Sally Beauty Restructuring Hits Q2 Results

Sally Beauty’s recent restructuring program impacted its second quarter, which experienced a decline in earnings and sales.

For the second quarter ended March 31, Sally Beauty Holdings reported net earnings of $57 million, or 40 cents per diluted share, versus $60.2 million, or 41 cents per diluted share, in the prior-year period.

The company stated that adjusted diluted earnings per share, excluding $9.2 million of charges related to restructuring plans, were 44 cents in the second quarter versus 41 cents in the period a year previous.

Consolidated net sales were $966.5 million in the second quarter, down 1.4% from the prior-year period. A 2% decline in comparable store sales affected overall revenue, partially offset by incremental sales from new stores. In addition, Sally Beauty noted that it had lost a day of selling in the second quarter versus the last leap year and gained a day of selling in the period due to the shift of this year’s Easter holiday to April. The calendar shifts together impacted reported comp growth in the quarter by approximately 60 basis points, the company asserted.

Operating earnings were $119 million versus $122.5 million in the previous second quarter while adjusted operating earnings, excluding the $9.2 million of charges related to restructuring, were $128.2 million, up 3.2% from the 2016 period.

“Our financial results in the second quarter reflect our teams’ sharp focus on gross margin management and operating expense discipline, both of which enabled us to deliver solid mid-single digit growth in adjusted operating income and even stronger growth in adjusted earnings per share,” said Chris Brickman, Sally Beauty’s president and CEO. “Store traffic was especially challenging in January and February but improved in the last month of the quarter. Additionally, revenue performance in April, the first month of our third fiscal quarter, was in line with the expectations that are included in the full year revenue guidance.”

He added, “We executed on many of our most important initiatives in the quarter, including zone and tactical pricing, as well as the introduction of new brands to BSG and Sally. In early April, we launched the test of our new Sally Beauty loyalty program and early customer feedback has been very positive. Further, we seamlessly executed on the most significant components of the restructuring plan that we announced in early February.”

In addition to its restructuring and cost reduction initiatives, the company reported that Sharon Leite, president of Sally Beauty U.S. and Canada, resigned from her position. Brickman will serve as the interim president of Sally Beauty U.S. and Canada until the company appoints a successor. An external firm has been retained to assist with the search process.