• System-Wide Sales (Q4): Increased 1.1% to $229.3 million.
• Total Revenue (Q4): Decreased 4.6% to $49.7 million.
• Gross Margin (Q4): Improved 190 basis points to 74.3%.
• Adjusted EBITDA (Q4): $19 million, a decrease of 1.6%.
• Adjusted EBITDA Margin (Q4): Increased 390 basis points to 38.1%.
• GAAP Net Income (Q4): Decreased 13.1% to $3.1 million.
• Adjusted Net Income (Q4): Increased 37% to $8.1 million.
• Net Unit Growth (Full Year): 2.2% with 23 net new centers opened.
• System-Wide Sales (Full Year): Increased 1.2% to $951 million.
• Same Store Sales (Full Year): Increased 0.2%.
• Gross Margin (Full Year): 83.6%.
• Adjusted EBITDA (Full Year): $75.5 million, a decrease of 7%.
• Adjusted Net Income (Full Year): Increased 15.2% to $25.6 million.
• Cash and Cash Equivalents: $49.7 million at the end of the quarter.
• Net Leverage Ratio: 4.5 times at the end of fiscal 2024.
• Fiscal 2025 Revenue Outlook: $210 million to $214 million.
• Fiscal 2025 Adjusted EBITDA Outlook: $69 million to $71 million.
• Fiscal 2025 Adjusted Net Income Outlook: $16 million to $18 million.

• Warning! GuruFocus has detected 5 Warning Signs with EWCZ.

Release Date: March 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• European Wax Center Inc (NASDAQ:EWCZ) is the industry pioneer with a significant market opportunity in the $7 billion out-of-home waxing market.
• The company boasts a strong guest retention rate, with three-quarters of sales generated by loyal core guests.
• EWCZ has a solid foundation with over 1,000 centers and a strong franchisee network, positioning it well for future growth.
• The company is focusing on developing a robust data-rich marketing engine to drive traffic and improve center-level economics.
• EWCZ is assembling a world-class management team to address strategic priorities and achieve sustainable long-term growth.

Negative Points

• Franchisees are experiencing pressure from declining transactions and profitability, leading to a pause in new center growth plans.
• The macroeconomic environment is challenging, impacting consumer spending, especially among new guests.
• The company expects 40 to 60 center closures in fiscal 2025 due to ongoing profitability pressures and franchisee challenges.
• Retail product sales have softened, with guests prioritizing services over products in a tougher macro environment.
• Adjusted EBITDA decreased by 7% from fiscal 2023, reflecting headwinds from lower revenue and increased payroll expenses.

Q & A Highlights

Q: Can you provide an update on the expected store closures and openings for 2025, and when do you anticipate returning to net openings? A: Chris Morris, Chairman and CEO, stated that they expect 40 to 60 closures in 2025, with efforts to manage towards the lower end of that range. The focus is on stabilizing and re-accelerating the business, with a return to net openings anticipated towards the end of 2026, contingent on executing strategic priorities.

Q: What are the current four-wall economics, and how do you plan to improve them? A: Chris Morris explained that mature units have AUVs over $1 million with strong cash returns. The focus is on improving analytical rigor and operational infrastructure to enhance profitability across the portfolio, building on the strong foundation already in place.

Q: Are there any plans to adjust the franchisee economic agreements or consider buying back stores? A: Chris Morris indicated no immediate plans to change franchise agreements or buy back stores. The focus is on partnering with franchisees to optimize operations and growth strategies, with potential future consideration for owning and operating centers to enhance franchisor capabilities.

Q: How is the core guest segment performing, and what are the plans for pricing strategy? A: Stacie Shirley, CFO, noted that core guests remain stable and loyal. Chris Morris added that while franchisees control pricing, efforts are underway to develop a more sophisticated pricing strategy to support franchisees in optimizing their pricing decisions.

Q: What are the main cost-saving measures implemented, and how do they impact gross margins? A: Stacie Shirley highlighted successful negotiations for cost savings in product procurement, contributing to an expected modest improvement in gross margins to around 74% for 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.