GAAP Diluted EPS of $0.50; Adjusted Diluted EPS
of $0.50
GAAP Operating Margin of 11.1%; Adjusted
Operating Margin of 11.2%
Sally Beauty Holdings, Inc.
(NYSE: SBH) (“the Company”), the leader in professional hair color,
today announced financial results for its first quarter ended
December 31, 2020. The Company will hold a conference call today at
7:30 a.m. Central Time to discuss the results.
Fiscal 2021 First Quarter Summary
- Consolidated same store sales decreased 3.7%, primarily
reflecting temporary store closures in international markets,
government-mandated capacity restrictions in the U.S. and Canada,
and the shut-down of salons in California and certain territories
in Canada for part of the quarter due to the impact of
COVID-19;
- Global e-commerce sales increased 48%; Launched buy online/pick
up in-store (BOPIS) at Sally Beauty;
- Consolidated gross margin of 50.3%, up 190 basis points
compared to the prior year period;
- GAAP operating earnings of $104 million and GAAP operating
margin of 11.1%; Adjusted operating earnings of $105 million and
adjusted operating margin of 11.2%, up 130 basis points compared to
the prior year period;
- GAAP diluted earnings per share of $0.50 and adjusted diluted
earnings per share of $0.50, up 11% and 6%, respectively, compared
to the prior year period;
- Inventory of $896 million, down 10% to the prior year; and
- Strong liquidity position; Balance sheet cash of $538 million
and zero balance outstanding on $600 million asset-based line of
credit at quarter end.
“Our teams executed well both operationally and financially in a
particularly challenging topline environment,” said Chris Brickman,
president and chief executive officer. “Despite the disruption to
sales from store closures and capacity restrictions globally and
salon shut-downs in California and parts of Canada, we delivered
strong gross margins above 50%, closely managed expenses and
generated a 6% increase in adjusted diluted earnings per
share.”
“At the same time, we made continued progress against our key
initiatives, which included commercializing new digital
capabilities such as BOPIS, growing customer engagement and
loyalty, and executing against the remaining steps in our
successful transformation journey, which is expected to be
completed by the end of the year. Through our strategic investments
and repositioning over the past few years, we now have a solid
infrastructure and robust set of capabilities that we believe will
extend our leadership position in hair color and fuel a new leg of
growth for SBH post-pandemic.”
COVID-19 Update
The table below includes the operating status of corporate-owned
stores at the end of each month during the first quarter,
reflecting the disruption caused by COVID-19 on global stores
operations and customer traffic.
October
November
December
Territory
Hard
Closed
Reduced
Capacity
Fully
Open
Hard
Closed
Reduced
Capacity
Fully
Open
Hard
Closed
Reduced
Capacity
Fully
Open
Sally US/CAN
0%
0%
100%
0%
24%
76%
0%
38%
62%
Sally Europe
2%
4%
94%
43%
33%
24%
62%
2%
36%
Sally LATAM
1%
53%
46%
2%
76%
22%
25%
60%
15%
BSG US/CAN
0%
7%
93%
0%
28%
72%
2%
43%
55%
SBH Total *
0%
5%
95%
4%
29%
67%
8%
37%
55%
*Includes corporate stores only (excludes franchises)
Fiscal 2021 First Quarter Operating Results
First quarter consolidated same store sales decreased 3.7% and
consolidated net sales decreased 4.5% to $936.0 million, primarily
due to the impact of the COVID-19 pandemic (including temporary
store closures in international markets, restricted capacity in
certain markets and salon shut-downs in California and parts of
Canada for a portion of the quarter) and operating 43 fewer stores
compared to the prior year. Foreign currency translation had a
favorable impact of approximately 40 basis points on reported
sales. Global e-commerce sales increased 48%, partially offsetting
the decline.
Consolidated gross profit for
the first quarter was $470.7 million compared to $474.8 million in
the prior year. Consolidated gross margin was 50.3%, an increase of
190 basis points versus 48.4% in the prior year, driven primarily
by fewer promotions in the Sally segment.
Selling, general and
administrative (SG&A) expenses totaled $366.2 million, down
$11.8 million versus the prior year, driven primarily by lower
labor costs and advertising expenses. As a percentage of sales,
SG&A was 39.1% compared to 38.6% in the prior year, driven
primarily by lower sales volume compared to the prior
year.
GAAP operating earnings and operating margin in the first
quarter were $104.3 million and 11.1%, respectively, compared to
$94.4 million and 9.6%, respectively, in the prior year. Adjusted
operating earnings and operating margin increased to $104.5 million
and 11.2%, respectively, compared to $96.9 million and 9.9%,
respectively, in the prior year.
