Sally Beauty Posts Mixed Q1 Results

Sally Beauty’s net sales and comps declined in the first quarter, although its earnings received a boost from the federal tax reform.

Consolidated net sales were $995 million in the first quarter ended December 31, a decrease of 0.5% compared to the prior year. Same store sales decreased 2.2% in the quarter. By division, net sales were $585.6 million in the quarter for Sally Beauty Supply, a decrease of 0.7% compared to the prior year. Same store sales decreased 2.6%, with the lingering impact of the hurricanes late in the prior fiscal year contributing approximately 50 basis points of the decline. In the Beauty Systems Group, net sales were $409.4 million in the quarter, a decrease of 0.1% vs. the prior year. Same store sales declined 1.3%.

Reported net earnings in the first quarter were $83.3 million, an increase of $27.4 million, or 49.1% from the prior year. Reported diluted earnings per share in the first quarter were $0.65 compared to $0.39 in the prior year, an increase of 66.7%, driven primarily by lower income tax expense as a result of significant changes to U.S. federal tax law

The company’s Beauty Systems Group also acquired certain assets of H. Chalut Ltée, a distributor of professional beauty products in the province of Quebec, Canada. The acquisition included 21 stores, 40 distributor sales consultants, one warehouse and distribution rights for certain professional brands in Quebec. Additionally, this transaction provides Sally Beauty Holdings its first presence in the Quebec province.

“Consistent with our expectations, this was a challenging quarter in terms of revenue growth. Business in the first quarter was impacted by a continuation of disappointing traffic trends in our U.S. Sally Beauty stores,” said Chris Brickman, president and CEO, Sally Beauty. “Modest declines in consolidated net sales and gross margin were offset by benefits from our 2017 restructuring plan, tight control of discretionary expenses and lower interest expense.”

He added, “Additionally, we accelerated investments in our e-commerce fulfillment capabilities to allow us to offer two-day delivery to more than 90% of U.S. households. In addition to continuing to test and refine the new Sally loyalty program, we are designing and testing a number of in-store initiatives that seek to reinforce what Sally is best known for amongst its core consumer base, hair color and care.”