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Citi’s analysis suggests that while the guidance for fiscal year 2025 may be sufficiently cautious, the current macroeconomic uncertainty combined with the unclear prospects for store expansion pipeline contributes to a more uncertain outlook. The stock’s attractive PEG ratio of 0.59 suggests potential value relative to growth expectations. As a result, the analysts believe the risk/reward balance for European Wax Center’s stock is currently even at its present valuation.
European Wax Center reported system-wide comparable sales growth of 0.7%, which was ahead of the flat growth anticipated by consensus. However, this was countered by a decline in product sales, attributed to customers cutting back on in-store purchases due to a weaker macroeconomic environment. The company’s guidance for the closure of 40 to 60 centers in fiscal year 2025 was more than both Citi and the market had predicted, contributing to the stock’s significant 67% decline over the past year. Despite these challenges, the company maintains a healthy current ratio of 2.43, indicating strong ability to meet short-term obligations.
The company is undergoing changes at the leadership level, with new executives focusing on revitalizing comparable sales growth and enhancing visibility into franchise-level profitability. Part of this strategy includes overhauling marketing efforts to attract new customers to their centers. Despite these initiatives, there is limited visibility into the company’s store growth pipeline, with management not committing to a return to net store growth in fiscal year 2026. For deeper insights into EWCZ’s turnaround potential and comprehensive financial analysis, access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.
Citi’s analysis suggests that while the guidance for fiscal year 2025 may be sufficiently cautious, the current macroeconomic uncertainty combined with the unclear prospects for store expansion pipeline contributes to a more uncertain outlook. The stock’s attractive PEG ratio of 0.59 suggests potential value relative to growth expectations. As a result, the analysts believe the risk/reward balance for European Wax Center’s stock is currently even at its present valuation.
In other recent news, European Wax Center reported a decline in total revenue for Q4 2024, amounting to $49.7 million, which fell short of the market forecast of $51.91 million. The company also experienced a year-over-year revenue drop of 4.6%, although system-wide sales saw a slight increase of 1.1%. The company plans to close a significant number of centers in 2025, with projections of 40 to 60 closures. Telsey Advisory Group and Truist Securities both revised their price targets for European Wax Center, with Telsey lowering it to $5.00 and Truist to $6.00, citing the company’s ongoing challenges and anticipated store closures.
Despite these setbacks, Truist Securities maintains a Buy rating, expressing optimism about the company’s restructuring efforts and long-term profitability prospects. The company recently appointed new executive team members, including a new CFO, Chief Commercial Officer, and Chief Information and Digital Officer, to navigate through its transitional period. Analysts from Telsey Advisory Group have shown caution regarding European Wax Center’s ability to attract new customers and expand its footprint, especially given the planned net closures in FY25. The company’s CEO, Chris Morris, highlighted 2025 as a transitional year, with strategic initiatives aimed at stabilizing and eventually growing the business.
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