GAAP net earnings in the first
quarter were $57.2 million, or $0.50 per diluted share, compared to
$53.2 million, or $0.45 per diluted share in the prior year.
Adjusted net earnings were $57.4 million, an increase of 4% versus
$55.2 million in the prior year and adjusted earnings per diluted
share increased 6% to $0.50. Adjusted EBITDA in the first quarter
was $133.8 million, an
increase of 5.0%, compared to the prior year, and adjusted EBITDA
margin was 14.3%, an increase of 130 basis points compared to the
prior year.
Balance Sheet and Cash Flow
As of December 31, 2020, the
Company had cash on the balance sheet of $538 million and a zero
balance outstanding under its $600 million asset-based revolving
line of credit. The Company ended the quarter with a leverage ratio
of 2.78x, reflecting our significant cash balance. For comparison
purposes, the leverage ratio, as defined in our loan agreements
where the impact of balance sheet cash is capped at $100 million
for net debt calculation purposes, was 3.73x.
First quarter fiscal 2021 cash
flow from operations totaled $39.0 million. Capital expenditures totaled
$15.5 million. Operating
free cash flow totaled $23.5 million. The Company did not
repurchase any shares during the quarter. Subsequent to quarter
end, the Company utilized excess cash to repay the remaining $213
million on its 4.5% fixed-rate term loan.
Fiscal 2021 First Quarter Segment Results
Sally Beauty Supply
- Global segment same store sales decreased 3.3% in the first
quarter. The Sally Beauty businesses in the U.S. and Canada
represented 79% of the segment sales for the quarter and had a same
store sales decrease of 0.6%. Both Europe and Latin America had
significant decreases in same store sales for the quarter given the
temporary store closures from the impact of COVID-19.
- Net sales were $547.7 million in the quarter, a decrease of
3.8% compared to the prior year, driven primarily by the impact of
the COVID-19 pandemic (including temporary store closures and
restricted capacity in certain markets) and operating 58 fewer
stores compared to the prior year. Foreign currency translation had
a favorable impact of approximately 50 basis points on reported
sales.
- At the end of the quarter, net store count was 3,645, a decline
of 58 stores compared to the prior year.
- Gross margin increased by 340 basis points to 57.7% in the
quarter with the Sally Beauty business in the U.S. and Canada
delivering a gross margin of 60.5%. The increase in the gross
margin rate was driven primarily by the favorable impact from fewer
promotions.
- GAAP operating earnings were $95.1 million in the quarter, an
increase of 28.2% compared to the prior year. GAAP operating margin
was 17.4% compared to 13.0% in the prior year.
Beauty Systems Group
- Total segment same store sales decreased 4.6% in the first
quarter.
- Net sales were $388.4 million in the quarter, a decrease of
5.5% compared to the prior year, driven primarily by the impact of
the COVID-19 pandemic including restricted capacity in certain
markets and salon shut-downs in California and parts of Canada for
a portion of the quarter. Foreign currency translation had a
favorable impact of approximately 10 basis points on reported
sales.
- At the end of the quarter, net store count was 1,384, an
increase of 15 stores compared to the prior year.
- Gross margin decreased 40 basis points to 39.9% in the quarter,
driven primarily by higher capitalized inventory costs resulting
from lower inventory purchases.
- GAAP operating earnings were $48.6 million in the quarter, a
decrease of 22.2% compared to the prior year. GAAP operating margin
in the quarter was 12.5%, compared to 15.2% in the prior year.
- At the end of the quarter, there were 702 distributor sales
consultants, compared to 740 in the prior year.
Fiscal Year 2021 Outlook
The Company will provide
perspective on its outlook for the second quarter during its
earnings conference call. The Company will not be providing formal
guidance at this time.
Conference Call and Where You Can Find Additional
Information
The Company will hold a
conference call and audio webcast today to discuss its financial
results and its business at approximately 7:30 a.m. Central Time
today, February 4 2021. During the conference call, the Company may
discuss and answer one or more questions concerning business and
financial matters and trends affecting the Company. The Company’s
responses to these questions, as well as other matters discussed
during the conference call, may contain or constitute material
information that has not been previously disclosed. Simultaneous to
the conference call, an audio webcast of the call will be available
via a link on the Company’s website,
sallybeautyholdings.com/investor-relations. The conference call can
be accessed by dialing (844) 867-6169 (International: (409)
207-6975) and referencing the access code 7453604#. The
teleconference will be held in a “listen-only” mode for all
participants other than the Company’s current sell-side and
buy-side investment professionals. In addition, a supplemental
slide presentation may be viewed during the call at the following
link SBH Q1 Earnings Presentation. A replay of the earnings
conference call will be available starting at 10:30 a.m. Central
Time, February 4, 2021, through February 11, 2021, by dialing (866)
207-1041 (International: (402) 970-0847) and reference access code
9328373#. Also, a website replay will be available on
sallybeautyholdings.com/investor-relations.
