• Consolidated Net Sales: $938 million, an increase of 0.7% despite a $6 million foreign currency headwind.
• Comparable Sales Growth: 1.6% across both Sally Beauty and BSG segments.
• Gross Margin: Expanded by 60 basis points to 50.8%.
• Adjusted Operating Margin: 8.4%, an increase of 50 basis points.
• Adjusted EBITDA Margin: 11.7%, up 20 basis points.
• Adjusted Diluted EPS: $0.43, up 10% year-over-year.
• Free Cash Flow: $57 million, including $44 million from the sale of corporate office.
• Net Debt Leverage Ratio: 1.9 times, within target range of 1.5 to 2 times.
• Share Repurchases: $10 million of stock repurchased.
• Sally Beauty Segment Sales: $525 million, with comparable sales up 1.7%.
• BSG Segment Sales: $412 million, with comparable sales up 1.4%.
• Global E-commerce Sales: $99 million, up 9% year-over-year, representing 11% of total net sales.
• Inventory Levels: Slightly over $1 billion, essentially flat to last year.
• Capital Expenditures: $20 million in the quarter.

• Warning! GuruFocus has detected 3 Warning Sign with SBH.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sally Beauty Holdings Inc (NYSE:SBH) reported a third consecutive quarter of positive topline performance in both business segments.
• The company achieved a gross margin expansion of 60 basis points to 50.8%, driven by reduced shrink and lower distribution and freight costs.
• Sally Beauty Holdings Inc (NYSE:SBH) saw strong e-commerce growth, with sales up 9% year-over-year, representing 11% of total net sales.
• The 'Fuel for Growth' program is on track to deliver significant savings, with $40 to $45 million expected in fiscal 2025.
• The company successfully launched new product innovations and expanded distribution, contributing to sales growth in both Sally and BSG segments.

Negative Points

• Sally Beauty Holdings Inc (NYSE:SBH) faced a $6 million headwind from foreign currency translation, impacting sales.
• The company anticipates a flat comparable sales growth for Q2 due to macroeconomic pressures such as flu season and weather disruptions.
• There is a noted decline in traffic trends, particularly among non-color customers, affecting overall store visits.
• The promotional environment remains competitive, requiring strategic management to maintain margins.
• Potential tariff impacts and vendor exposure remain a concern, although the company has strategies in place to mitigate these risks.

Q & A Highlights

Q: Regarding your second quarter guidance, what are the dynamics between Sally and BSG, and what should we expect for the comp trajectory in the back half of the year? A: Denise Paulonis, President and CEO, explained that the company remains focused on delivering a full-year comp sales plan of 0 to 2%. The second quarter guidance reflects known headwinds for BSG, such as lapping the load-in of Amika and Briogeo and an unfavorable calendar. Despite a choppy macro environment in January, the company is optimistic about the back half of the year, with initiatives like the launch of K-18 and digital expansion driving growth.

Q: Can you provide more color on where you stand within your full-year guidance range after Q1 and expectations for a softer Q2? A: Denise Paulonis stated that they are squarely within the guidance range provided, with potential upside from innovation and performance marketing. Marlo Cormier, CFO, added that the operating margin cadence will continue to benefit from the Fuel for Growth program, with expected savings contributing to margin expansion throughout the year.

Q: What are you seeing in the promotional environment compared to pre-pandemic levels, and can you discuss the gross margin drivers? A: Denise Paulonis noted that promotional levels and frequency were consistent with last year, focusing on delivering value to customers. Marlo Cormier highlighted that gross margin expansion was driven by reduced shrink and supply chain efficiencies, with expectations for continued, albeit moderated, expansion in the back half of the year.

Q: What innovation trends are you seeing in the market, and how did traffic and demand evolve throughout the quarter? A: Denise Paulonis mentioned robust innovation in hair and nail care, with products like K-18 and advanced styling tools gaining traction. Traffic was consistent, with some noise in consumer patterns due to external factors like flu season and weather, but demand remained healthy, particularly in the color business.

Q: How do you plan to maintain EBIT growth as some margin levers taper, and do you expect the top line to inflect further? A: Denise Paulonis expressed confidence in achieving single-digit operating margin growth, supported by strategic initiatives and the Fuel for Growth program. Marlo Cormier emphasized the ongoing nature of the program, which is expected to deliver significant savings and margin expansion beyond 2026.

Q: Have you seen any improvement in consumer behavior since January, and how do you plan to offset macro pressures in the second half? A: Denise Paulonis noted that January showed the brunt of macro pressures, but the company is well-positioned to navigate challenges with strategic initiatives like innovation and service enhancements. Marlo Cormier added that their exposure to tariffs is limited, and they have strategies in place to mitigate potential impacts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.