8-K: European Wax Center Anticipates Solid Fiscal 2024 Results, Updates Outlook Ahead of ICR Conference

European Wax Center expects solid full-year results for fiscal 2024, driven by strong fourth-quarter Wax Pass sales and continued customer loyalty, with system-wide sales near the high end of the previous outlook.

Summary

• European Wax Center, Inc. anticipates solid full-year results for fiscal year 2024.
• The company expects system-wide sales to be near the high end of its previous outlook, which ranged from $930 million to $950 million.
• They are reporting 23 net new center openings in fiscal 2024, above its previous outlook of 17 to 22.
• This includes 43 gross new center openings and 20 closures.
• The company has updated its same-store sales outlook to 0.0% to 0.2%, compared to the previous outlook of (1.5)% to 0.5%.
• The company reiterates its previous fiscal 2024 outlook for total revenue of $216 million to $221 million.
• Adjusted Net Income is expected to be between $19 million and $22 million.
• Adjusted EBITDA is projected to be between $70 million and $74 million.
• During the fourth quarter, the company repurchased approximately 1.6 million shares for $10.0 million.
• Cumulatively, the company has repurchased $40.1 million of the $50.0 million authorized under its current share repurchase program.
• The company expects to publish its audited financial results for the fiscal year ended January 4, 2025, in March 2025.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook with improved guidance on key metrics and a focus on growth and shareholder value. However, some risks and uncertainties are acknowledged.

Positives

• The company exceeded its net new center opening outlook for fiscal 2024, reporting 23 openings compared to the previous outlook of 17 to 22.
• The company's system-wide sales are expected to be near the high end of its previous outlook.
• The company updated its same-store sales outlook to 0.0% to 0.2%, compared to the previous outlook of (1.5)% to 0.5%.
• The company has an active share repurchase program and has already repurchased a significant portion of the authorized amount.

Negatives

• The company experienced 20 center closures in fiscal 2024.
• Same-store sales are only expected to be between 0.0% and 0.2%.

Risks

• The company's fiscal 2024 financial results are subject to quarter and year-end closing procedures, including a financial statement audit.
• The forward-looking statements are subject to various risks and uncertainties, including those related to franchisees' performance, competition, and economic conditions.
• The company's substantial indebtedness could impact its financial flexibility.
• The company's ability to attract, train, and retain talented wax specialists and managers could impact its performance.

Future Outlook

The company anticipates solid full-year results for fiscal 2024 and remains focused on action plans to drive new guests and tickets. Management looks forward to sharing progress updates on the fourth-quarter earnings call in March 2025.

Management Comments

• Stacie Shirley, Chief Financial Officer, stated that they are pleased to share expectations for solid full-year results, including 23 net new center openings.
• Chris Morris, Chairman and Chief Executive Officer, is excited to lead European Wax Center and build upon the momentum established by the previous leadership team.
• Chris Morris stated that the company is well-positioned to further leverage its business model to generate sustained growth, strong free cash flow, and long-term value for stakeholders.

Industry Context

European Wax Center operates in the out-of-home waxing services industry. The company's performance is influenced by consumer spending habits, competition from other waxing service providers, and the effectiveness of its franchise model.

Comparison to Industry Standards

• Key competitors in the waxing and personal care services industry include companies like Regis Corporation (RGS), which operates salon brands, and franchise-based businesses like Massage Envy.
• European Wax Center's focus on waxing-specific services differentiates it from broader salon offerings.
• The company's system-wide sales of approximately $950 million in fiscal 2024 demonstrate its significant market presence.
• The company's growth strategy, including new center openings and same-store sales improvements, aligns with industry trends of expanding service offerings and enhancing customer loyalty programs.

Management Changes

Stakeholder Impact

• Shareholders can expect continued focus on growth, free cash flow generation, and long-term value creation.
• Franchisees can anticipate support in opening new centers and improving same-store sales.
• Guests can expect continued high-quality waxing services and products.
• Employees can expect a positive work environment and opportunities for growth.

Next Steps

• The company expects to publish its audited financial results for the fiscal year ended January 4, 2025, in March 2025.
• Management is scheduled to participate in meetings at the 2025 ICR Conference on January 13, 2025.
• The company will share progress updates on its fourth-quarter earnings call in March 2025.

Key Dates