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH), as the leader in
professional hair color, sells and distributes professional beauty
supplies globally through its Sally Beauty Supply and Beauty
Systems Group businesses. The Company operates more than 5,000
stores, including 142 franchised locations. Sally Beauty Supply
stores offer up to 8,000 products for hair color, hair care, skin
care, and nails through proprietary brands such as Ion®, Generic
Value Products®, Beyond the Zone® and Silk Elements® as well as
professional lines such as Wella®, Clairol®, OPI®, Conair® and Hot
Shot Tools®. Beauty Systems Group stores, branded as CosmoProf® or
Armstrong McCall® stores, along with its outside sales consultants,
sell up to 10,500 professionally branded products including Paul
Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®
and CHI®, intended for use in salons and for resale by salons to
retail consumers. For more information about Sally Beauty Holdings,
Inc., please visit https://www.sallybeautyholdings.com/.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995, can be identified by the use of
forward-looking terminology such as “believes,” “projects,”
“expects,” “can,” “may,” “estimates,” “should,” “plans,” “targets,”
“intends,” “could,” “will,” “would,” “anticipates,” “potential,”
“confident,” “optimistic,” or the negative thereof, or other
variations thereon, or comparable terminology, or by discussions of
strategy, objectives, estimates, guidance, expectations and future
plans. Forward-looking statements can also be identified by the
fact these statements do not relate strictly to historical or
current matters.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, but not limited to, the
risks and uncertainties related to COVID-19 and those described in
our filings with the Securities and Exchange Commission, including
our Annual Report on Form 10-K for the year ended September 30,
2020. Consequently, all forward-looking statements in this release
are qualified by the factors, risks and uncertainties contained
therein. We assume no obligation to publicly update or revise any
forward-looking statements.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the United States, or
GAAP, and are therefore referred to as non-GAAP financial measures:
(1) Adjusted EBITDA and EBITDA Margin; (2) Adjusted Operating
Earnings and Operating Margin; (3) Adjusted Net Earnings; (4)
Adjusted Diluted Net Earnings Per Share; and (5) Operating Free
Cash Flow. We have provided definitions below for these non-GAAP
financial measures and have provided tables in the schedules hereto
to reconcile these non-GAAP financial measures to the comparable
GAAP financial measures.
Adjusted EBITDA and EBITDA Margin – We define the measure
Adjusted EBITDA as GAAP net earnings before depreciation and
amortization, interest expense, income taxes, share-based
compensation, costs related to the Company’s previously announced
restructuring plans and COVID-19 related income for the relevant
time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures. Adjusted
EBITDA Margin is Adjusted EBITDA as a percentage of net sales.
Adjusted Operating Earnings and Operating Margin – Adjusted
operating earnings are GAAP operating earnings that exclude costs
related to the Company’s previously announced restructuring plans
and income related to COVID-19 for the relevant time periods as
indicated in the accompanying non-GAAP reconciliations to the
comparable GAAP financial measures. Adjusted Operating Margin is
Adjusted Operating Earnings as a percentage of net sales.
Adjusted Net Earnings – Adjusted net earnings is GAAP net
earnings that exclude tax-effected costs related to the Company’s
previously announced restructuring plans and tax-effected income
related to COVID-19 for the relevant time periods as indicated in
the accompanying non-GAAP reconciliations to the comparable GAAP
financial measures.
Adjusted Diluted Net Earnings Per Share – Adjusted diluted net
earnings per share is GAAP diluted earnings per share that exclude
tax-effected costs related to the Company’s previously announced
restructuring plans and tax-effected income related to COVID-19 for
the relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
Operating Free Cash Flow – We define the measure Operating Free
Cash Flow as GAAP net cash provided by operating activities less
payments for capital expenditures (net). We believe Operating Free
Cash Flow is an important liquidity measure that provides useful
information to investors about the amount of cash generated from
operations after taking into account payments for capital
expenditures (net).
We believe that these non-GAAP financial measures provide
valuable information regarding our earnings and business trends by
excluding specific items that we believe are not indicative of the
ongoing operating results of our businesses; providing a useful way
for investors to make a comparison of our performance over time and
against other companies in our industry.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance and cash flows. Our management and Board of Directors
also use these non-GAAP measures as supplemental measures to
evaluate our businesses and the performance of management,
including the determination of performance-based compensation, to
make operating and strategic decisions, and to allocate financial
resources. We believe that these non-GAAP measures also provide
meaningful information for investors and securities analysts to
evaluate our historical and prospective financial performance.
