Sally Beauty Holdings, Inc.
For the period ended Dec 31, 2024. Filed Feb 13, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 13, 2025
SBH$18.31-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000950170-24-094050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-13.
0000950170-25-019869
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 72 current paragraphs.
41 unchanged; 25 reworded; 6 added; 25 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
During the three months ended December 31, 2024, we sold our corporate headquarters located in Denton, Texas to Denton County, Texas for $45.5 million, excluding $1.5 million in closing costs, and recognized a gain of $26.6 million which is included in selling, general and administrative expenses within our condensed consolidated statement of earnings.
Current report
SBS’s increase in comparable sales was primarily reflecting strong growth in hair color and digital marketplaces.
Current report
Interest expense was relatively unchanged but included a decrease in interest on our Term Loan B driven by lower interest rates, partially offset by increased interest costs on our senior notes. Our 2032 Senior Notes compared to our 2025 Senior Notes, reflect a higher interest rate with a lower outstanding principle balance. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.
Current report
In December of 2021, the Organization for Economic Cooperation and Development (OECD) established a framework, referred to as Pillar 2, designed to ensure large multinational enterprises pay a minimum 15 percent level of tax on the income arising in each jurisdiction in which they operate. The earliest effective date is for taxable years beginning after December 31, 2023, which for us is fiscal year 2025. Numerous jurisdictions in which Sally Beauty operates have enacted the OECD model rules or drafted legislation, including Belgium, Canada, France, Germany, Ireland, Italy, Netherlands, Spain, and the United Kingdom. The United States is not subject to Pillar 2. We do not expect this legislation to have a material impact on our consolidated financial statements. We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.
Current report
Our working capital (current assets less current liabilities) decreased $14.5 million, to $698.1 million at December 31, 2024, compared to $712.6 million at September 30, 2024. The decrease was primarily driven by lower inventory, as a result of a strategic reduction in slower moving products and the negative impacts of foreign exchange rates of $15.0 million, the disposal of assets held for sale previously included in other current assets as a result of the sale of our corporate HQ, and the timing of lease renewals, partially offset by the timing of accounts payable.
Current report
For the three months ended December 31, 2024, net cash provided was primarily a result of receiving $44.0 million from the sale of our corporate headquarters. Additionally, we had lower capital expenditures as we lapped system upgrades in the prior year, while current spend related primarily to store improvements.
Removed paragraphs (25)
Previous report
SBS’s net sales increase was primarily driven by an increase in comparable sales, partially offset by the impact of closed stores. SBS’s increase in comparable sales was driven by improved new and reactivated customer trends as key strategic initiatives continue to mature.
Previous report
BSG. BSG’s gross profit was flat for the three months ended June 30, 2024, as a result of a lower gross margin on units sold, offset by an increase in net sales. BSG’s gross margin decline was driven by an unfavorable fixed cost absorption and lower product margins, primarily from higher take rate on promotions and brand mix, partially offset by lower distribution and freight costs from supply chain efficiencies.
Previous report
SBS. SBS’s selling, general and administrative expenses increased $8.3 million, or 3.7%, for the three months ended June 30, 2024. As a percentage of SBS net sales, selling, general and administrative expense for the three months ended June 30, 2024, was 43.6%, compared to 42.2% for the three months ended June 30, 2023. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, depreciation expense, and advertising expense.
Previous report
The increase in interest expense is primarily due to the repricing of our Term Loan B which resulted in the recognition of $1.7 million in losses on debt extinguishment. See Note 9, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.
Previous report
The effective tax rates were 26.1% and 28.9% for the three months ended June 30, 2024 and 2023, respectively. The decrease in the effective tax rate was primarily due to additional taxes and interest paid in the prior year quarter for the one-time transition tax on unrepatriated foreign earnings (“Repatriation Tax”) related to the fiscal year ended September 30, 2018.
Previous report
The Nine Months Ended June 30, 2024, compared to the Nine Months Ended June 30, 2023
Previous report
Net Sales
Previous report
(a)
Previous report
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months.
Previous report
SBS’s net sales decrease was primarily driven by fewer comparable sales and the impact of store closures, which includes $23.8 million resulting from the Plan, of which, a significant portion was recaptured in other locations that are included within comparable sales. These decreases were partially offset by a favorable impact from foreign currency exchange rates. SBS’s comparable sales decline was a result of fewer transactions, partially offset by growth in our average unit retail, driven by inflationary impacts and pricing leverage.
