Emerging Self-Care Trends Will Unlock Urban Market Opportunities

Key Takeaways

• Enhanced data-driven marketing and guest analytics are accelerating revenue growth, customer retention, and same-store sales above expectations.
  
• Scalable membership models and strong new center performance are driving durable recurring revenue and margin expansion ahead of industry trends.
  
• Shifts in consumer behavior, rising costs, franchise attrition, and limited service offerings threaten growth, profitability, and long-term stability.

Catalysts

Operates as the franchisor and operator of out-of-home waxing services in the United States.

• Analyst consensus expects the marketing engine to drive results in late 2025; however, the latest data indicates a 40% improvement in cost per acquisition and early evidence that visit frequency and guest retention are already increasing, suggesting potential for a much faster and stronger rebound in revenue growth and system-wide sales.
  
• While analysts broadly expect operational excellence and franchisee support to improve margins gradually, recent results show that highly engaged centers have already experienced a 170 basis point EBITDA margin improvement, indicating that network-wide adoption could accelerate both net margin expansion and earnings above current expectations.
  
• The company's granular guest analytics and segmentation capabilities are now enabling targeted interventions to reactivate lapsed guests and increase frequency, uniquely positioning European Wax Center to fully capitalize on the long-term shift toward higher personal care spending and recurring beauty routines, which should drive sustained same-store sales and gross margin outperformance.
  
• The rapid maturation and above-target performance of new center openings since late 2024, coupled with a refined and data-driven market planning platform, demonstrate that European Wax Center has potential to outpace industry unit growth rates and capture untapped demand in urban and underpenetrated markets, supercharging system-wide revenue and future EBITDA scalability.
  
• Increasing Wax Pass sales, a scalable membership model, and growing success in upselling proprietary retail products position European Wax Center to build an exceptionally sticky, high-frequency customer base, allowing for durable recurring revenue growth and enhanced gross margin leverage as consumer grooming standards and social media influence continue to rise.

European Wax Center Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on European Wax Center compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming European Wax Center's revenue will grow by 4.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.2% today to 10.6% in 3 years time.
• The bullish analysts expect earnings to reach $26.0 million (and earnings per share of $0.47) by about August 2028, up from $8.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 30.5x on those 2028 earnings, up from 22.8x today. This future PE is greater than the current PE for the US Consumer Services industry at 17.7x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.79%, as per the Simply Wall St company report.

European Wax Center Future Earnings Per Share Growth

Risks

• The shift toward at-home beauty and self-care solutions, including technological developments and increased e-commerce convenience, threatens to erode in-center traffic and reduce recurring service revenue, which would negatively impact top-line growth and future revenue expansion.
  
• The company is experiencing regional softness, particularly in California and other parts of the West Coast, which could signal broader issues with demand in key markets and undermine future same-store sales growth and overall revenue stability.
  
• Franchise model maturity is reflected in a flat year-over-year center count and ongoing net center closures, with the company forecasting between 28 and 50 net closures in 2025, highlighting risk of franchisee attrition and signaling that diminishing new unit growth could put long-term pressure on system-wide sales and unit economics.
  
• Increasing labor costs across the service industry, as acknowledged in the discussion of labor being "by far the greatest cost," suggest that ongoing wage pressures will continue to squeeze operational margins and limit future profitability, especially if unit volume growth fails to offset these higher expenses.
  
• Heavy reliance on waxing as a core offering makes the brand vulnerable to shifts in consumer hair removal preferences or heightened competition from med-spa chains and clinics offering broader service menus, which could erode market share and constrain both revenue and earnings growth over time.

Valuation

• The assumed bullish price target for European Wax Center is $13.63, which represents two standard deviations above the consensus price target of $6.79. This valuation is based on what can be assumed as the expectations of European Wax Center's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $4.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $244.6 million, earnings will come to $26.0 million, and it would be trading on a PE ratio of 30.5x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of $4.69, the bullish analyst price target of $13.63 is 65.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.