Issue #28

Beauty or Bargains? 2 Stocks Ready to Test Consumer Strength

Earnings season isn’t over yet — and two very different consumer stories are set to take center stage next week. One comes from the beauty aisles of Main Street America, the other from the vast logistics networks of China. Both are poised to reveal how shifting spending habits and macro trends are reshaping their industries.

👉 On November 12, European Wax Center (NASDAQ: EWCZ) will report earnings that could test the strength of its franchise model in a tight consumer economy.
👉 On November 13, JD.com (NASDAQ: JD) — China’s e-commerce and logistics powerhouse — will show whether its “value and speed” strategy is paying off amid a fragile recovery in consumer demand.
👉 Each offers investors a lens into how two very different markets are adapting to inflation, digital transformation, and evolving consumer behavior.

In this edition, we break down what to watch in both reports — from margins and customer growth to signals of resilience across the global retail landscape.

European Wax Center (NASDAQ: EWCZ)

European Wax Center (NASDAQ: EWCZ) is a leading franchisor and operator of out-of-home waxing services in the United States, operating as a specialized personal care franchise company. The company is set to report its Q3 2025 earnings next week, which will be a key indicator of its ability to navigate a challenging consumer environment.

Business Model and Revenue Streams 📦

European Wax Center's business model is built on a capital-light, franchise-based model that focuses on a single, high-repeat service: waxing. This specialization allows for exceptional consistency and expertise across its network.

The company's revenue streams are primarily derived from three sources:

• Royalty Fees: This is a core recurring revenue stream generated from franchisees, typically a percentage (e.g., 6%) of the gross sales of the franchised centers. This model provides scalable income tied to the overall performance of the center network.
• Product Sales: Revenue from the sale of proprietary products, most notably their signature Comfort Wax® and a line of pre- and post-wax retail skincare products, which franchisees are required to purchase from EWCZ.
• Marketing Fees: Franchisees pay a percentage (e.g., 3%) of their gross sales, which EWCZ uses for national and local marketing and advertising campaigns to drive traffic to the centers.

Macroeconomic Impact

As a provider of a beauty and personal care service, EWCZ operates in a sector that is sensitive to discretionary consumer spending.

• Inflation and Interest Rates: High inflation and rising interest rates can pressure consumers' budgets, potentially leading to a decrease in the frequency of non-essential services like waxing. This is particularly relevant for new and non-core guests. However, the recurring nature of waxing, especially among core, loyal guests who subscribe to their "Wax Pass" program, provides a degree of revenue resilience.
• Supply Chain: EWCZ has cited navigating a dynamic macroeconomic environment and taking a disciplined, strategic approach to its supply chain, which includes managing supply costs, particularly for its proprietary wax and retail products.
• Unit Economics: High interest rates and financing costs can also impact franchisees' willingness and ability to open new locations, which EWCZ has acknowledged in its slower pace of new center openings and planned net center closings in the near term.

Recent Performance and Corporate Developments 📈

European Wax Center has shown resilience, with a focus on improving unit-level economics and driving guest traffic.

Recent Quarterly Financial Highlights (Q2 Fiscal Year 2025): 💰

• System-wide Sales: The network's total sales continue to grow, which is the primary driver of EWCZ's royalty and marketing fee revenues.
• Same-Store Sales (SSS) Growth: This has been a key focus, and while it has varied, the company aims to grow SSS by increasing guest traffic and frequency, driven by a refined digital marketing strategy.
• Earnings Surprise Trend: EWCZ has consistently beaten analyst expectations for earnings per share (EPS) in the last few quarters (Q2'25 EPS of $0.22 vs. consensus of $0.16; Q1'25 EPS of $0.17 vs. consensus of $0.03), suggesting strong operational performance relative to conservative estimates.
• Net Unit Growth Challenge: In its latest full-year outlook, the company estimated a number of net center closings for fiscal 2025 (e.g., 28 to 50 net center closings projected for FY2025 as of Q1'25), reflecting a strategic focus on the profitability and health of the network rather than just unit count, with a goal to return to net unit growth by the end of 2026.

