The Stephan Co. (SPCO) research, news, and more from GeoInvesting

Company description

Fri, 01 Sep 2017 15:09:37 GMT

The Stephan Co., together with its subsidiaries, manufactures, sells, and distributes hair care and personal care products. It operates in two segments, Distributors and Brands. The Distributors segment sells to distributors that purchase company’s hair care products, and beauty and barber supplies for resale to salons, barbershops, and beauty schools, as well as operates as a mail order, and online barber and beauty supply company. This segment also sells products directly to cosmetology schools. The Brands segment manufacture and sells products to mass merchandisers, chain drug stores, and supermarkets that sells hair care and other personal care products directly to the end user; and distributors that sell to retailers. The company manufactures Image and Sorbie hair care products that are sold through distributors to salons; and Cashmere Bouquet talc, Quinsana Medicated talc, Balm Barr and Stretch Mark creams and lotions, Protein 29 liquid and gel grooming aids, and Stiff Stuff and Wildroot hair care products. It also markets a line of cosmetics through online and mail order channels; and manufactures and sells shampoos, hair treatments, after-shave lotion, dandruff lotion, hair conditioners, and hair spray under the brand name STEPHAN’S, as well as Lekari, New Era, OLD 97, and Imágen. In addition, it markets Hope, Interlude, and Fade-away brand names through various retail chains. The company operates in the United States, Canada, Europe, and Asia. The Stephan Co. was founded in 1897 and is headquartered in Tampa, Florida.

Research

Wed, 15 Nov 2023 16:26:43 GMT

The Stephan Co. (OTC:SPCO) a leader in providing quality professional barber products, announced Q3 2023 results:

Sales of $2.7 million vs $2.6 million
EPS of $0.01 vs EPS of $0.01

“To improve our focus on these operational initiatives, we will shift our capital allocation priorities back to the basics of building cash, selectively reducing debt, and when appropriate paying out cash to shareholders. Once we have achieved our operational goals, we expect to restart our acquisition program, but with a renewed emphasis on more optimal and efficient integration of new purchases.”

Research

Mon, 06 Mar 2023 16:06:27 GMT

The Stephan Co. (OTC:SPCO) a leader in providing quality professional barber products, announced Q4 2022 results:

Sales of $2.6 million vs $2.4 million
Loss of $0.07 vs loss of $0.01

"The Stephan Co is excited to continue on our strategy of building market share through acquisition and organic growth," said Benjamin Large, Chief Executive Officer.

Research

Mon, 21 Nov 2022 12:23:27 GMT

The Stephan Co. (OTC:SPCO) a leader in providing quality professional barber products, announced Q3 2022 results:

Sales of $2.6 million vs $2.3 million
EPS of $0.01 vs EPS of $0.05

“We continue to seek attractively priced acquisitions of barber brands and distributors and our pipeline of new deals is keeping us busy. As always, we will remain financially disciplined, but when the time comes for a deal, we will move quickly to acquire and integrate brands and distributors that allow us to add new customers and to scale our business while adding incremental cash flow to grow value per share.

We continue to grow the business given the attractive incremental returns we are enjoying from acquisitions like 614 Barber Supply and Appleton. This strategy also allows us to maximize the use of our substantial federal tax assets. Labor remains a key challenge for the company given the inflationary wage pressures and the tight supply of labor in our markets. We continue to seek to fill open positions and acquisitions can be an excellent way to acquire talented team members.”

Legal issue we need to look into:

“The Company has been named in more than 100 lawsuits related to talc products it previously manufactured, usually as a contract manufacturer for larger brands. In each case, the Company is one of a large number of defendants named. We have made some progress on our legal exposure and SPCO has been dismissed from some cases. There still remain many lawsuits and we will continue to work to reduce our exposure over time. The Company cannot currently estimate the cost of defending itself in these potential lawsuits or the potential legal liability. The Company will vigorously defend itself and believes the cases are without merit. While the expenses to defend the Company could be material, we cannot predict the outcome of this or any other legal contingency and our insurance carriers have agreed to fund a significant portion of our current expenses.”

Research

Sat, 20 Aug 2022 14:41:38 GMT

The Stephan Co. (OTC:SPCO) ($2.30; $8.7M market cap), a leader in providing quality professional barber products, announced Q2 2022 results:

Sales of $2.5 million vs $2.2 million
EPS of $0.03 vs EPS of $0.08

Results via 10-Q.

“In Q2 2022, revenues grew +9.3%, and Adjusted EBITDA remains comparable to Q2 2021. Gross margins declined by 2.2% as higher product pricing was more than offset by discounting on excess inventory. While demand continues to be soft in the industry, we also saw declines in our catalog business at WB Barber and one of our key owned brand products declined in sales as we were not able to meet demand due to component and labor shortages. We are overcoming this component shortage, but demand is still greater than we can handle given supply constraints. 614 Barber Supply continues to contribute and grow organically and has been a strong acquisition. Organic revenues in the catalog and web were down slightly, while 614’s retail operation continues to grow on strong merchandising and solid execution. We continue to work to drive down excess inventory as product availability in our supply chain improves.”

