European Wax Center (EWCZ)

Beauty and waxing service franchise European Wax Center (NASDAQ:EWCZ) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 6.6% year on year to $55.91 million. The company’s full-year revenue guidance of $207 million at the midpoint came in 2.6% below analysts’ estimates. Its GAAP profit of $0.09 per share was in line with analysts’ consensus estimates.

Company Overview

Founded by two siblings, European Wax Center (NASDAQ:EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.

Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.

As a niche business, European Wax Center has no direct public competitors. Privately owned competitors include Bluemercury, Radiant Waxing, and Waxing the City.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, European Wax Center grew its sales at a 12.5% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. European Wax Center’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.2% annually. Note that COVID hurt European Wax Center’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

European Wax Center also reports same-store sales, which show how much revenue its established locations generate. Over the last two years, European Wax Center’s same-store sales were flat. Because this number is better than its revenue growth, we can see its sales from existing locations are performing better than its sales from new locations.

This quarter, European Wax Center missed Wall Street’s estimates and reported a rather uninspiring 6.6% year-on-year revenue decline, generating $55.91 million of revenue.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

European Wax Center’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 22.4% over the last two years. This profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.

This quarter, European Wax Center generated an operating margin profit margin of 25.2%, up 1.2 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

European Wax Center’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q2, European Wax Center reported EPS of $0.09, down from $0.11 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

European Wax Center has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer discretionary sector, averaging 23.4% over the last two years.

European Wax Center broke even from a free cash flow perspective in Q2. The company’s cash profitability regressed as it was 23.7 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

European Wax Center historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.6%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, European Wax Center’s ROIC has increased. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

European Wax Center reported $63.89 million of cash and $381.4 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $77.73 million of EBITDA over the last 12 months, we view European Wax Center’s 4.1× net-debt-to-EBITDA ratio as safe. We also see its $12.83 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing European Wax Center beat analysts’ EBITDA expectations this quarter. We were also glad its EPS was in line with Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. Still, the stock traded up 1.1% to $4.47 immediately following the results.

Updated: November 8, 2025 at 10:02 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own European Wax Center, you should also grasp the company’s longer-term business quality and valuation.

European Wax Center isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, the downside is its projected EPS for the next year is lacking. On top of that, its same-store sales performance has disappointed.

European Wax Center’s P/E ratio based on the next 12 months is 6.9x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $6.59 on the company (compared to the current share price of $3.68).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.