Strategic Initiatives and Mergers: 🤝

There have been no major mergers or acquisitions in the recent period. Key corporate developments focus on:

• Brand and Digital Marketing: A data-rich, digital-first marketing engine to attract new, higher-lifetime-value guests and increase engagement with non-core guests.
• Franchisee Support: Strengthening corporate infrastructure and deploying new tools to support franchisees in achieving higher profitability.
• Product Expansion: Continuing to innovate its retail line, with a recent example being the debut of an All-Over Deodorant.
• Executive Changes: Strengthening its executive leadership team with key appointments to drive the strategic vision.

Path to Profitability and Fair Value 🎯

EWCZ is a profitable company on an Adjusted EBITDA and Adjusted Net Income basis, with a path to sustained growth anchored in unit economics and network health.

• Profitability Strategy: The strategy is centered on driving same-store sales through marketing and operational excellence to increase franchisee profitability, which, in turn, boosts EWCZ's royalty revenue. A disciplined approach to unit growth, prioritizing high-potential markets, is also key to improving long-term network value.
• Fair Value Analysis: With the stock trading near the lower end of its 52-week range, some analysts view it as potentially undervalued relative to its long-term growth potential and specialized market position. The company has a low normalized Price-to-Earnings (P/E) ratio of approximately 5.33 (as of a recent date), though this can be misleading given its high debt-to-equity ratio of around 3.53, which is typical for a franchisor. The company's high Return on Equity (ROE) of around 12% is aided by this significant financial leverage.

Analyst Estimates and Ratings (Last 30 Days) 📊

• Consensus Rating: The consensus rating from a pool of analysts is a mixed but leaning positive "Hold" to "Buy" (The average brokerage recommendation is around 2.41, where 1 is Strong Buy and 5 is Strong Sell, which is near a "Buy" rating).
• Recent Activity: Over the last 30 days, there has been no revision in the consensus EPS estimate of $0.14 for Q3 2025, suggesting analysts are largely sticking to their forecasts ahead of the report. One recent rating from Weiss Ratings did assign a "Sell" rating, while other firms have maintained "Market Perform" and "Hold" ratings.
• Price Target: The average 12-month price target is approximately $6.59, which suggests a significant potential upside from the current share price (which is around $3.76). Individual targets range from a low of $4.00 to a high of $15.00.

Investor-Focused Takeaway: Is EWCZ Right for Your Portfolio?

European Wax Center offers exposure to the resilient, recurring revenue stream of specialized personal care services via a capital-light franchise model. The company's consistent beat on earnings estimates in recent quarters demonstrates operational efficiency in a tough macroeconomic climate.

What to Watch in the Near Term (Q3 Earnings): 📈

• Same-Store Sales (SSS): The key metric to watch, as it directly reflects consumer health and the success of marketing initiatives.
• Net Center Openings/Closures: Monitor the unit count, as a stabilization or improvement in the net closure guidance would be a significant positive for the long-term unit growth story.
• Q4 and Full-Year Outlook: Any revisions to the total revenue and Adjusted EBITDA guidance will set the tone for investor sentiment heading into the next year.

Recommendation:

EWCZ is viewed as a stock with significant potential upside based on analyst price targets and a high-margin, sticky business model. While macroeconomic pressures and the near-term hurdle of net center closures present risks, the stock's operational outperformance and strong analyst support make it a compelling watch for investors who believe in the long-term growth and resilience of specialized beauty services.

JD.com (NASDAQ: JD)

JD.com (NASDAQ: JD) is one of China's largest e-commerce and retail infrastructure companies, often distinguished from competitors by its highly integrated, proprietary logistics network. The company is scheduled to report its third-quarter 2025 earnings next week, which will be scrutinized for signs of recovery in Chinese consumer spending.