These non-GAAP measures should not be considered a substitute for
or superior to GAAP results. Furthermore, the non-GAAP measures
presented by us may not be comparable to similarly titled measures
of other companies.
Supplemental Schedules
Segment
Information
1
Non-GAAP
Financial Measures
Reconciliations
2
Non-GAAP
Financial Measures Reconciliations; Adjusted EBITDA and Operating
Free Cash
Flow
3
Store
Count and Same Store
Sales
4
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Consolidated Statements of
Earnings
(In thousands, except per share
data)
(Unaudited)
Three Months Ended December
31,
2020
2019
Percentage
Change
Net sales
$
936,022
$
980,208
(4.5
)%
Cost of products sold
465,298
505,360
(7.9
)%
Gross profit
470,724
474,848
(0.9
)%
Selling, general and administrative expenses
366,170
377,930
(3.1
)%
Restructuring
232
2,531
(90.8
)%
Operating earnings
104,322
94,387
10.5
%
Interest expense
25,978
21,541
20.6
%
Earnings before provision for income taxes
78,344
72,846
7.5
%
Provision for income taxes
21,153
19,631
7.8
%
Net earnings
$
57,191
$
53,215
7.5
%
Earnings per share:
Basic
$
0.51
$
0.46
10.9
%
Diluted
$
0.50
$
0.45
11.1
%
Weighted average shares:
Basic
112,475
116,125
Diluted
113,828
117,154
Basis Point
Change
Comparison as a percentage of net
sales Consolidated gross
margin
50.3
%
48.4
%
190
Selling, general and administrative expenses
39.1
%
38.6
%
50
Consolidated operating margin
11.1
%
9.6
%
150
Effective
tax rate
27.0
%
26.9
%
10
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
December 31,
2020
September 30,
2020
Cash and cash equivalents
$
537,644
$
514,151
Trade and other accounts receivable
67,950
56,429
Inventory
895,984
814,503
Other current assets
44,300
48,014
Total current assets
1,545,878
1,433,097
Property and equipment, net
305,225
315,029
Operating lease assets
519,985
525,634
Goodwill and other intangible assets
604,846
598,321
Other assets
23,714
23,066
Total assets
$
2,999,648
$
2,895,147
Current maturities of long-term debt
$
186
$
180
Accounts payable
285,636
236,333
Accrued liabilities
133,328
170,665
Current operating lease liabilities
154,090
153,267
Income taxes payable
17,096
2,917
Total current liabilities
590,336
563,362
Long-term debt, including capital leases
1,798,154
1,796,897
Long-term operating lease liabilities
390,873
394,375
Other liabilities
29,406
32,976
Deferred income tax liabilities, net
92,013
92,094
Total liabilities
2,900,782
2,879,704
Total stockholders’ equity
98,866
15,443
Total liabilities and stockholders’ equity
$
2,999,648
$
2,895,147
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Segment
Information
(In thousands)
(Unaudited)
Three Months Ended December
31,
2020
2019
Percentage
Change
Net sales: Sally Beauty Supply ("SBS")
$
547,670
$
569,147
(3.8
)%
Beauty Systems Group ("BSG")
388,352
411,061
(5.5
)%
Total net sales
$
936,022
$
980,208
(4.5
)%
Operating earnings: SBS
$
95,128
$
74,225
28.2
%
BSG
48,572
62,434
(22.2
)%
Segment operating earnings
143,700
136,659
5.2
%
Unallocated expenses (1)
39,146
39,741
(1.5
)%
Restructuring
232
2,531
(90.8
)%
Interest expense
25,978
21,541
20.6
%
Earnings before provision for income taxes
$
78,344
$
72,846
7.5
%
Segment gross margin:
2020
2019
Basis Point
Change
SBS
57.7
%
54.3
%
340
BSG
39.9
%
40.3
%
(40
)
Segment operating margin:
SBS
17.4
%
13.0
%
440
BSG
12.5
%
15.2
%
(270
)
Consolidated operating margin
11.1
%
9.6
%
150
(1) Unallocated expenses, including share-based compensation
expense, consist of corporate and shared costs and are included in
selling, general and administrative expenses.
