Sally Beauty Holdings (SBH): Hacking Affected Less Than 25K

Tickers in this article: SBH TGT

NEW YORK ( TheStreet) --  Sally Beauty Holdings   is the latest retailer to fall victim to hackers. The cosmetics and beauty supplies chain said the security breach discovered on March 5 compromised fewer than 25,000 of its customers' credit and debit details.

However, the company would not detail the scope or nature of the breach until a complete investigation had been undertaken. The Denton, Texas-based business has hired forensics firm Verizon to investigate.

"We take this criminal activity very seriously. We continue to work diligently with Verizon on this investigation and are taking necessary actions and precautions to mitigate and remediate the issues caused by this security incident," the company said in a statement Monday.

Additionally, the retailer is working with the United States Secret Service in their preliminary investigation.

Though Sally Beauty has determined the size of damage, as Target  learned, expenses related to security breaches can add up quickly. 

Last year, Target experienced a similar hacking attack which saw around 40 million credit and debit cards and 70 million other records containing personal customer information compromised. 

Over the three months to Feb. 1, the Minneapolis-based retailer earned $520 million, or 81 cents a share, down from $961 million, or $1.47 a share, in the year-ago quarter.

Potential expenses include claims for counterfeit fraud losses, card re-issuance expenses, civil litigation, governmental investigations, and legal and consulting fees.

"These costs may have a material adverse effect on Target's results of operations in first quarter and full-year 2014 and future periods," the company said in the statement.

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TheStreet Ratings team rates SALLY BEAUTY HOLDINGS INC as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate SALLY BEAUTY HOLDINGS INC (SBH) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SALLY BEAUTY HOLDINGS INC has improved earnings per share by 9.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SALLY BEAUTY HOLDINGS INC increased its bottom line by earning $1.48 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.48).
  • Net operating cash flow has increased to $60.10 million or 39.26% when compared to the same quarter last year. In addition, SALLY BEAUTY HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of -19.02%.
  • 48.97% is the gross profit margin for SALLY BEAUTY HOLDINGS INC which we consider to be strong. Regardless of SBH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SBH's net profit margin of 6.16% compares favorably to the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the Specialty Retail industry average, but is less than that of the S&P 500. The net income has decreased by 1.7% when compared to the same quarter one year ago, dropping from $58.98 million to $58.00 million.

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