Business Model and Revenue Streams 📦

JD.com's core business model is centered on a direct sales approach combined with a complementary third-party marketplace. This is a critical difference from its major competitors.

• Direct Sales (1P Retail): This is JD's primary revenue driver. The company buys inventory directly from brands and suppliers, manages its storage, and sells the products directly to the consumer. This model, supported by its proprietary logistics, ensures authenticity, quality control, and faster delivery—a key value proposition in the Chinese market.
• Service Revenue (3P Marketplace & Logistics): This high-margin segment is growing rapidly and includes:
  • Marketplace Commissions & Advertising: Fees from third-party merchants who sell on JD's platform.
  • JD Logistics (JDL): Revenue from providing integrated supply chain solutions and logistics services (warehousing, transportation, last-mile delivery) to its own retail segment, third-party merchants, and external companies. JDL is one of JD's most significant competitive advantages.
  • New Businesses: Revenue from JD Health, JD Property, and JD Technology, diversifying the company's income streams.

Macroeconomic Impact

JD.com is highly sensitive to the Chinese macroeconomic environment, particularly consumer confidence and spending.

• Slower Consumption Growth: A post-pandemic slowdown in China's consumption has created a challenging retail environment. Consumers are becoming more value-conscious, which can pressure JD's pricing and gross margins. JD has responded by refocusing on a "better and cheaper" user mindset, emphasizing value alongside quality and speed.
• Government Policy: The Chinese government's pro-growth, stimulus-oriented monetary and fiscal policies are intended to boost consumer spending. While the impact has been uneven, a sustained recovery would directly benefit JD's core e-commerce business.
• Strategic Investment: The company's recent heavy investments in new businesses like JD Food Delivery, while a drag on short-term net profit, are strategic moves to expand its ecosystem and increase transaction frequency—a long-term growth driver to combat slower core growth.

Recent Performance and Corporate Developments 📈

JD.com has consistently shown strong revenue growth and operational efficiency despite macroeconomic headwinds, often beating consensus EPS estimates for multiple consecutive quarters.

Recent Quarterly Financial Highlights (Q2 Fiscal Year 2025): 💰

• Revenue Growth: Q2 2025 net revenues were strong, with total revenue growth of 22.4% year-over-year, marking the fastest acceleration in three years. This was driven by both product sales and accelerating service revenues.
• Operational Efficiency: JD Retail achieved a record operating margin of 4.5%, demonstrating improving efficiency in its core business through logistics automation and cost control.
• Net Profit: Net income attributable to ordinary shareholders decreased year-over-year, which management attributed not to operational weakness, but to strategic investments in future growth areas, such as its food delivery and AI-related initiatives. This reflects a trade-off between short-term net profit and long-term market share/ecosystem expansion.

Strategic Initiatives and Mergers: 🤝

• CECONOMY Takeover Offer: JD.com announced a decision to make a voluntary public takeover offer and strategic investment partnership with CECONOMY, a leading European retail group for consumer electronics. This move signals an ambitious, strategic expansion into the European market, leveraging JD's advanced supply chain expertise for global growth.
• JD Food Delivery: A major focus for investment, this new business is seen as key to increasing customer shopping frequency. It reportedly showed triple-digit growth in Q2 and is being built on JDL's existing infrastructure.
• AI Integration: The company continues to invest heavily in its technology, using AI to improve logistics efficiency, enhance customer service (AI chatbots), and accelerate in-warehouse operational speeds.

Path to Profitability and Fair Value 🎯

JD.com is a profitable entity on both a GAAP and Non-GAAP basis, with its path to accelerated profitability centered on leveraging its highly efficient infrastructure.

