EWCZ Q2 Deep Dive: Data-Driven Marketing and Operational Overhaul Amid Guidance Reset

Beauty and waxing service franchise European Wax Center (NASDAQ:EWCZ) fell short of the market’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 non-GAAP profit of $0.18 per share was 11.6% above analysts’ consensus estimates.

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StockStory’s Take

European Wax Center’s second quarter saw a positive market reaction despite a year-over-year sales decline and a revenue miss versus Wall Street expectations. Management pointed to early signs of stabilization in guest transaction trends and highlighted a disciplined approach to cost control and operational efficiency. CEO Chris Morris noted, “Our strategies are beginning to take hold,” referencing improvements in visit frequency among existing guests and enhanced marketing efficiency. The company also credited a test-and-learn approach and increased franchisee engagement as supporting factors.

Looking ahead, European Wax Center’s forward guidance is shaped by management’s focus on traffic growth, franchisee profitability, and a gradual return to unit expansion by 2026. The company expects more meaningful new guest acquisition to take hold later this year and into 2026, supported by targeted marketing and operational initiatives. CFO Tom Kim emphasized, “Our updated outlook reflects the visibility we now have and the tangible progress we’ve made,” while cautioning that new guest momentum is building more slowly than hoped. Management believes ongoing investments in analytics, targeted support for franchisees, and leadership additions will be key to executing its turnaround strategy.

Key Insights from Management’s Remarks

Management attributed Q2 performance to targeted marketing, operational discipline, and the first results from a refreshed executive team, with cost controls offsetting top-line softness.

• Marketing efficiency gains: The company reported a 40% improvement in cost per acquisition since the start of the year, crediting refined digital targeting and creative testing. Management cited a new "Champion ad test" that identified top-performing marketing assets now being used system-wide.
• Franchisee support and engagement: European Wax Center emphasized expanded field support to franchisees, including over 400 field visits and the rollout of new tools for tracking and labor analytics. Centers highly engaged with these initiatives saw EBITDA margin improvement of 170 basis points, according to management.
• Leadership team expansion: The addition of Angela Jaskolski as Chief Operating Officer and Kurt Smith as Chief Development Officer was highlighted as critical for operational discipline and development strategy. Both bring franchise and operational experience from outside the company.
• Guest retention and engagement: Management reported a rise in contactability rates—from 38% to 57%—as more guests opted into SMS and email communications. Personalized outreach has led to a reported 0.5 visit increase in frequency among these guests.
• Regional and product trends: While softness persisted on the West Coast, improvement was noted in Texas, Florida, and New York. The core "Wax Pass" offering saw sales up nearly 2% year-over-year, with management noting ongoing product acceptance but prioritizing transaction growth over retail expansion.

Drivers of Future Performance

European Wax Center’s near-term outlook is built on improving traffic growth, disciplined cost management, and a gradual recovery in unit development.

• Traffic and guest acquisition: Management believes ongoing investment in data-driven marketing and guest engagement tools will drive incremental traffic, with more pronounced effects expected in the latter part of this year and into 2026. However, new guest acquisition remains slower than anticipated, representing a key execution risk.
• Franchisee profitability and system health: The company’s focus on operational excellence and franchisee support is expected to enhance four-wall profitability and mitigate the impact of store closures. Management sees improved franchisee confidence and alignment as prerequisites to resuming net unit growth by 2026.
• Cost management and margin discipline: European Wax Center expects continued benefit from cost control initiatives, including supply chain optimization to address tariff impacts. While advertising spend will remain steady, margin improvement is targeted through efficiency gains and better leveraging of the asset-light franchise model.

Catalysts in Upcoming Quarters

In the coming quarters, our team will closely monitor (1) the pace of transaction growth and sustained improvement in guest acquisition, (2) the effect of enhanced franchisee support and new executive leadership on operational execution and profitability, and (3) progress towards stabilizing and reopening centers, especially in challenging markets like the West Coast. We will also track how marketing and data analytics investments translate into stronger unit economics and network health.

European Wax Center currently trades at $5.02, up from $4.42 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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