Sally Beauty Holdings Reports Second Quarter Fiscal 2025 Results

DENTON, Texas--(BUSINESS WIRE)--Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”), the leader in professional hair color, today announced financial results for its second quarter ended March 31, 2025. The Company will hold a conference call today at 7:30 a.m. Central Time to discuss these results and its business. Fiscal 2025 Second Quarter Summary Consolidated net sales of $883 million, a decrease of 2.8% compared to the prior year, includes 110 basis points of unfavorable foreign currency impact; Consolidated comparable sales decrease of 1.3%; Global e-commerce sales of $94 million, representing 10.7% of net sales; GAAP gross margin expanded 100 basis points to 52.0%; GAAP operating earnings of $69 million and GAAP operating margin of 7.9%; Adjusted Operating Earnings of $75 million and Adjusted Operating Margin of 8.5%; GAAP diluted net earnings per share of $0.38; Adjusted Diluted Net Earnings Per Share of $0.42, which represents a 20% increase over the prior year; and Cash flow from operations of $51 million and Operating Free Cash Flow of $32 million. “We are pleased to report a third consecutive quarter of adjusted operating margin expansion and increased profitability, driven by strong gross margin performance and careful cost control,” said Denise Paulonis, president and chief executive officer. “We were able to deliver these results amidst a challenging macro backdrop, which impacted our topline performance. The business continues to generate strong cash flow, enabling us to maintain our balanced capital allocation strategy, which prioritizes investing in our strategic initiatives, optimizing our balance sheet and returning value to shareholders. During the second quarter, we further reduced our debt levels by $36 million and repurchased $10 million of stock under our share repurchase program.” Board of Directors Approves Four-Year Extension to Share Repurchase Program In 2017, the Board of Directors of the Company approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock through September 30, 2021. In 2021, the Board of Directors approved an extension of the share repurchase program for the four-year period ending September 30, 2025. In total, the Company has repurchased $498.9 million of its common stock under this share repurchase program. On May 6, 2025, the Board of Directors approved an extension of the share repurchase program for an additional four-year period ending on September 30, 2029. Under this extension, the Company is authorized to repurchase its common stock up to the amount remaining under the initial 2017 authorization, which is currently $501.1 million. Repurchases will be made in compliance with all U.S. Securities and Exchange Commission rules, including Rule 10b-18, and other legal requirements. Fiscal 2025 Second Quarter Operating Results Second quarter consolidated net sales were $883.1 million, a decrease of 2.8% compared to the prior year. Foreign currency translation had an unfavorable impact of 110 basis points on consolidated net sales for the quarter. The Company was operating 22 fewer stores at the end of the quarter compared to the prior year. At constant currency, global e-commerce sales were $94 million, or 10.7% of consolidated net sales, for the quarter. Consolidated comparable sales decreased 1.3%, driven primarily by external factors, including weather, an unusually harsh flu season and macro uncertainty, which impacted consumer spending at Sally Beauty and pressured stylist appointments and related purchases at Beauty Systems Group. This was partially offset by strong growth in hair color and digital marketplaces at Sally Beauty as well as the continued momentum at Beauty Systems Group from expanded distribution and new brand innovation. Consolidated gross profit for the second quarter was $458.8 million compared to $463.1 million in the prior year, a decrease of 0.9%. Consolidated GAAP gross margin was 52.0%, an increase of 100 basis points, compared to 51.0% in the prior year, driven primarily by lower distribution and freight costs and lower shrink expense across both business segments, and higher product margin at Sally Beauty. GAAP selling, general and administrative (SG&A) expenses totaled $389.4 million, a decrease of $14.0 million compared to the prior year. As a percentage of sales, SG&A expenses were 44.1% compared to 44.4% in the prior year. Adjusted Selling, General and Administrative Expenses, excluding the costs related to the Company’s fuel for growth initiative, asset impairment, and expenses related to the sale of the Company’s corporate headquarters, totaled $383.7 million, a decrease of $10.8 million compared to the prior year. The decrease was driven primarily by the favorable impact from foreign currency exchange rates, $3.9 million in savings from our fuel for growth initiative, and lower advertising and depreciation expenses. As a percentage of sales, Adjusted SG&A expenses were 43.4%, same as the prior year. GAAP operating earnings and operating margin in the second quarter were $69.4 million and 7.9%, respectively, compared to $59.6 million and 6.6%, in the prior year. Adjusted Operating Earnings and Operating Margin, excluding the costs related to the Company’s fuel for growth initiative, asset impairment, expenses related to the sale of the Company’s corporate headquarters, and restructuring efforts, were $75.2 million and 8.5%, respectively, compared to $68.6 million and 7.6%, in the prior year. GAAP net earnings in the second quarter were $39.2 million, or $0.38 per diluted share, compared to GAAP net earnings of $29.2 million, or $0.27 per diluted share, in the prior year. Adjusted Net Earnings, excluding the costs related to the Company’s fuel for growth initiative, asset impairment, expenses related to the sale of the Company’s corporate headquarters, the loss on debt extinguishment, and restructuring efforts, were $43.5 million, or $0.42 per diluted share, compared to Adjusted Net Earnings of $37.8 million, or $0.35 per diluted share, in the prior year. Adjusted EBITDA in the second