“We continue to seek attractively priced acquisitions of barber brands and distributors and our pipeline of new deals is keeping us busy. As always, we will remain financially disciplined, but when the time comes for a deal, we will move quickly to acquire and integrate brands and distributors that allow us to add new customers and to scale our business while adding incremental cash flow to grow value per share.”

The company also announced an acquisition of Appleton Barber Supply.

"Appleton Barber Supply, founded in 1926, is one of the oldest barber supply companies in the United States.

Benjamin Large, CEO of The Stephan Co., commented, We are excited to welcome Appleton Barber Supply to The Stephan Co. We have long admired Appletons place in the barber supply industry and look forward to continuing to service their customers with the same high quality products and customer care they have known for almost a hundred years.

SPCOs acquisition of Appletons business assets was financed with cash on hand as well as a new bank financing. The purchase price for Appletons business was $769,000 and included the purchase of $419,000 of Appletons inventory. No liabilities were assumed in the asset purchase. Appleton generates approximately $1.2M of annual revenue."

Interviews

Tue, 22 Mar 2022 14:31:29 GMT

3/22/2022 SPCO Morning Briefing with Jad Fakhry, Director

Research

Tue, 22 Mar 2022 04:00:00 GMT

Jad Fakhry, Director on the Board of The Stephan Co. (SPCO), on management moves to ramp up its online business

Research

Mon, 21 Mar 2022 15:47:19 GMT

The Stephan Co. (OTC:SPCO) ($2.50; $9.5M market cap), a leader in providing quality professional barber products, reported its Q4 2021 results:

Sales of $2.4 million vs $2.0 million
Loss of $0.01 vs EPS of $0.00

Q4 highlights:

Completed the acquisition of and began integrating 614 Columbus Barber Supply Q421
Improved product offerings and maintained high in-stock inventory availability for
customers
Gross margins improved in December 2021 as SPCO raised prices late in Q421
Poised to accelerate industry consolidation with acquisition strategy

“The Stephan Co is excited to be building relationships with the next generation of barbers as we continue our transition from a catalog retailer to a digital destination. We have been able to generate 30% returns on our invested capital through this transition. We will continue to grow the business both through acquisitions and organically in the years ahead,” said Benjamin Large, Chief Executive Officer.”

We will attempt to have a follow up call with management to discuss the quarterly results in a Management Morning Briefing this week . You can see our past fireside chat with the Company here.

PodClips

Sat, 18 Dec 2021 05:00:00 GMT

The Stephan Co. (SPCO) Fireside Chat Cliff Notes

Reference: Fireside Chat - Watch here

Interviews

Fri, 17 Dec 2021 14:05:20 GMT

12/16/2021 Fireside Chat with Jad Fakhry, Director, The Stephan Company (SPCO)

Research

Tue, 23 Nov 2021 05:00:00 GMT

Maj shares his in-depth research process on Stephan Co (OTC:SPCO) via a recorded session. The Stephan Co operates is engaged in the distribution of hair grooming and personal care products mainly throughout the United States.

Research

Fri, 01 Sep 2017 15:08:32 GMT

SPCO ($1.97) is a small company that entered our Tier 1 Pink radar. The company distributes hair care and personal care products throughout the United States and select markets overseas. It distributes its products to barbershops. Our Co-founder, Maj Soueidan, actually had invested in the stock early in his full-time investing career, but late in the company’s growth cycle.

In late 2014 the company decided to discontinue its manufacturing operations and solely concentrate on the distribution of products. We see that this decision, among other cost measures, have resulted in a lean company that produces a stable $8m in annual revenue with a 10% net profit margin.

It seems that this small company has managed to stabilize and become a true cash-cow. The company spent about $600,000 on dividends and employs the rest of the cash flow to buy back shares. This has resulted in shareholders receiving a 15% dividend yield and the stock price roughly doubling over the last year.

With slightly under 4 million shares, minimum dilution, and no debt, we find this company to qualify for criteria that help us narrow down stocks into our lists.

A caveat is that we do not believe a lot of growth can be expected, which leaves it up to intelligent capital allocation by the board to return money to shareholders. We saw that activist investor Chuck GIllman has been on the board since 2015, and we know him as an effective advocate for value creation in the microcap space.

With a run rate EPS of $0.20 per year, it seems that the bargain opportunity might be slightly missed, but we are conducting more research to understand potential upsides and risks. The company is certainly a candidate for inclusion into our portfolio because of its strong and stable cash-flow profile.