Previous report
(a)
Previous report
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months and sales from acquired stores.
Previous report
BSG’s net sales increase was primarily driven by an increase in comparable sales, reflecting expanded distribution, new brand innovation and improving salon demand trends, partially offset by the impact of store closures and the unfavorable impact from foreign currency exchange rates.
Previous report
Gross Profit
Previous report
BSG. BSG’s gross profit was flat for the nine months ended June 30, 2024, as a result of a lower gross margin on units sold, offset by an increase in net sales. BSG’s gross margin decline was driven primarily by unfavorable fixed cost absorption, shrink expense, and adjustments to our expected obsolescence reserve related to the Plan in the prior year, partially offset by lower distribution and freight costs from supply chain efficiencies.
Previous report
Selling, General and Administrative Expenses
Previous report
BSG. BSG’s selling, general and administrative expenses decreased $0.6 million, or 0.2%, for the nine months ended June 30, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the nine months ended June 30, 2024, was 28.3% compared to 28.6% for the nine months ended June 30, 2023. The decrease as a percentage of sales was driven primarily by higher net sales and lower delivery expense.
Previous report
Restructuring
Previous report
The decrease in restructuring was primarily due to the lapping of expenses incurred in connection with the Plan in the prior year for $18.1 million. See Note 12, Restructuring, in Item 1 of this quarterly report for more information on the Plan.
Previous report
Interest Expense
Previous report
The increase in interest expense is primarily due to the impacts of higher interest rates and debt extinguishment, partially offset by lower average outstanding borrowings on our ABL facility during the current year. See Note 9, Short-term and Long-term Debt, and Note 10, Derivative Instruments and Hedging Activities, in Item 1 of this quarterly report for more information on our debt and interest rate swap that has helped mitigate some of the additional interest costs resulting from higher interest rates.
Previous report
Provision for Income Taxes
Previous report
Our working capital (current assets less current liabilities) increased $18.9 million, to $667.6 million at June 30, 2024, compared to $648.7 million at September 30, 2023. The increase was primarily driven by an increase in inventory, as a result of expanded distribution rights in BSG and vendor price increases, and the timing of account payables and lease renewals. These impacts were partially offset by higher borrowings under our ABL facility and a decrease in cash and cash equivalents.
Previous report
Cash used by investing activities was relatively unchanged. Our capital expenditures related primarily to store improvements and system upgrades.
Previous report
During the current fiscal year, we issued $600.0 million in 2032 Senior Notes and used the proceeds, together with cash on hand and borrowings under our ABL facility, to repay in full our 2025 Senior Notes. See Note 9, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.
Reworded paragraphs (25)
Previous wording
Consolidated net sales for the three months ended June 30, 2024, increased $11.3 million, or 1.2%, to $942.3 million, compared to the three months ended June 30, 2023. Consolidated net sales included a net negative impact from changes in foreign currency exchange rates of $1.0 million;
Current wording
Consolidated net sales for the three months ended December 31, 2024, increased $6.6 million, or 0.7%, to $937.9 million, compared to the three months ended December 31, 2023. Consolidated net sales included a net negative impact from changes in foreign currency exchange rates of $5.7 million;
Previous wording
Consolidated comparable sales increased 1.5% for the three months ended June 30, 2024;
Current wording
Consolidated comparable sales increased 1.6% for the three months ended December 31, 2024;
Previous wording
Consolidated gross profit for the three months ended June 30, 2024, increased $6.2 million, or 1.3%, to $480.9 million, compared to the three months ended June 30, 2023. Consolidated gross margin remained unchanged at 51.0% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023;
Current wording
Consolidated gross profit for the three months ended December 31, 2024, increased $9.7 million, or 2.1%, to $476.8 million, compared to the three months ended December 31, 2023. Consolidated gross margin increased 60 bps to 50.8% for the three months ended December 31, 2024, compared to the three months ended December 31, 2023;
Previous wording
Consolidated operating earnings for the three months ended June 30, 2024, decreased $18.4 million, or 20.4%, to $71.8 million, compared to the three months ended June 30, 2023. Operating margin decreased 210 bps to 7.6% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023;
Current wording
Consolidated operating earnings for the three months ended December 31, 2024, increased $31.2 million, or 45.1%, to $100.3 million, compared to the three months ended December 31, 2023. Operating margin increased 330 bps to 10.7% for the three months ended December 31, 2024, compared to the three months ended December 31, 2023;
Previous wording
For the three months ended June 30, 2024, our consolidated net earnings decreased $13.1 million, or 25.8%, to $37.7 million, compared to the three months ended June 30, 2023;
Current wording
For the three months ended December 31, 2024, our consolidated net earnings increased $22.6 million, or 58.9%, to $61.0 million, compared to the three months ended December 31, 2023;
Previous wording
For the three months ended June 30, 2024, our diluted earnings per share was $0.36 compared to $0.46 for the three months ended June 30, 2023; and
Current wording
For the three months ended December 31, 2024, our diluted earnings per share was $0.58 compared to $0.35 for the three months ended December 31, 2023;
Previous wording
Cash provided by operations was $47.9 million for the three months ended June 30, 2024, compared to $53.1 million for the three months ended June 30, 2023.
