Sally Beauty Holdings, Inc.

Previous wording

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.

Current wording

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, including the Risk Factors sections therein, as well as the condensed consolidated interim financial statements and accompanying notes included elsewhere in this Quarterly Report.

Previous wording

Consolidated net sales for the three months ended March 31, 2025, decreased $25.2 million, or 2.8%, to $883.1 million, compared to the three months ended March 31, 2024. Consolidated net sales included a net negative impact from changes in foreign currency exchange rates of $9.7 million;

Current wording

Consolidated net sales for the three months ended June 30, 2025, decreased $9.0 million, or 1.0%, to $933.3 million, compared to the three months ended June 30, 2024;

Previous wording

Consolidated comparable sales decreased 1.3% for the three months ended March 31, 2025;

Current wording

Consolidated comparable sales decreased 0.4% for the three months ended June 30, 2025;

Previous wording

Consolidated gross profit for the three months ended March 31, 2025, decreased $4.3 million, or 0.9%, to $458.8 million, compared to the three months ended March 31, 2024. Consolidated gross margin increased 100 bps to 52.0% for the three months ended March 31, 2025, compared to the three months ended March 31, 2024;

Current wording

Consolidated gross profit for the three months ended June 30, 2025, was relatively flat at $481.0 million, compared to the three months ended June 30, 2024. Consolidated gross margin increased 50 bps to 51.5% for the three months ended June 30, 2025, compared to the three months ended June 30, 2024;

Previous wording

Consolidated operating earnings for the three months ended March 31, 2025, increased $9.8 million, or 16.4%, to $69.4 million, compared to the three months ended March 31, 2024. Operating margin increased 130 bps to 7.9% for the three months ended March 31, 2025, compared to the three months ended March 31, 2024;

Current wording

Consolidated operating earnings for the three months ended June 30, 2025, increased $6.4 million, or 8.9%, to $78.2 million, compared to the three months ended June 30, 2024. Operating margin increased 80 bps to 8.4% for the three months ended June 30, 2025, compared to the three months ended June 30, 2024;

Previous wording

For the three months ended March 31, 2025, our consolidated net earnings increased $10.0 million, or 34.1%, to $39.2 million, compared to the three months ended March 31, 2024;

Current wording

For the three months ended June 30, 2025, our consolidated net earnings increased $8.0 million, or 21.2%, to $45.7 million, compared to the three months ended June 30, 2024;

Previous wording

For the three months ended March 31, 2025, our diluted earnings per share was $0.38 compared to $0.27 for the three months ended March 31, 2024; and

Current wording

For the three months ended June 30, 2025, our diluted earnings per share was $0.44 compared to $0.36 for the three months ended June 30, 2024; and

Previous wording

Cash provided by operations was $51.1 million for the three months ended March 31, 2025, compared to $36.9 million for the three months ended March 31, 2024.

Current wording

Cash provided by operations was $69.4 million for the three months ended June 30, 2025, compared to $47.9 million for the three months ended June 30, 2024.

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 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.

Current wording

We consider comparable sales to be an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales metric includes sales from stores that have been operating for 14 months or longer as of the end of the reporting period, as well as sales from e-commerce revenue, sales to franchisees, and full service sales. Our comparable sales metric excludes the impact of foreign exchange rate fluctuations and sales from stores relocated until 14 months after the relocation. Similarly, revenue from acquired stores is excluded from our comparable sales metric 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 as well as the $26.6 gain related to the sale of our corporate headquarters during the six months ended March 31, 2025. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.

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 nine months ended June 30, 2025. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.

Previous wording

SBS’s net sales decrease was driven primarily by the negative impacts from foreign exchange rates, net closed stores, and lower comparable sales. The decrease in comparable sales was primarily a result of external factors that impacted consumer spending, including weather, an unusually harsh flu season and macro uncertainty, partially offset by strong growth in hair color and digital marketplaces.

Current wording

SBS’s net sales decrease was driven primarily by lower comparable sales and the impacts of net store closures over the past 12 months. The decrease in comparable sales was primarily a result of macro uncertainty, which impacted consumer spending, partially offset by strong growth in hair color and digital marketplaces.

Previous wording

BSG. The decrease in net sales for BSG was primarily driven by the following (in thousands):

Current wording

BSG. The increase in net sales for BSG was primarily driven by the following (in thousands):

Previous wording

SBS. SBS’s gross profit decreased for the three months ended March 31, 2025, as a result of lower net sales, partially offset by a higher gross margin. SBS’s gross margin improvement was driven primarily by lower distribution and freight costs, higher product margins resulting from enhanced promotional strategies and benefits from our Fuel for Growth initiative, and lower shrink expense.

