Home Sally Beauty Sales Slip in Q4 as Store Closures Continue
November 11, 2022

Sally Beauty Sales Slip in Q4 as Store Closures Continue

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Sally Beauty sales and profits slipped in its fourth quarter, but the company beat a Wall Street earnings-per-share estimate as the company continues closing stores.

Net earnings in the fourth quarter were $21.3 million, or 20 cents per diluted share, versus $68.1 million, or 59 cents per diluted share, in the prior-year period. Adjusted for one-time events, including the company’s restructuring efforts and COVID-19 related net expenses, net earnings were $54.4 million, or 50 cents per diluted share, versus $73.1 million, or 64 cents per diluted share, in the prior year. 

Adjusted earnings per share topped a Yahoo Finance-published analyst consensus estimate of 48 cents.

Fourth-quarter consolidated net sales by Sally Beauty were $962.5 million, a decrease of 2.8% versus the 2021 period, the company reported. Comparable sales in the quarter were flat year over year. The company operated 117 fewer stores at the end of the recent quarter compared to the 2021 period. Foreign currency translation had an unfavorable impact of 170 basis points on consolidated net sales for the quarter. At constant currency, global e-commerce sales gained 30% compared to the previous-year period to $90 million or 9.3% of consolidated net sales.

Operating earnings were $39.2 million versus $111.2 million in the 2021 quarter while adjusted operating earnings were $83.9 million versus $115.8 million.

In the consumer-oriented Sally Beauty Supply segment, versus the Beauty Systems Group, which focuses on professionals, net sales were $554 million in the quarter, down 5.4% versus the prior-year period. The segment suffered an unfavorable impact of 270 basis points from foreign currency translation on reported sales and operated 110 fewer stores at quarter’s end versus the 2021 period. At constant currency, segment e-commerce sales advanced 20% in the quarter year over year to $33 million, or 6% of segment net sales. Comps decreased 1.1% in the quarter year over year with comps in the United States and Canada, which represented 80% of segment net sales for the quarter, down 2%, primarily reflecting inflationary pressures affecting consumer behavior, the company asserted.

For the full year, net earnings were $183.6 million, or $1.66 per diluted share, versus $239.9 million, or $2.10 per diluted share, in the year before. Adjusted net earnings were $237.9 million, or $2.16 per diluted share, versus $274 million, or $2.40 per diluted share, in 2021.

Sally Beauty’s consolidated net sales of $3.82 billion, were down 1.5% from the year past, with comps increasing 0.6%. Global e-commerce sales were $333 million, representing 8.7% of net sales. Operating earnings were $337.6 million versus $418.4 million in 2021, while adjusted operating earnings were $391.3 million versus $461.1 million.

Sally Beauty pointed out that during the last several quarters it has piloted store closures in various markets to maximize the value of the company’s large store portfolio and provide customers with a seamless omnichannel experience. Based on positive sales recapture rates and improved profitability in the markets where it shuttered locations, the company is accelerating the store optimization plan. It said it will shut down approximately 350 more stores, the majority of those closing in December 2022. Most of the locations closed will be Sally Beauty stores in the U.S.

Denise Paulonis, Sally Beauty president and CEO, said, “As we turn to fiscal 2023, the teams will continue to leverage the omnichannel capabilities and modern retail infrastructure we have built. Additionally, we will be executing against three strategic initiatives that will serve as the foundation for us to inspire a more colorful, confident and welcoming world. We will enhance our customer centricity, including an expanded services ecosystem to support our professional stylists and increased education and expertise to inspire and support all customers; grow our Sally portfolio of high margin owned brands and amplify innovation; and increase the efficiency of our operations. Moreover, we will also advance our ESG and our diversity, inclusion and belonging commitments. These strategic initiatives are designed to build upon our core strengths in hair color and care, and drive long-term financial performance and shareholder value.”

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