The narrative of American macroeconomics focusing on consumer behavior. Reducing non-essential spending. persists. Stock of Provider of hair removal services in Europe ( EWCZ -26.98% ) This afternoon, the stock plummeted by 26.6% by 12:30 p.m. ET, following the company’s strong earnings performance but weak sales results.
Experts predicted that the company specializing in body-hair removal franchises would make around $0.08 per share from $61.3 million in sales in the second quarter, totaling approximately $3.9 million. In reality, the company earned $6 million, equivalent to $0.12 per share (although they did not disclose the per-share figure). Unfortunately, sales did not meet expectations, coming in at $59.9 million.
Financial results for the second three-month period of the year
Initially, it may not appear negative: achieving higher earnings than anticipated even though the sales were lower than expected. Earnings increased by 6% compared to the previous year, while sales only increased by 1%.
Investors may have concerns that today’s news could be more negative than it seems, as European Wax Centers disclosed a change in leadership simultaneously with the earnings report. David Willis is stepping down as CEO, and David Berg will take over his position.
Adding to this concern is the recent update for the remainder of fiscal year 2024, indicating a significant decrease in business activity. Initially, the company had intentions to launch up to 80 new stores within the year, but they have now revised their projection to a range of 27 to 32 stores, with 15 of them already in operation.
The company revised its revenue forecast to a range of $216 million to $221 million and changed its outlook for. Sales at stores that have been open for a certain period of time. increase from 2% to 5%, to a new range of 0.5% to negative 1.5%.
Should European Wax Center stock be sold?
Sales are declining at the current locations of the company, and the number of new locations opening to potentially counteract this decrease in revenue is also decreasing.
In terms of earnings, European Wax Center did not provide a projection following the guidelines of generally accepted accounting principles. GAAP Rather than providing positive news, the company cautioned that its adjusted earnings will fall short of expectations, ranging between $19 million and $22 million, equivalent to approximately $0.45 per share. This figure, although below the initial forecast, surpasses Wall Street’s projection of $0.37 per share.
However, despite the change in CEOs and the concerning decrease in new store openings, investors appear to be indifferent.