Current wording

SBS. SBS’s gross profit was relatively flat for the three months ended June 30, 2025, as a result of lower net sales, partially offset by a higher gross margin. SBS’s gross margin improvement was driven primarily by higher product margins resulting from benefits from our Fuel for Growth initiative, lower distribution and freight costs, and lower shrink expense, partially offset by an inventory write-off in our European operations in connection with our Fuel for Growth initiative.

Previous wording

BSG. BSG’s gross profit decreased for the three months ended March 31, 2025, as a result of lower net sales, partially offset by a higher gross margin. BSG’s gross margin improvement was driven by lower distribution and freight costs and lower shrink expense, partially offset by lower product margins related to brand mix

Current wording

BSG. BSG’s gross profit was relatively flat for the three months ended June 30, 2025, as a result of slightly higher net sales, while gross margin was unchanged. BSG’s gross margin was flat to last year, but included lower distribution and freight costs, offset by lower product margins related to brand mix.

Previous wording

SBS. SBS’s selling, general and administrative expenses decreased $1.7 million, or 0.7%, for the three months ended March 31, 2025, and included a favorable impact from foreign exchange rates of $3.4 million. As a percentage of SBS net sales, selling, general and administrative expenses for the three months ended March 31, 2025, were 45.8%, compared to 45.0% for the three months ended March 31, 2024. The increase as a percentage of sales was primarily due to deleveraging resulting from lower net sales, an impairment charge related to a trade name (non-cash expense of $1.8 million), and higher labor and other compensation-related expenses, partially offset by lower advertising expense.

Current wording

SBS. SBS’s selling, general and administrative expenses increased $3.4 million, or 1.5%, for the three months ended June 30, 2025, and included a favorable impact from foreign exchange rates of $4.0 million. As a percentage of SBS net sales, selling, general and administrative expenses for the three months ended June 30, 2025, were 45.1%, compared to 43.6% for the three months ended June 30, 2024. The increase as a percentage of sales was primarily due to deleveraging resulting from lower net sales and an increase in labor and other compensation-related expenses.

Previous wording

BSG. BSG’s selling, general and administrative expenses decreased $4.0 million, or 3.5%, for the three months ended March 31, 2025. As a percentage of BSG net sales, selling, general and administrative expenses for the three months ended March 31, 2025, were 28.4% compared to 28.5% for the three months ended March 31, 2024. The decrease as a percentage of sales was primarily due to a decrease in depreciation expenses, partially offset by higher labor and other compensation-related expenses.

Current wording

BSG. BSG’s selling, general and administrative expenses decreased $3.6 million, or 3.2%, for the three months ended June 30, 2025. As a percentage of BSG net sales, selling, general and administrative expenses for the three months ended June 30, 2025, were 26.9% compared to 27.9% for the three months ended June 30, 2024. The decrease as a percentage of sales was primarily due to decreases in depreciation expense and delivery expense.

Previous wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $8.3 million, or 13.8%, for the three months ended March 31, 2025, primarily due to lower professional fees and severance costs in connection to our Fuel for Growth initiative, lower labor and other compensation-related expenses, and savings generated from our Fuel for Growth initiative.

Current wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $5.7 million, or 9.3%, for the three months ended June 30, 2025, primarily due to lower costs in connection to our Fuel for Growth initiative and savings generated from this initiative, partially offset by higher information technology costs and an increase in labor and other compensation-related expenses.

Previous wording

The decrease in interest expense was driven by a lower outstanding principle balance and interest rate on our Term Loan B, lower losses on debt extinguishment, and lower interest costs related to our senior notes as we incurred interest costs on both our current 2032 Senior Note and our prior 2025 Senior Notes for the brief redemption notice period in the prior year.

Current wording

The decrease in interest expense was driven by a lower outstanding principle balance and interest rate on our Term Loan B, fewer borrowings on our ABL facility, and lower losses on debt extinguishment compared to the prior year.

Previous wording

The effective tax rate was 26.3% and 25.6% for the six months ended March 31, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to foreign operations, offset by the tax impact of share-based compensation which was more detrimental in the prior year.

Current wording

The effective tax rate was 26.8% and 26.1% for the three months ended June 30, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to the divestiture of Spain operations and the associated net operating losses not utilized.

Previous wording

BSG’s net sales decrease was primarily driven by reflecting external factors that impacted stylist purchasing behavior, including weather, an unusually harsh flu season and macro uncertainty, and negative impacts from foreign exchange rates, partially offset by continued momentum from expanded distribution and new brand innovation.

