Sally Beauty sales miss in third quarter; additional store closures announced

By

Erin Floyd

Published
Aug 2, 2018

US beauty supplies specialist Sally Beauty Holdings Inc. recorded a 0.2 percent decline in net sales, down to $996.3 million, in the third quarter of fiscal 2018, ended June 30. The company, which is maintaining its focus on its restructuration plan and debt reduction, has also announced the forthcoming closure of 1-2 percent of its stores.
 

Adjusted EBITDA decreased 8.7 percent, or by $14.5 million, to $152.5 million, from the previous year, trailing analyst expectations.

 “As we mentioned in April, in partnership with FTI Consulting, we are undertaking a substantial transformation plan at Sally Beauty Holdings, which seeks to align our operations to reduce our cost base, refocus our team on the defensible categories of hair color and hair care, and improve execution of basic retail fundamentals, all with the goal of returning the business to growth,” President and Chief Executive Officer Chris Brickman said.

“This effort will take multiple quarters, but we have already made progress and we are fully committed to transforming and investing in our business, controlling our indebtedness, and returning capital to shareholders.”

The company reduced its debt from $80.5 million at the end of the second quarter to $63.5 million at the end of the third quarter.

The tough brick-and-mortar retail landscape continued to squeeze sales, with consolidated net sales seeing a drop of 2 percent, reflecting a geographic shift to lower margin international revenue streams.  

Amongst its initiatives to boost cost-cutting, the company, which operates 5,170 stores across the United States, South America and Europe, also announced the forthcoming closure of 1-2 percent of its stores.  Dates and specific locations will be announced later, the retailer said.

Looking ahead, the company is hoping to bolster its store network with an increased focus on technology, including the rollout of a loyalty program and the testing during the fourth quarter of “endless aisles” which will allow customers to order out-of-stock items via an iPad for later home delivery.

Alongside the integration of online orders, the beauty retailer will relaunch its e-commerce site with a new design and enhanced delivery options, it said.

However, the turnaround is not likely to gain traction in the short-term, with full year operating earnings projected to decrease between 11 and 13 percent, due to declines in gross margin; restructuring costs in fiscal 2018 and other expenses related to data security incidents.