- Consolidated same store sales
decreased by 2.0%
- GAAP diluted EPS of $0.48; decrease
of 2.0% versus prior year, driven by restructuring charges and
expenses related to previously disclosed data security
incidents
- Adjusted diluted EPS of $0.60;
growth of 15.4% versus prior year
- Global e-commerce sales increased by
30.8% versus prior year
- Multi-quarter transformation plan
underway; continuing to make progress
- Strong cash flow from operations
utilized to reduce indebtedness and fund share repurchases
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”) today
announced financial results for its fiscal 2018 third quarter ended
June 30, 2018. The Company will hold a conference call today at
7:30 a.m. Central Time to discuss these results and its
business.
Fiscal 2018 Third Quarter Overview
Consolidated same store sales decreased 2.0% in the quarter.
Consolidated net sales were $996.3 million in the third quarter, a
decrease of 0.2% compared to the prior year. Foreign currency
translation had a favorable impact of approximately 90 basis points
on reported sales.
GAAP diluted earnings per share in the third quarter were $0.48
compared to $0.49 in the prior year, a decrease of 2.0%. Adjusted
diluted earnings per share, excluding charges related to the
Company’s transformation efforts and expenses from assessments and
remediation costs associated with previously disclosed data
security incidents, were $0.60 in the third quarter compared to
$0.52 in the prior year, an increase of 15.4%. The increase was
driven primarily by lower income tax expense as a result of U.S.
tax reform, reduced share count from share repurchases and lower
interest expense.
“Despite the short-term challenges we are facing, we continue to
make progress on the core elements of a transformation plan that we
are confident will put Sally Beauty Holdings on the right track
long-term,” said Chris Brickman, President and Chief Executive
Officer. “During the third quarter, core traffic challenges were
exacerbated by material issues from two of our top manufacturers
for Beauty Systems Group and the impact of significant, but
necessary, internal changes in how we operate.”
Update on Transformation Plan
“As we mentioned in April, in partnership with FTI Consulting,
we are undertaking a substantial transformation plan at Sally
Beauty Holdings, which seeks to align our operations to reduce our
cost base, refocus our team on the defensible categories of hair
color and hair care, and improve execution of basic retail
fundamentals, all with the goal of returning the business to
growth,” Brickman continued. “This effort will take multiple
quarters, but we have already made progress and we are fully
committed to transforming and investing in our business,
controlling our indebtedness, and returning capital to
shareholders.”
In terms of activities during the third quarter, we
accomplished the following:
- Implemented significant organizational
efficiencies at our central operations in the U.S. and Europe, with
savings that we can see in the operating results notwithstanding
the increase in selling, general and administrative expenses during
the quarter versus the prior year;
- Completed the roll-out of field
structure realignment and store wage increases, alongside store
labor hour optimization, within Sally Beauty Supply;
- Optimized elements of our freight
spend;
- Kicked off our long-term efforts to
improve direct and indirect sourcing;
- Completed the product design work in
support of the upcoming launch of boxed color;
- Launched the Sally Beauty Cultivate
program in order to connect with women entrepreneurs in the beauty
space and source new innovation.
In the fourth quarter, our team will focus on the following
actions:
- Executing changes to our owned-brand
sourcing to improve profitability;
- Expanding the focus of our sourcing and
store labor work to the Beauty Systems Group and our European and
Mexican operations;
- Implementing further cost benefits from
our organizational redesign;
- Making progress in resolving the supply
issues from our key vendors and reloading our network with the
right inventory;
- Assessing our supply chain operations
and vendor partnership efforts for further opportunities.
As we move into fiscal year 2019, our transformation plan
will continue and will be focused around the following key
long-term objectives:
- Playing to win with our
customers by re-focusing our marketing and merchandising efforts in
service of their needs in our differentiated core of the business –
hair color and hair care. This includes entering a multi-billion
dollar category and launching box color across our Sally Beauty
Supply network. In our Beauty Systems Group division, we recently
expanded our distribution rights of important hair color and hair
care brands manufactured by Coty, namely Sebastian, Nioxin and
Kadus, and we will continue to pursue additional new and exclusive
brands, which bring new customers to our professional distribution
business.
- Improving our retail
fundamentals through targeted investment in people, processes,
technology and our stores. Initiatives include the launch of our
new Sally Beauty Loyalty Program, a new point-of-sale system for
both Sally Beauty and Beauty Systems Group and launching the first
phase of a multi-year JDA supply-chain platform implementation,
which will dramatically improve our merchandising capabilities and
our ability to position inventory across our nodes.