Current wording

BSG’s net sales decrease reflects external factors during the fiscal year that impacted stylist purchasing behavior, including weather, an unusually harsh flu season and macro uncertainty, negative impacts from foreign exchange rates, and the impacts of net store closures over the past 12 months, partially offset by continued momentum from expanded distribution and new brand innovation.

Previous wording

SBS. SBS’s gross profit increased for the six months ended March 31, 2025, as a result of lower net sales, partially offset by a higher gross margin. SBS’s gross margin improvement was primarily driven by lower distribution and freight costs, higher product margins, resulting from enhanced promotional strategies and benefits from our Fuel for Growth initiative, and lower shrink expense.

Current wording

SBS. SBS’s gross profit increased for the nine months ended June 30, 2025, as a result of a higher gross margin, partially offset by lower net sales. SBS’s gross margin improvement was primarily driven by lower distribution and freight costs and higher product margins, resulting from enhanced promotional strategies and benefits from our Fuel for Growth initiative, partially offset by an inventory write-off in our European operations in connection with our Fuel for Growth initiative.

Previous wording

BSG. BSG’s gross profit was relatively unchanged for the six months ended March 31, 2025, as a result of fewer net sales, partially offset by a higher gross margin. 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.

Current wording

BSG. BSG’s gross profit was relatively unchanged for the nine months ended June 30, 2025, as a result of fewer net sales, partially offset by a higher gross margin. BSG’s gross margin improvement was driven by lower distribution and freight costs from supply chain efficiencies, partially offset by lower product margins related to brand mix.

Previous wording

SBS. SBS’s selling, general and administrative expenses increased $2.8 million, or 0.6%, for the six months ended March 31, 2025, and included a favorable impact from foreign exchange rates of $4.9 million. As a percentage of SBS net sales, selling, general and administrative expenses for the six months ended March 31, 2025, were 45.1%, compared to 44.4% for the six months ended March 31, 2024. The increase as a percentage of sales was primarily due to increased labor and other compensation-related expenses and an impairment charge related to a trade name (non-cash expense of $1.8 million), partially offset by other Fuel for Growth benefits.

Current wording

SBS. SBS’s selling, general and administrative expenses increased $6.2 million, or 0.9%, for the nine months ended June 30, 2025, and included a favorable impact from foreign exchange rates of $8.9 million. As a percentage of SBS net sales, selling, general and administrative expenses for the nine months ended June 30, 2025, were 45.1%, compared to 44.1% for the nine months ended June 30, 2024. The increase as a percentage of sales was primarily due to deleveraging resulting from lower net sales, increased labor and other compensation-related expenses and an impairment charge related to a trade name (non-cash expense of $1.8 million), partially offset by other Fuel for Growth benefits.

Previous wording

BSG. BSG’s selling, general and administrative expenses decreased $6.9 million, or 3.0%, for the six months ended March 31, 2025. As a percentage of BSG net sales, selling, general and administrative expenses for the six months ended March 31, 2025, were 27.9% compared to 28.4% for the six months ended March 31, 2024. The decrease as a percentage of sales was primarily due to decreases in delivery expense, depreciation expense, and savings generated from our Fuel for Growth initiative.

Current wording

BSG. BSG’s selling, general and administrative expenses decreased $10.5 million, or 3.1%, for the nine months ended June 30, 2025. As a percentage of BSG net sales, selling, general and administrative expenses for the nine months ended June 30, 2025, were 27.6% compared to 28.3% for the nine months ended June 30, 2024. The decrease as a percentage of sales was primarily due to decreases in delivery expense, depreciation expense, and savings generated from our Fuel for Growth initiative.

Previous wording

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $31.5 million, or 27.8%, for the six months ended March 31, 2025, primarily due to a $26.6 million gain on the sale of our corporate headquarters, lower professional fees and severance costs in connection to our Fuel for Growth initiative, and lower depreciation expense, partially offset by increased 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 $37.3 million, or 21.3%, for the nine months ended June 30, 2025, primarily due to a $26.6 million gain on the sale of our corporate headquarters and lower costs in connection to our Fuel for Growth initiative, partially offset by increased labor and other compensation-related expenses.

Previous wording

The decrease in interest expense was driven by a lower outstanding principle balance and interest rate on our Term Loan B, lower losses on debt extinguishment, and lower interest costs related to our senior notes as we incurred interest costs on both our current 2032 Senior Note and our prior 2025 Senior Notes for the brief redemption notice period in the prior year.

Current wording

The decrease in interest expense was driven by a lower outstanding principle balance and interest rate on our Term Loan B, a lower average outstanding balance on our ABL Facility, and lower losses on debt extinguishment compared to the prior year.

