Alberto Culver CompanyACV

Alberto's acquisition of Simple gives the firm the number-two market share position in hair care and skin care in the United Kingdom. We think the Simple brand has healthy distribution opportunities outside its home market.

Operating margins have increased substantially since the firm separated from its Sally Beauty Supply business, and with sales from the higher margin Simple brand being added to the mix we expect to see further expansion.

Alberto has little infrastructure overseas, but the firm has been slowly introducing its hair-care brands in overseas markets and, as a result, is enjoying low-double-digit sales growth in many regions as it rolls out its hair-care brands. Read more 

The Alberto V05 brand is stuck in a value positioning in the U.S., where it derives about 40% of its total sales. Additionally, a restage of the St. Ives brand failed to live up to expectations. We have some concerns about management's ability to change or improve the positioning of these two core brands.

Consumer staple brands have not escaped unscathed from the economic downturn as consumers reduce discretionary spending. Unfortunately, it doesn't appear that Alberto's value brands have benefited from added sales or market share as consumers trade down in its categories.

With Noxzema newly under its belt, Alberto has now acquired the Simple brand. There are risks as the firm juggles integrating and marketing two brands new to the firm.

Foreign currency remains a very questionable headwind. Any easing of the negative foreign exchange rates experienced much of last year could be undone should the dollar continue to strengthen as some European economies, such as Greece, continue to weaken. Read more