What Happened?
Shares of beauty and waxing service franchise European Wax Center (NASDAQ: EWCZ) fell 4.3% in the morning session after the stock's negative momentum continued as the company reported third-quarter results that showed declining year-over-year revenue and a net reduction in its store count, signaling underlying business weakness.
Although the company's revenue of $54.2 million and its profit of $0.09 per share beat Wall Street's expectations, total revenue still fell by 2.2% compared to the same period in the previous year. The decline was partly attributed to a net decrease in its locations, as franchisees closed nine centers while opening only three. The company also projected a net loss of 23 to 28 centers for the full fiscal year. Furthermore, system-wide sales saw a slight decline of 0.8%, and the company noted it faced challenges in attracting new customers. While European Wax Center reaffirmed its full-year financial guidance, the negative trends in sales and its physical footprint appeared to weigh on investor sentiment.
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What Is The Market Telling Us
European Wax Center’s shares are extremely volatile and have had 48 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 15.8% on the news that the company reported third-quarter 2025 financial results that surpassed Wall Street's expectations on profit and revenue. Although revenue declined 2.2% year on year to $54.2 million, the figure still topped analysts' forecasts. The company's profitability was a key highlight for the quarter. GAAP earnings per share of $0.09 was more than double the consensus estimate of $0.04. Furthermore, adjusted EBITDA, a key measure of profitability, came in at $20.2 million, handily beating expectations of $15.7 million. While the company reaffirmed its full-year revenue outlook, its full-year EBITDA guidance was slightly below analysts' projections. Overall, the strong bottom-line performance appeared to outweigh the mixed guidance, driving investor optimism.
European Wax Center is down 36.9% since the beginning of the year, and at $4.01 per share, it is trading 49.9% below its 52-week high of $8.01 from November 2024. Investors who bought $1,000 worth of European Wax Center’s shares at the IPO in August 2021 would now be looking at an investment worth $187.61.
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