Sally Beauty posts accelerated earnings growth thanks to transformation plan

By

Robin Driver

Published
Aug 1, 2019

Denton, Texas-based hair and beauty supply retailer Sally Beauty Holdings, Inc. reported an increase of 22.2% in earnings in the third quarter ended June 30, 2019, on Wednesday, further highlighting the progress made in its ongoing transformation plan.

 
Net earnings for the quarter totaled $71.2 million, an increase of $12.9 million when compared to the $58.2 million reported by the company in the prior-year period. Diluted earnings per share were $0.59, up 22.9% from $0.48 in the previous year.
 
This accelerated earnings growth was mainly driven by reductions in selling, general and administrative expenses achieved through the company’s transformation initiatives, as well as lower restructuring charges.

Indeed, net sales actually saw a slight decline during the period, falling 2.1% from $996.3 million in last year’s third quarter to $975.2 million.
 
This decrease was principally due to the company operating 81 fewer stores as compared to the prior-year period, with same store sales increasing 0.1% in the quarter.
 
70 of the stores lost since the prior year were operated under the Sally Beauty Supply banner, which posted net sales of $575.0 million in Q3, a decrease of 2.8%. The segment also saw same store sales drop 0.6% internationally and 0.2% in the U.S. and Canada, a region which accounts for 78% of its revenues.
 
In the Beauty Systems Group segment, net sales also fell 1.1% to $400.1 million. Same store sales, however, rose 1.4%.
 
Year to date, Sally Beauty Holdings’ net sales decreased 1.9% to $2.9 billion, down from $3.0 billion in the same nine-month period in the previous year, while net earnings remained largely flat.
 
“We continued to deliver against our transformation plan and objectives in the third quarter,” said Sally Beauty Holdings President and CEO Chris Brickman in a release, highlighting a number of strategic initiatives undertaken by the company since the beginning of Q3.

Aside from cost-cutting measures, these include the exclusive launch of new brands – Elegance and No Nothing at Beauty Systems Group; My Black is Beautiful and Iroiro at Sally Beauty Supply – as well as the expansion of the color palette available in Ion hair color kits in the U.S. and Canada.
 
The company also invested heavily in improving its retail network and boosting its digital commerce capabilities, having notably launched a new fully integrated shopping app.
 
“Looking ahead, we remain focused on taking meaningful actions to position the Company for sustainable growth and value creation, including building on our market leadership and expertise in hair color and care, improving our retail fundamentals, advancing our digital commerce capabilities and continuing to reduce our cost base,” added Brickman. “While we have work to do, we are confident in both our strategic position and direction.”

In line with its Q3 results, Sally Beauty has reiterated its full-year fiscal 2019 guidance and still expects same store sales to remain flat.