How will the expanded distribution through Sally Beauty affect LAMEL's revenue growth and profit margins?

Fundamental impact

LAMEL’s rollout from 500 to essentially an entire North‑American Sally Beauty network (≈ 3,500 U.S. stores + key Canadian locations) multiplies its retail‐available SKUs by roughly 6‑7×. Assuming the same per‑store sell‑through as the pilot, LAMEL’s top‑line could climb 20‑30% YoY in 2025‑26, well ahead of the modest 3‑4% organic growth the broader lip‑care segment is forecast to earn. The “reach‑first, sell‑through‑later” model also means LAMEL will still be pricing its products at Sally’s wholesale tier (≈ 30‑35% lower than its direct‑to‑consumer channel), which will compress gross margins in the short term. However, the massive volume uplift will offset the lower price points; with a 6‑fold increase in units, fixed‑cost per unit (manufacturing, packaging, and brand‑building) falls dramatically, allowing gross margins to edge back up toward the mid‑30% range by FY‑27.

Trading implications

• Sally Beauty (SBH) – the distribution partnership is a clear catalyst for revenue expansion, so the stock should price‑in a 2‑3% forward‑EV/EBITDA uplift. The announcement has already sparked a modest price‑strength in the last two sessions (≈ 3% gain), holding above the 20‑day SMA. If the rollout holds to schedule, a breakout above $32 (the prior resistance on the 20‑day EMA) could trigger short‑cover and institutional buying, especially if analysts upgrade SBH’s FY‑26 sales estimate.

• LAMEL (private) – while the brand itself isn’t directly tradable, its expanding footprint will enhance Sally’s same‑store sales growth, a key driver for the sector’s earnings. For traders with exposure to the beauty retail space (e.g., ULTA, Sephora‑related REITs), tilting long on the beauty sector ETF or adding SBH at current pull‑back would capture the upside from the incremental top‑line while bearing limited downside as margin compression is expected to be transitory.

Actionable view: Stay long on SBH with a target of $34‑35 (≈ 5–7% upside) and a stop around $30 if the rollout stalls. Consider a sector‑wide long position in beauty ETFs to benefit from the broader margin‑improvement tailwinds as LAMEL’s scale drives industry‑wide pricing power.