Current wording
Cash provided by operations was $33.5 million for the three months ended December 31, 2024, compared to $51.0 million for the three months ended December 31, 2023; and
Previous wording
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores are excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.
Current wording
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.
Previous wording
Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include costs associated with our Fuel for Growth initiative. Restructuring costs included in this line are related to our Distribution Center Consolidation and Store Optimization Plan. See Note 12 for more information.
Current wording
Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include costs associated with our Fuel for Growth initiative as well as the $26.6 gain related to the sale of our corporate headquarters during the three months ended December 31, 2024. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.
Previous wording
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months and sales from acquired stores.
Current wording
Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.
Previous wording
BSG’s net sales increase was primarily driven by an increase in comparable sales, reflecting expanded distribution, new brand innovation and improving salon demand trends, partially offset by unfavorable impacts of foreign currency exchange rates.
Current wording
BSG’s net sales increase was primarily driven by an increase in comparable sales, reflecting continued momentum from expanded distribution and new brand innovation.
Previous wording
SBS. SBS’s gross profit decreased for the nine months ended June 30, 2024, as a result of a decrease in net sales, partially offset by higher gross margin on units sold. SBS’s gross margin improvement was primarily due to lower distribution and freight costs from supply chain efficiencies and higher product margins, partially offset by unfavorable fixed cost absorption.
Current wording
SBS. SBS’s gross profit increased for the three months ended December 31, 2024, as a result of an increase in net sales and a higher gross margin on units sold. SBS’s gross margin improvement was driven primarily by higher product margins, resulting from enhanced promotional strategies and benefits from our Fuel for Growth initiative, and lower shrink expense.
Previous wording
SBS. SBS’s gross profit increased for the three months ended June 30, 2024, as a result of an increase in net sales and a higher gross margin on units sold. SBS’s gross margin improvement was driven primarily by lower distribution and freight costs from supply chain efficiencies and higher product margins, partially offset by unfavorable fixed cost absorption.
Current wording
BSG. BSG’s gross profit increased for the three months ended December 31, 2024, as a result of an increase in net sales and a higher gross margin on units sold. BSG’s gross margin improvement was driven by lower distribution and freight costs from supply chain efficiencies and lower shrink expense, partially offset by lower product margins related to brand mix.
Previous wording
SBS. SBS’s selling, general and administrative expenses increased $18.7 million, or 2.8%, for the nine months ended June 30, 2024, and included an unfavorable impact from foreign exchange rates of $4.8 million and cost savings from store closures in connection with the Plan. As a percentage of SBS net sales, selling, general and administrative expense for the nine months ended June 30, 2024, was 44.1% compared to 41.8% for the nine months ended June 30, 2023. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, rent expense, depreciation expense, and advertising expense.
Current wording
SBS. SBS’s selling, general and administrative expenses increased $4.5 million, or 1.9%, for the three months ended December 31, 2024, and included an unfavorable impact from foreign exchange rates of $1.5 million. As a percentage of SBS net sales, selling, general and administrative expenses for the three months ended December 31, 2024, were 44.4%, compared to 43.8% for the three months ended December 31, 2023. The increase as a percentage of sales was primarily due to increased labor and other compensation-related expenses and higher advertising expense, partially offset by a decrease in delivery expenses and other Fuel for Growth benefits.