Previous wording

The effective tax rate was 26.1% and 25.1% for the three months ended March 31, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to foreign operations and federal tax credits in the prior year.

Current wording

The effective tax rate was 26.4% and 25.8% for the nine months ended June 30, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to foreign operations, including the divestiture of Spain operations, and higher federal tax credits in the prior year.

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 March 31, 2025, we had $574.9 million of available liquidity, which includes $482.7 million available for borrowing under our ABL facility and cash and cash equivalents of $92.2 million.

Current wording

Our principal sources of liquidity are cash from operations, cash and cash equivalents, and borrowings under our ABL Facility. We utilize these resources primarily to fund our operating costs, working capital requirements, capital expenditures, and scheduled debt service obligations, including interest and principal payments. Additionally, under our share repurchase program (see below for more details) we may repurchase shares of our common stock on the open market to return value to our shareholders. At June 30, 2025, we had $595.3 million of available liquidity, which includes $482.5 million available for borrowing under our ABL Facility and cash and cash equivalents of $112.8 million.

Previous wording

Our working capital (current assets less current liabilities) decreased $6.8 million, to $705.8 million at March 31, 2025, 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 $9.2 million, the disposal of assets held for sale previously included in other current assets as a result of the sale of our corporate headquarters, and the timing of lease renewals, partially offset by the timing of accounts payable.

Current wording

Our working capital (current assets less current liabilities) increased $25.2 million, to $737.8 million at June 30, 2025, compared to $712.6 million at September 30, 2024. The increase was primarily driven by the timing of accounts payable and income taxes payments, partially offset by lower inventory, as a result of a strategic reduction in slower moving products and the negative impacts of foreign exchange rates of $6.1 million, the disposal of assets held for sale previously included in other current assets as a result of the sale of our corporate headquarters, and the timing of lease renewals.

Previous wording

The decrease in cash provided by operating activities was primarily driven by the timing of accounts payable and income tax payments and lower cash receipts from customers, partially offset by lower inventory purchases and the timing of debt interest payments.

Current wording

The increase in cash provided by operating activities was primarily driven by lower inventory purchases and lower interest paid on our debt, partially offset by the timing of accounts payable and income tax payments, and lower cash receipts from customers.

Previous wording

Net Cash Provided (Used) by Investing Activities

Current wording

Net Cash Used by Investing Activities

Previous wording

The change in investing activities was primarily the result of receiving $43.6 million from the sale of our corporate headquarters and lower capital expenditures as we lapped technology investments in the prior year, offset by investments in store improvements.

Current wording

The decrease in cash used by investing activities was primarily the result of receiving $43.6 million from the sale of our corporate headquarters, lower capital expenditures as we lapped technology investments in the prior year, offset by investments in store improvements, and $3.1 million from the divesture of our operations in Spain.

Previous wording

The increase in cash used by financing activities was primarily due to the higher net paydown of our long-term debt in the current year compared to the prior year, partially offset by fewer shares repurchased in the current year under our share repurchase program and lower issuance costs related to our debt financing activities.

Current wording

The increase in cash used by financing activities was primarily due to the higher net paydown of our long-term debt in the current year compared to the prior year, partially offset by fewer shares repurchased in the current year under our share repurchase program.

Previous wording

At March 31, 2025, we had $917.0 million in outstanding debt principal, excluding finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $10.2 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $317.0 million remaining on our Term Loan B. There were no outstanding borrowings under our ABL facility. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

Current wording

At June 30, 2025, we had $896.0 million in outstanding debt principal, excluding unamortized debt issuance costs and debt discounts, in the aggregate, of $9.6 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $296.0 million remaining on our Term Loan B. There were no outstanding borrowings under our ABL Facility. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

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 six months ended March 31, 2025, 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 nine months ended June 30, 2025, the weighted average interest rate on our borrowings under the ABL Facility was 7.4%.

Previous wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the six months ended March 31, 2025 (in thousands):

Current wording

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the nine months ended June 30, 2025 (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 six months ended March 31, 2025 and 2024, we repurchased 1.1 million shares and 1.8 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.

Current wording

Under our current share repurchase program, we may from time to time repurchase our common stock on the open market in compliance with all SEC rules, including Rule 10b-18, and other legal requirements, and may be made in part under Rule 10b5-1 plans, which permit stock repurchases when the Company might otherwise be precluded from doing so. During the nine months ended June 30, 2025 and 2024, we repurchased 3.3 million shares and 4.3 million shares of our common stock for $33.0 million and $50.0 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.