Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- European Wax Center Inc (EWCZ, Financial) reported a 2.3% increase in system-wide sales, reaching $260 million.
- The company achieved an adjusted EBITDA of $20.6 million with a margin of 34.5%, demonstrating effective bottom-line management.
- Gross margin improved by 180 basis points to 73.2%, primarily due to product cost savings.
- The company has a robust pipeline of over 370 locations, indicating strong long-term growth potential.
- European Wax Center Inc (EWCZ) continues to generate strong free cash flow, even in a challenging macroeconomic environment.
Negative Points
- Top-line revenue was modestly below expectations, with total revenue just under $60 million.
- The company is facing a challenging macroeconomic environment, affecting consumer spending and new guest growth.
- European Wax Center Inc (EWCZ) has reduced its outlook for the second half of 2024 due to softer transaction volumes.
- The company has lowered its unit growth outlook for 2024, delaying new center openings to address near-term challenges.
- Certain geographies, particularly the West Coast, are facing increased rent and labor costs, impacting four-wall profitability.
Q & A Highlights
Q: Can you clarify if the cost savings mentioned in the revised guidance are temporary or permanent?
A: Stacie Shirley, CFO: The cost savings are expected to continue, with gross margin improvements anticipated to remain around 73% for the full year. We aim to leverage the top line and maintain a high-margin structure as we grow.
Q: What are the top priorities for European Wax Center moving forward?
A: David Berg, CEO: The main focus is on driving new guests to the brand and increasing transaction volumes. These priorities are crucial for accelerating center ramping and improving four-wall EBITDA, which will enable franchisees to reinvest in the brand.
Q: With new center openings down significantly for 2024, when do you expect to return to a normal pace?
A: David Berg, CEO: This is a temporary reset to focus on driving new guests and transactions. We expect to return to normal growth rates for new center openings once these initiatives are back on track.
Q: Are there any specific regions where four-wall productivity has declined more significantly?
A: Stacie Shirley, CFO: The West Coast, particularly California, has been more impacted due to higher rents and labor costs, which have pressured cash flow and four-wall profitability.
Q: How are you addressing the challenges of higher rents and potential center closures?
A: David Berg, CEO: We are working with franchisees to mitigate these challenges, including facilitating transfers to stronger operators in affected areas. We continue to support franchisees in managing rent renegotiations and labor costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
