were down nearly 8% in early Wednesday trading.
Price: 18.92, Change: -1.63, Percent Change: -7.91
