Part 1: Analysis of Performance
European Wax Center, Inc. is the largest and fastest-growing operator of out-of-home waxing services in the United States. The company operates in a growing market of hair removal alternatives, with a total addressable market of $18 billion and annualized growth that is more than double other hair removal alternatives. Despite the challenges of the pandemic, the company generated $899 million in system-wide sales in 2022, up from $797 million in 2021. Their asset-light franchise platform delivered capital-efficient growth and generated significant cash flow, with mature centers generating annual cash-on-cash returns in excess of 60%. Aside from growing through opening new centers, the company also invested in enhancing the guest experience, corporate infrastructure, and marketing capabilities.
European Wax Center’s strong competitive position in the market is due to its trusted and efficacious brand, technology-enabled guest interface, pre-paid Wax Pass program, high-quality and hygienic waxing services administered by its licensed wax specialists, and unmatched scale. They are approximately six times larger than the next largest wax-focused competitor by center count and approximately 11 times larger by system-wide sales, and they have a significant whitespace opportunity of over 3,000 locations for their standard center format across the US. None of their existing markets are fully penetrated, and their centers have a long track record of sustained growth delivering consistent positive same-store sales growth with resilient performance through economic cycles.
Part 2: Forward Looking Analysis
European Wax Center, Inc. is well-positioned for future growth, having established a strong foundation for its next chapter. They plan to continue their growth strategy primarily by opening new franchised centers and then increasing their system-wide sales while leveraging their corporate infrastructure to expand their profit margins and generate robust free cash flow. They have a significant whitespace opportunity for expansion across the US and can continue to sustain consistent positive same-store sales growth. Moreover, they have a growing recurring revenue model as more guests view their services as a non-discretionary part of their personal-care and beauty regimens.
Despite uncertainty around the ongoing impact of the pandemic, the waxing industry's consistency in demand and European Wax Center's well-established brand, structured approach to growth, and strong focus on enhancing the guest experience suggest their future outlook is positive. Additionally, they have invested in their corporate infrastructure and marketing capabilities, which should help to further their growth and increase profitability. Their straightforward, asset-light franchise model enhances profitability and drives EBITDA margin accretion and free cash flow generation. Overall, investors can have confidence in European Wax Center's potential for sustained growth due to its positive competitive position, whitespace opportunity for expansion, and strong track record of financial performance.