quarter was $104.8 million, an increase of 5.3% compared to the prior year, and Adjusted EBITDA Margin was 11.9%, an increase of 90 basis points compared to the prior year. Balance Sheet and Cash Flow As of March 31, 2025, the Company had cash and cash equivalents of $92 million and no outstanding borrowings under its asset-based revolving line of credit. At the end of the quarter, inventory was $1.01 billion, down 3.2% versus a year ago. Second quarter cash flow from operations was $51.1 million and Operating Free Cash Flow totaled $32.2 million. During the quarter, the Company utilized its cash flow to repay $36 million of term loan B debt and repurchase 1.1 million shares under its share repurchase program at an aggregate cost of $10 million. The Company ended the quarter with a net debt leverage ratio of 1.8x. Fiscal 2025 Second Quarter Segment Results Sally Beauty Supply Segment net sales were $500.6 million in the quarter, a decrease of 2.5% compared to the prior year. The segment had an unfavorable impact of 150 basis points from foreign currency translation on reported sales and operated 17 fewer stores at the end of the quarter compared to the prior year. At constant currency, segment e-commerce sales were $41 million, or 8.2% of segment net sales, for the quarter. Segment comparable sales decreased 0.3% in the second quarter, primarily reflecting strong growth in hair color and digital marketplaces, offset by a decline in hair care. At the end of the quarter, segment store count was 3,117. GAAP gross margin increased by 130 basis points to 61.2% compared to the prior year. The increase was driven primarily by lower distribution and freight costs, higher product margin resulting from enhanced promotional strategies and benefits from the fuel for growth initiative, and lower shrink expense. GAAP operating earnings were $77.3 million compared to $76.8 million in the prior year, representing an increase of 0.6%. GAAP operating margin increased to 15.4% compared to 15.0% in the prior year. Beauty Systems Group Segment net sales were $382.6 million in the quarter, a decrease of 3.2% compared to the prior year. The segment had an unfavorable impact of 50 basis points on reported sales from foreign currency translation and operated 5 fewer stores at the end of the quarter compared to the prior year. At constant currency, segment e-commerce sales were $53 million, or 13.9% of segment net sales, for the quarter. Segment comparable sales decreased 2.7% in the second quarter, primarily reflecting a decline in hair care, partially offset by the continued momentum from expanded distribution and new brand innovation. At the end of the quarter, segment store count was 1,329. GAAP gross margin increased 40 basis points to 39.8% in the quarter compared to the prior year, driven primarily by lower distribution and freight costs and lower shrink expense, partially offset by lower product margins related to brand mix. GAAP operating earnings were $43.9 million compared to $43.0 million in the prior year, representing an increase of 2.1%. GAAP operating margin in the quarter was 11.5% compared to 10.9% in the prior year. At the end of the quarter, there were 632 distributor sales consultants compared to 654 in the prior year. Fiscal Year 2025 Guidance* The Company is updating its full year guidance to reflect current business trends. Given the complexity surrounding global trade policy and its potential impact on consumer sentiment and spending, the guidance the Company is providing does not assume any material change to the macroeconomic environment or broader consumer demand trends. In addition, the Company is providing the following guidance for its third quarter: Third Quarter Comparable sales are expected to be flat to down 2% compared to the prior year Consolidated net sales are expected to be approximately 50 basis points lower than comparable sales due to the expected unfavorable impact from foreign exchange rates Adjusted Operating Margin is expected to be in the range of 8.0% to 8.5% Full Year Comparable sales are expected to be flat to down 1% compared to the prior year Consolidated net sales are expected to be approximately 75 basis points lower than comparable sales due to the expected unfavorable impact from foreign exchange rates Adjusted Operating Margin is expected to be in the range of 8.0% to 8.5% Conference Call and Where You Can Find Additional Information The Company will hold a conference call and live webcast at approximately 7:30 a.m. Central Time today, May 12, 2025, to discuss its financial results and its business. During the conference call, the Company may discuss and answer one or more questions concerning business and financial matters and trends affecting the Company. The Company’s responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed. Participants can listen to the live webcast of the conference call by accessing the investor relations section of the Company’s website at sallybeautyholdings.com/investor-relations/events-and-presentations/events-calendar, or through our third-party host at SBH Q2 Earnings Webcast. To join the conference call, participants can pre-register to receive a dial-in number and unique PIN using the following link: Pre-register SBH Q2 Earnings Call. Pre-registration can be completed at any time up to and following the call start time. A replay will be available on the Company’s investor relations website after 10:00 a.m. Central Time on May 12, 2025, through May 12, 2026. About Sally Beauty Holdings, Inc. Sally Beauty Holdings, Inc. (NYSE: SBH), as the leader in professional hair color, sells and distributes professional beauty supplies globally through its Sally Beauty Supply and Beauty Systems Group segments. Sally Beauty Supply stores offer up to 7,000 products for hair color, hair care, nails, and skin care through proprietary brands such as Ion®, Bondbar®, Strawberry Leopard®, Generic Value Products®, Inspired by Nature® and Silk Elements® as well as professional lines such as Wella®, Clairol®, OPI®, L’Oreal®, Wahl® and Babyliss Pro®. Beauty Systems Group stores, branded as Cosmo