Sally Beauty reports slip in sales and earnings, pushes forward with transformation
A month after the Denton, Texas-based beauty retailer unveiled the relaunch of its flagship banner, Sally Beauty Holdings announced declines in its first-quarter sales and earnings on Wednesday, as transformation efforts at the company continue.
For the first quarter ended December 31, 2019, Sally Beauty announced net sales of $980.2 million, down 0.9% from the $989.5 million reported by the company in the same period in the previous year. Consolidated same store sales decreased 0.3%.
Sally Beauty attributed the decline in sales to the impact of a shortened holiday retail calendar, as well as technology implementation issues and a smaller store base, with the retailer operating 57 fewer stores than in the first quarter of the prior year.
36 of these closures were in the company’s Sally Beauty Supply business, which reported net sales of $569.1 million in Q1 2020, down 2.0% from the previous year, while operating 3,703 locations. Same store sales in the segment also decreased 1.1%, mostly due to declines in the U.S. and Canada. Europe’s contribution to quarterly sales was positive.
In the retailer’s Beauty Systems segment, net sales totaled $411.1 million, an increase of 0.5% when compared to the prior-year period. The business ended the quarter with 1,369 stores, 21 fewer than in Q1 2019. Quarterly same store sales in the segment rose 1.2%.
Sally Beauty Holdings’ net earnings for the first quarter came to $53.2 million, representing a 19.0% decrease from $65.7 million. Diluted earnings per share fell 16.7% from $0.54 to $0.45.
Over the course of the quarter, the effects of the company’s slipping sales were compounded by increased wage and marketing expenses but were partially offset by a reduced interest expense related to the retailers deleveraging initiatives.
“Although we made significant progress on our transformation program during the first quarter, we fell short of both our top-line and bottom-line goals,” commented Sally Beauty Holdings president and CEO Chris Brickman in a release.
“We want to be clear that our first priority is to complete the transformation and put in place the right retail and digital capabilities to set the company up for long-term success. We are focused on unlocking the full potential of our highly differentiated business and we will invest additional resources as appropriate over the year if that is required to deliver our objectives,” he added.
Aside from the recent relaunch of the Sally Beauty brand, the company’s transformation efforts have also included improvements to its digital commerce capacities, adding new marketing, merchandising and e-commerce talent to its team, and renewing the exclusive contract between Beauty Systems Group and Coty.
Future projects for 2020 include the national rollout of new point-of-sale systems, the expansion of both Sally Beauty and Beauty Systems concept stores, and the optimization of the company’s supply chain network.
Looking forward, Sally Beauty Holdings is maintaining its previously reported annual guidance for revenue, same store sales and adjusted EPS. In fiscal 2020, the company expects its revenue to increase in the range of 1.0% to 2.0%, while same store sales are expected to see growth of between 0.5% and 1.5%.
Diluted EPS is still predicted to rise in the low to mid-single digits.
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