Sally Beauty Lifts Profit as Sales Growth Slows
Fiscal third-quarter net sales edged up 0.2% to $935.5 million.
Sally Beauty Holdings (SBH), the beauty-products retailer and distributor, posted a 25% increase in quarterly profit per share as wider margins offset weakening sales growth.
The results marked a sharper split between sales and profitability. Consolidated comparable sales were flat after rising 1.3% in the prior quarter, while GAAP operating margin expanded 80 basis points from a year earlier to 9.2%.
Fiscal third-quarter revenue rose to $935.5 million from a year earlier and increased from $903 million in the second quarter. GAAP diluted earnings rose to $0.55 a share, accelerating from a 13% year-over-year increase in the prior quarter, while adjusted earnings also reached $0.55 a share, up 8%.
The Sally Beauty segment remained the principal sales driver, with revenue rising 2.2% to $538.6 million and comparable sales increasing 1.6%. Both rates slowed from the second quarter, when revenue grew 4.1% and comparable sales advanced 2.5%.
Beauty Systems Group weakened, with sales declining 2.4% to $396.9 million after slipping 0.1% in the prior quarter. Comparable sales fell 2.1%, and operating margin contracted 20 basis points to 12.3%, even as gross margin expanded 70 basis points to 40.1%.
Global e-commerce revenue increased 11% to $110 million and held at 12% of total sales, though growth eased from 13% in the second quarter. Free cash flow rose 25.4% from a year earlier to $61.6 million, while net leverage improved to 1.4 times from 1.5 times.
Sally Beauty now expects full-year sales of $3.725 billion to $3.733 billion, narrowing the previous range by cutting its top end by $17 million. It expects comparable sales growth of about 0.5% and adjusted earnings of $2.04 to $2.08 a share, while maintaining free-cash-flow guidance of about $200 million.
The company ended the quarter with 4,386 stores, 39 fewer than a year earlier, and 558 Beauty Systems Group salon business consultants, a decline of 53.