Supplemental Schedule 2
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliations
(In thousands, except per share
data)
(Unaudited)
Three Months Ended December
31, 2020
As Reported
(GAAP)
Restructuring (1)
COVID-19
Expenses, net (2)
As Adjusted
(Non-GAAP)
Selling, general
and administrative expenses
$
366,170
$
-
$
45
$
366,215
SG&A expenses, as a percentage of sales
39.1
%
39.1
%
Operating earnings
104,322
232
(45
)
104,509
Operating margin
11.1
%
11.2
%
Earnings before provision for income taxes
78,344
232
(45
)
78,531
Provision for income taxes (3)
21,153
34
(12
)
21,175
Net earnings
$
57,191
$
198
$
(33
)
$
57,356
Earnings per
share: Basic
$
0.51
$
0.00
$
(0.00
)
$
0.51
Diluted
$
0.50
$
0.00
$
(0.00
)
$
0.50
Three Months Ended December
31, 2019
As Reported
(GAAP)
Restructuring (1)
As Adjusted
(Non-GAAP)
Selling, general
and administrative expenses
$
377,930
$
-
$
377,930
SG&A expenses, as a percentage of sales
38.6
%
38.6
%
Operating earnings
94,387
2,531
96,918
Operating margin
9.6
%
9.9
%
Earnings before provision for income taxes
72,846
2,531
75,377
Provision for income taxes (3)
19,631
581
20,212
Net earnings
$
53,215
$
1,950
$
55,165
Earnings per
share: Basic
$
0.46
$
0.02
$
0.48
Diluted
$
0.45
$
0.02
$
0.47
(1) For the three months ended December 31, 2020 and
2019, restructuring represents costs and expenses incurred
primarily in connection with Project Surge and the Transformation
Plan. (2) For the three months ended December 31, 2020, COVID-19
expenses represents an adjustment to an employee retention payroll
tax credit. (3) The provision for income taxes was calculated
using the applicable tax rates for each country, while excluding
the tax benefits for countries where the tax benefit is not
currently deemed probable of being realized.
Supplemental Schedule 3
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliations, Continued
(In thousands)
(Unaudited)
Three Months Ended December
31,
Adjusted EBITDA:
2020
2019
Percentage
Change
Net earnings
$
57,191
$
53,215
7.5
%
Add: Depreciation and amortization
26,386
27,076
(2.5
)%
Interest expense
25,978
21,541
20.6
%
Provision for income taxes
21,153
19,631
7.8
%
EBITDA (non-GAAP)
130,708
121,463
7.6
%
Share-based compensation
2,893
3,473
(16.7
)%
Restructuring
232
2,531
(90.8
)%
COVID-19
(45
)
-
100.0
%
Adjusted EBITDA (non-GAAP)
$
133,788
$
127,467
5.0
%
Basis Point
Change
Adjusted EBITDA as a percentage of net
sales Adjusted EBITDA margin
14.3
%
13.0
%
130
Operating Free Cash
Flow:
2020
2019
Percentage
Change
Net cash provided by operating activities
$
38,986
$
62,325
(37.4
)%
Less: Payments for property and equipment, net
15,483
40,875
(62.1
)%
Operating free cash flow (non-GAAP)
$
23,503
$
21,450
9.6
%
Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC.
AND SUBSIDIARIES
Store Count and Same Store
Sales
(Unaudited)
As of December 31,
2020
2019
Change
Number of stores:
SBS:
Company-operated stores
3,637
3,690
(53
)
Franchise stores
8
13
(5
)
Total SBS
3,645
3,703
(58
)
BSG:
Company-operated stores
1,250
1,225
25
Franchise stores
134
144
(10
)
Total BSG
1,384
1,369
15
Total consolidated
5,029
5,072
(43
)
Number of BSG distributor sales
consultants
702
740
(38
)
BSG distributor sales
consultants (DSC) include 180 and 199 sales consultants employed by
our franchisees at December 31, 2020 and 2019, respectively.
Three Months Ended December
31,
2020
2019
Basis Point
Change
Same store sales growth (decline):
SBS
(3.3
)%
(1.1
)%
(220
)
BSG
(4.6
)%
1.2
%
(580
)
Consolidated
(3.7
)%
(0.3
)%
(340
)
For the purpose of calculating our same store sales metrics,
we compare the current period sales for stores open for 14 months
or longer as of the last day of a month with the sales for these
stores for the comparable period in the prior fiscal year. Our same
store sales are calculated in constant U.S. dollars and include
e-commerce sales, but do not generally include the sales from
stores relocated until 14 months after the relocation. The sales
from stores acquired are excluded from our same store sales
calculation until 14 months after the acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210204005238/en/
Jeff Harkins Investor Relations 940-297-3877
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Sally Beauty (NYSE:SBH)
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From Apr 2023 to Apr 2024