Prof® or Armstrong McCall® stores, along with its outside sales consultants, sell up to 8,000 professionally branded products including Paul Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®, Amika® and Moroccanoil®, intended for use in salons and for resale by salons to retail consumers. For more information about Sally Beauty Holdings, Inc., please visit sallybeautyholdings.com/investor-relations. Cautionary Notice Regarding Forward-Looking Statements Statements in this news release and the schedules hereto that are not purely historical facts or that depend upon future events may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, can be identified by the use of words such as “believes,” “projects,” “expects,” “can,” “may,” “estimates,” “should,” “plans,” “targets,” “intends,” “could,” “will,” “would,” “anticipates,” “potential,” “confident,” “optimistic,” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy, objectives, estimates, guidance, expectations and future plans. Forward-looking statements can also be identified by the fact that these statements do not relate strictly to historical or current matters. Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including the “Risk Factors” described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, and other filings with the U.S. Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements. Use of Non-GAAP Financial Measures This news release and the schedules hereto include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the United States, (“GAAP”), and are therefore referred to as non-GAAP financial measures: (1) Adjusted Selling, General and Administrative Expenses; (2) Adjusted EBITDA and EBITDA Margin; (3) Adjusted Operating Earnings and Operating Margin; (4) Adjusted Net Earnings; (5) Adjusted Diluted Net Earnings Per Share; and (6) Operating Free Cash Flow. We have provided definitions below for these non-GAAP financial measures and have provided tables in the schedules hereto to reconcile these non-GAAP financial measures to the comparable GAAP financial measures. Adjusted Selling, General and Administrative Expenses – We define the measure Adjusted Selling, General and Administrative Expenses as GAAP selling, general and administrative expenses excluding the costs related to the Company’s fuel for growth initiative, asset impairment, and expenses related to the sale of the Company’s corporate headquarters for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted EBITDA and EBITDA Margin – We define the measure Adjusted EBITDA as GAAP net earnings before depreciation and amortization, interest expense, income taxes, share-based compensation, costs related to the Company’s fuel for growth initiative, expenses related to asset impairment, and expenses related to the sale of the Company’s corporate headquarters for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of net sales. Adjusted Operating Earnings and Operating Margin – Adjusted operating earnings are GAAP operating earnings that exclude the costs related to the Company’s fuel for growth initiative, expenses related to asset impairment, expenses related to the sale of the Company’s corporate headquarters, and restructuring efforts for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted Operating Margin is Adjusted Operating Earnings as a percentage of net sales. Adjusted Net Earnings – Adjusted net earnings is GAAP net earnings that exclude the tax-effected the costs related to the Company’s fuel for growth initiative, tax-effected expenses related to asset impairment, tax-effected expenses related to the sale of the Company’s corporate headquarters, tax-effected costs from the loss on debt extinguishment, and tax-effected costs related to restructuring efforts for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Adjusted Diluted Net Earnings Per Share – Adjusted diluted net earnings per share is GAAP diluted earnings per share that exclude the tax-effected costs related to the Company’s fuel for growth initiative, tax-effected expenses related to asset impairment, tax-effected expenses related to the sale of the Company’s corporate headquarters, tax-effected costs from the loss on debt extinguishment, and tax-effected costs related to restructuring efforts for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures. Operating Free Cash Flow – We define the measure Operating Free Cash Flow as GAAP net cash provided by operating activities less payments for capital expenditures (net). We believe Operating Free Cash Flow is an important liquidity measure that provides useful information to investors about the amount of cash generated from operations after taking into account payments for capital expenditures (net). We believe that these non-GAAP financial measures provide valuable information regarding our earnings and business trends by excluding specific items that we believe are not indicative of the ongoing operating results of our businesses, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry. We have provided these non-GAAP financial measures as supplemental information to our GAAP financial measures and believe these non-GAAP measures provide investors with additional meaningful financial information regarding our operating performance and cash flows. Our management and Board of Directors also use these non-GAAP measures as supplemental measures to evaluate our businesses and the performance of management, including the determination of performance-based compensation, to make operating and strategic decisions, and to allocate financial resources. We believe that these non-GAAP measures also provide meaningful information for investors and securities analysts to evaluate our historical and prospective financial performance. These non-GAAP measures should not be considered a substitute for or superior to GAAP results. Furthermore, the non-GAAP measures presented by us may not be comparable to similarly titled measures of other companies. More News From Sally Beauty Holdings, Inc.

Sally Beauty Holdings Reports Second Quarter Fiscal 2025 Results

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