European Wax Center, Inc. reported its financial results for the thirteen and thirty-nine weeks ended October 5, 2024, revealing mixed performance compared to the previous fiscal period. For the thirteen weeks, total revenue decreased slightly to $55.4 million, down 0.5% from $55.7 million in the same period last year. This decline was attributed to a decrease in product sales, which fell to $31.7 million, a 0.6% drop from the prior year. However, royalty fees increased marginally to $13.4 million, up 0.5%, and marketing fees rose to $7.6 million, reflecting a 0.7% increase.

Operating expenses for the same quarter rose by 6.1% to $45.9 million, leading to a significant decrease in income from operations, which fell 23.5% to $9.5 million. Consequently, net income for the quarter was $2.0 million, a 50.7% decline from $4.1 million in the prior year. Net income attributable to European Wax Center, Inc. was $1.5 million, down 48.7% from $2.9 million.

In contrast, the thirty-nine weeks ended October 5, 2024, showed a revenue increase of 1.5%, totaling $167.2 million compared to $164.7 million in the previous year. This growth was driven by a 1.8% rise in product sales to $95.1 million and a 1.2% increase in royalty fees to $40.3 million. Net income for this period rose 36.4% to $11.6 million, with net income attributable to the company increasing by 35.4% to $8.5 million.

The company’s cash and cash equivalents decreased to $48.0 million as of October 5, 2024, from $52.7 million at the beginning of the year. Total current assets also fell to $87.5 million, down from $95.5 million. Total liabilities decreased significantly, with current liabilities at $27.6 million compared to $37.8 million earlier in the year.

Strategically, European Wax Center has continued to expand its franchise model, with a total of 1,064 centers as of October 5, 2024, up from 1,026 centers a year prior. The company identified over 3,000 potential locations for future growth. However, it faced challenges with increased operating expenses, particularly in payroll and benefits, which included severance for departing executives.

The company also reported a material weakness in internal controls over financial reporting, specifically regarding the fair value of trade names and goodwill, prompting a remediation plan overseen by the Audit Committee. This issue could potentially impact investor confidence and market performance if not addressed effectively.