European Wax Center: Wax On, Lights Off.
Disclaimer: This is not investment advice. I am a (NASDAQ: EWCZ) shareholder.
European Wax Center has a problem that every consumer brand CEO should tattoo on their desk: you can’t cut your way to growth.
On paper, things look fine (I suppose if you look at this quarter versus the few prior). Adjusted EBITDA margins are up. Cash is sitting pretty. Debt isn’t a dumpster fire. The finance team is probably high-fiving over the 420 basis point margin expansion in Q2 (honestly, solid progress).
And yet…the stock is down 37% this year. Why? Because the guest walking into a waxing suite doesn’t care about margins. She cares about the experience, I’m assuming. I’ve never been into one of these centers before, ha. But, I’ve walked by enough to see what the general vibe is. And right now according to the data, traffic is basically flat, units are shrinking, and same-store sales are barely clinging to positive territory.
The Balance Sheet Mirage
Quarter after quarter, management talks about stability. But stability is just corporate-speak for “we’re not growing.” Franchisees opened 7 centers this year and closed 15. That’s what I call “shrink-to-survive”, when the top line isn’t moving up and leverage is high as a kite.
Sure, cash flow is solid and leverage hasn’t overly spiraled. But for a business model like this, if your guest count is flat (marketing not translating to sales) and your network is contracting (no one wants to franchise), investors know the math doesn’t hold forever. You can’t financial-engineer your way out of declining relevance.
Where the Real Action Is
Here’s the good news: there are glimmers of execution actually working.
Franchisees who leaned into the new playbooks and labor analytics saw 170 basis points of margin improvement. Good.
SMS and email opt-ins jumped from 38% to 57%, and those guests are visiting more often. OK.
Cost per acquisition? Down ~40% year-to-date thanks to smarter, test-and-learn marketing. Fine.
That’s not accounting magic. That’s marketing execution. That’s where the story is.
Because here’s the truth: if franchisees make money and guests feel good about the experience, growth takes care of itself. If not, no amount of “tightening SG&A” will matter.
The 2026 Promise
Management keeps pointing to 2026 as the year they return to net unit growth. But the bigger test is whether they can prove in 2025 that existing centers can grow traffic, improve guest frequency, and make franchisees profitable again.
If franchisees believe, expansion follows. If they don’t, closures keep piling up. It’s that simple.
Why This Matters Beyond Wax
This is a pattern I see again and again in consumer turnarounds. Public markets reward cost discipline in the short term, but they only reward execution in the long run. Brands can buy time with buybacks, tightened SG&A, or leverage management. But they only win when they fix the guest experience, when operators are profitable, and when the fundamentals of traffic and loyalty are heading up.
European Wax Center has the right ideas on paper — data-driven marketing, operational playbooks, more disciplined development. The question is whether they can execute fast enough to restore confidence before investors lose patience. Or, when the top line continues to fall and leverage isn’t improved.
The Path Forward
If I were drawing up the playbook, it would look something like this:
Traffic is oxygen. Every marketing dollar should be measured in butts in chairs, not “awareness.”
Franchisee profitability first. Happy, profitable operators are the best growth strategy there is. They are the best advocate and can directly impact the top line.
Stop shrink-to-survive. Closures may be inevitable this year, but 2026 has to prove the unit count can grow again.
Execution > Excuses. Margins look nice in investor decks, but only guest traffic and loyalty will get the stock off the mat.
This seems to be a traffic story. Get ‘em in the door, and keep ‘em coming back. Marketing execution will reign supreme for the EWCZ story.