Sally Beauty Holdings, Inc. (NYSE:SBH) shares took a dip Thursday as the company may be the subject of a takeover soon.
“Beauty has been a hard category to crack for AMZN, and it has entered a partnership with SBH to test in the Dallas area same-day delivery of beauty orders fulfilled by Sally Beauty retail store,” said D.A. Davidson analyst Linda Bolton Weiser.
Sally Beauty is already the retail partner of Amazon in the beauty industry due to the former’s large presence in the U.S., where it owns more than 2,900 stores and a high gross margin of 55%.
Weiser added that Amazon’s decision to attempt to purchase Sally Beauty does not come from a desire to compete with large retail rivals. “Rather, it’s strategy is to keep raising the percentage of sales from exclusive products over time, which enhances gross margin,” said Weiser.
About 50% of Sally Beauty’s sales come from private label products or products that are exclusive to the store. Plus, adding the company to Amazon’s fold would help bring in another slate of customers with a new loyalty program that would enhance its gross margin.
SBH stock fell 5.2% Thursday. AMZN shares fell 1.1% during regular trading hours.