Previous wording
BSG. BSG’s selling, general and administrative expenses increased $1.5 million, or 1.4%, for the three months ended June 30, 2024. As a percentage of BSG net sales, selling, general and administrative expense for the three months ended June 30, 2024, was 27.9% compared to 28.2% for the three months ended June 30, 2023. The decrease as a percentage of sales was primarily due to higher net sales, partially offset by higher depreciation expense.
Current wording
BSG. BSG’s selling, general and administrative expenses decreased $2.9 million, or 2.5%, for the three months ended December 31, 2024. As a percentage of BSG net sales, selling, general and administrative expenses for the three months ended December 31, 2024, were 27.4% compared to 28.4% for the three months ended December 31, 2023. The decrease as a percentage of sales was primarily due to higher net sales, lower delivery expenses and other Fuel for Growth benefits.
Previous wording
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $14.7 million, or 31.3%, for the three months ended June 30, 2024, primarily due to expenses in connection with our Fuel for Growth initiative and higher labor and other compensation-related expenses.
Current wording
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $23.2 million, or 43.6%, for the three months ended December 31, 2024, primarily due to a $26.6 million gain on the sale of our corporate headquarters, partially offset by increased labor and other compensation-related expenses.
Previous wording
The effective tax rates were 25.8% and 27.1% for the nine months ended June 30, 2024 and 2023, respectively. The decrease in the effective tax rate was primarily due to Repatriation Tax related to the fiscal year ended September 30, 2018.
Current wording
The effective tax rates were 26.4% and 25.9% for the three months ended December 31, 2024 and 2023, respectively. The increase in the effective tax rate was primarily due to foreign operations for which a tax benefit was not recognized.
Previous wording
Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program (see below for more details) we will from time to time repurchase shares of our common stock on the open market to return value to our shareholders. At June 30, 2024, we had $535.0 million in our liquidity pool, which includes $437.6 million available for borrowing under our ABL facility and cash and cash equivalents of $97.4 million.
Current wording
Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program (see below for more details) we will from time to time repurchase shares of our common stock on the open market to return value to our shareholders. At December 31, 2024, we had $588.2 million of available liquidity, which includes $482.7 million available for borrowing under our ABL facility and cash and cash equivalents of $105.5 million.
Previous wording
The increase in cash provided by operating activities was primarily driven by the timing of interest and tax payments and the impact of lease contract termination and severance payments in connection with the Plan in the prior year, partially offset by fewer cash receipts from customers, higher inventory purchases and the timing of vendor and manufacturing allowances.
Current wording
The decrease in cash provided by operating activities was primarily driven by the timing of accounts payable and tax payments, partially offset by lower inventory purchases, the timing of debt interest payments and higher cash receipts from customers.
Previous wording
Net Cash Used by Investing Activities
Current wording
Net Cash Provided (Used) by Investing Activities
Previous wording
The increase in cash used by financing activities was primarily due to shares repurchased in the current year under our share repurchase program and an increase in debt issuance costs, partially offset by fewer reductions in our debt outstanding in the current year compared to the prior year.
Current wording
The increase in cash used by financing activities was primarily due to the $40.0 million early repayment on our term loan, partially offset by fewer shares repurchased in the current year under our share repurchase program.
Previous wording
At June 30, 2024, we had $1.0 billion in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $12.1 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, $395.0 million remaining on our term loan and $45.0 million in outstanding borrowings under our ABL facility.
Current wording
At December 31, 2024, we had $942.2 million in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $10.8 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $353.0 million remaining on our Term Loan B. There were no outstanding borrowings under our ABL facility.
Previous wording
We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the nine months ended June 30, 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.3%.
Current wording
We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the three months ended December 31, 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.0%.
Previous wording
The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the nine months ended June 30, 2024 (in thousands):
Current wording
The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the three months ended December 31, 2024 (in thousands):
Previous wording
Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the three and nine months ended June 30, 2024, we repurchased 0.9 million and 4.3 million shares of our common stock for $10.0 million and $50.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. During the three and nine months ended June 30, 2023, no shares were repurchased in connection with our share repurchase program. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.
Current wording
Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the three months ended December 31, 2024 and 2023, we repurchased 0.8 million shares and 1.9 million shares of our common stock for $10.0 million and $20.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):
Previous report — wording carried elsewhere
BSG. The increase in net sales for BSG was primarily driven by the following (in thousands):
Previous report — wording carried elsewhere
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $25.6 million, or 17.1%, for the nine months ended June 30, 2024, primarily due to expenses in connection with our Fuel for Growth initiative in the current year.