• Profitability Strategy: The strategy is to continue expanding the high-margin service revenue stream (logistics and marketplace services) while using the scale and operational efficiency of its core retail business to fund new, high-growth, but currently loss-making, ventures like Food Delivery. Analyst projections anticipate that losses in the new businesses will significantly decline, for example, by 2026, which would provide a substantial boost to overall net income.
• Fair Value Analysis: The stock is considered by multiple analysts to be undervalued. JD's valuation metrics, such as a forward price-to-earnings (P/E) ratio often cited below 10x, compare favorably to the broader technology sector and even to competitors. Its robust cash position and asset-heavy (logistics infrastructure) business model often lead valuation models to place its intrinsic "Fair Value" significantly above its current trading price (e.g., one model suggests a fair value of $45.26 vs. a recent price near $32).

Analyst Estimates and Ratings (Last 30 Days) 📊

• Consensus Rating: The consensus rating from analysts is a "Strong Buy" based on a high percentage of "Buy" ratings (often above 90% of ratings). Analysts largely favor JD's strategy and operational execution.
• EPS Estimate (Q3 2025): The consensus earnings per share (EPS) estimate for the upcoming Q3 2025 report is approximately $0.69.
• Price Target: The average 12-month price target is approximately $41.14 (ranging from $32.00 to over $50.00), suggesting a substantial potential upside from the current share price.

Investor-Focused Takeaway: Is JD Right for Your Portfolio?

JD.com represents a high-quality investment in the Chinese e-commerce sector, distinguished by its unique vertical integration and emphasis on quality/speed over pure low-cost competition. Its recent performance shows strong operational health in its core business, with bottom-line pressure coming from calculated, strategic investments in future growth drivers.

What to Watch in the Near Term (Q3 Earnings): 📈

• JD Retail Margin: Look for sustained or improved operating margins in the core retail segment, which is a key indicator of its operational efficiency gains.
• Service Revenue Growth: Continued robust growth in the service segment (JDL, Marketplace) is crucial for the company's overall margin expansion.
• New Business Commentary: Any updates or revised guidance on the timeline for reducing losses in new ventures like Food Delivery will be a major catalyst for the stock.

Recommendation:

JD.com (JD) is widely viewed as a Strong Buy among analysts. The stock presents an opportunity for value investors to gain exposure to China's consumer market through a fundamentally strong, logistics-backed e-commerce leader. While general market risk in China remains a factor, JD's strategic focus, operational excellence, and significant potential upside make it a top stock to watch for its upcoming earnings.

💄📦 Final Take: Two Consumer Stocks with Opposite Models—But Shared Resilience

As global consumers adjust to tighter wallets and shifting priorities, European Wax Center (EWCZ) and JD.com (JD) offer contrasting but compelling windows into how specialized services and scale-driven commerce can thrive—even in uncertain markets.

Whether you’re focused on high-margin beauty services in U.S. suburbs or the backbone of Chinese e-commerce logistics, these stocks are not just about earnings next week—they’re about navigating the future of consumer behavior.

💅 European Wax Center (EWCZ) – Franchised Beauty with Sticky Revenue
✔ Consistent earnings beats, capital-light franchise model
✔ Resilient Wax Pass subscriber base supports recurring revenue
✔ Trading at low multiples with long-term growth optionality
➤ Best for: Investors seeking defensive exposure to recurring, high-margin beauty services with a consumer recovery upside.

🌏 JD.com (JD) – China's Scaled E-Commerce & Logistics Machine
✔ Record growth in service revenue, efficient 1P model with margin expansion
✔ Strategic investments in food delivery, AI, and global logistics
✔ Undervalued vs. peers with strong analyst support
➤ Best for: Long-term investors looking for value in China's digital economy with infrastructure-driven growth and diversified revenue streams.

Investor Insight:

💄 Want a U.S. retail rebound play in specialty beauty with low downside risk? → EWCZ
​ 📦 Want a large-cap China tech stock with global ambitions and deep logistics moats? → JD

Next week’s earnings will give both a chance to prove their resilience—and for investors, a front-row seat to the evolving global retail story.​
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Happy Trading
​— Team Premium Stock Alerts