Sally Beauty Readies Cost Reduction Plan

Sally Beauty is preparing a cost reduction plan designed to help fund long-term growth initiatives.

The program includes cost savings initiatives focused on organizational efficiencies, sourcing of product and brands for resale, indirect procurement, store operating expenses, and inventory management. As a first step, the company is cutting its workforce, primarily at its corporate headquarters in Denton, Texas, and reflects the company’s continued focus on streamlining operations.

The company said benefits from these new initiatives are expected to be reinvested into market-competitive store wages; the acceleration of technology investments that will improve customers’ in-store experience, accelerate e-commerce growth and provide better visibility to store-level inventory; and initiatives that will strengthen the Sally business in the U.S. and Canada by increasing focus on its core hair color and hair care categories.

The new plan is expected to generate annualized benefits in the range of $14 million to $15 million, with benefits in fiscal year 2018 in the range of $6 million to $7 million. The charges to be incurred in connection with this plan in fiscal year 2018, consisting primarily of costs related to employee separation and third party consultants, are expected to be in the range of $15 million to $16 million.

“We have dedicated a substantial amount of work over the last several months into the development of initiatives that we expect will generate meaningful financial benefits, within both product margin and G&A expenses,” said Chris Brickman, president and CEO, Sally Beauty. “We plan to utilize these benefits to maintain our profitability and fund the key investments required to transform the business and intensify our focus on our most differentiated categories: hair color and hair care.”