UPDATE 1-Sally Beauty plunges after loss of L'Oreal rights

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By Jessica Wohl

CHICAGO, Dec 20 (Reuters) - Sally Beauty Holdings Inc.'s (SBH.N: Quote, Profile, Research, Stock Buzz) shares fell 19 percent on Wednesday, a day after the salon products retailer said it would lose much of its exclusive rights to sell L'Oreal's (OREP.PA: Quote, Profile, Research, Stock Buzz) professional products, crimping sales as Sally starts out on its own.

The news, which means a loss of about $110 million in revenue in the last nine months of fiscal 2007, comes a month after Sally Beauty made its debut as a public company after being spun off from Alberto-Culver Co. Inc. (ACV.N: Quote, Profile, Research, Stock Buzz).

Two of the three analysts who follow the stock cut their ratings on Sally Beauty.

The company, which has annual revenue of more than $2 billion, said that it hopes to mitigate some of the lost revenue by taking steps such as marketing certain products that it didn't sell before and expanding existing product lines in new territories.

Prudential Equity cut its rating on Sally Beauty to "underweight" from "neutral" and Oppenheimer & Co. took its rating down to "sell" from "neutral."

Bear Stearns analyst Justin Hott, who has an "outperform" rating on the shares, lowered his year-end 2007 price target on the shares to $10 from $12 but told investors not to sell.

"We clearly misjudged the L'Oreal issue and their resolve to leave BSG," Hott said. "Right after the blowup is not the time to abandon the Sally story. L'Oreal or no L'Oreal, this company should grow again."