- Advancing our digital commerce
capabilities: Sally stores will be testing “endless aisle”
during the fourth quarter, a process where a store will be able to
order out-of-stock product through a store iPad and have it shipped
directly to the customer. Over the next several quarters, the Sally
e-commerce site will undergo a site redesign, which will improve
the site speed and overall online customer experience, including
improved educational materials focused around hair color and hair
care. Lastly, we expect that both Sally and Beauty Systems Group
will be moving towards enhancing our customers’ shopping experience
through the convenience of “click and collect at store” and “click
and delivery.”
- Continuing to drive costs out of the
business through our continuous improvement efforts. We are
seeking to achieve additional selling, general and administrative
expense savings as a result of negotiations around benefits and
third-party services.
Finally, as part of a portfolio-wide review of existing store
locations, the Company anticipates closing approximately 1% to 2%
of its stores in the U.S. and abroad. The dates of closure of
individual stores will be market and store specific over the coming
year.
Additional Third Quarter Financial Detail
Gross margin for the third quarter was 49.5%, a decrease of 90
basis points compared to the prior year. In the Sally segment,
margin declines were driven primarily by increased coupon
redemptions and a geographic revenue mix shift towards the
segment’s lower margin international business. In the Beauty
Systems Group segment, margin decreases were driven primarily by
opportunistic purchases in the prior year that were not repeated
this quarter and increased promotional activity.
GAAP operating earnings and operating margin in the third
quarter were $102.2 million and 10.3%, respectively, compared to
$130.3 million and 13.1%, respectively, in the prior year. Adjusted
operating earnings and operating margin (excluding restructuring
charges in both years and the data security incident charges from
this year) were $122.7 million and 12.3%, respectively, compared to
$135.4 million and 13.6%, respectively, in the prior year.
The Company’s effective tax rate for the third quarter was 25.1%
compared to 35.6% in the prior year, with the significant reduction
driven by the impact of U.S. tax reform.
GAAP net earnings in the third quarter were $58.2 million, a
decrease of $8.3 million, or 12.5%, from the prior year. Adjusted
EBITDA in the third quarter was $152.5 million, a decrease of $14.5
million, or 8.7%, from the prior year, and Adjusted EBITDA margin
was 15.3%, a decline of approximately 140 basis points from the
prior year.
At the end of the quarter, inventory was $951.0 million, up 0.4%
from the prior year. The increase was driven by the impact of a
weaker U.S. dollar on reported inventory levels and inventory
related to the H. Chalut Ltée acquisition that closed in the first
quarter.
Capital expenditures in the quarter were $23.5 million,
primarily for information technology projects, store remodels and
maintenance, and distribution facility upgrades.
As a result of a focus on the levels of indebtedness, the
outstanding balance on the asset-based revolving line of credit was
reduced from $80.5 million at the end of the second quarter to
$63.5 million at the end of the third quarter. Additionally, the
Company repurchased (and subsequently retired) a total of 3.2
million shares of common stock during the third quarter at an
aggregate cost of $50.1 million.
Fiscal Year 2018 Guidance
Sally Beauty Holdings’ updated guidance reflects the impact of
the implementation of its transformation plan, the competitive
environment and the near-term impact of supplier issues.
The Company expects full year consolidated same store sales to
decline in the range of 1.5% to 1.9%.
Full year gross margin is expected to decrease by approximately
50 basis points compared to the prior year, primarily due to price
investments made in Sally during the first quarter, increased
promotional activity and a business segment mix shift, partially
offset by recent price increases on exclusive brands.
Full year adjusted selling, general and administrative expenses
(including depreciation and amortization expense) are expected to
be approximately 37.7% of sales versus 37.2% of sales in the prior
year. While operating efficiencies from recent restructurings are
identifiable, they will not achieve full run rate status until
fiscal year 2019 and are expected to be offset for the remainder of
fiscal year 2018 by investments in the business.
Due to the benefits of U.S. tax reform, the Company expects the
consolidated effective tax rate for fiscal year 2018 to be in the
range of 22% to 23%. Excluding the one-time adjustments from the
first quarter (net impact of the revaluation of deferred income
taxes partially offset by a deemed repatriation tax on previously
undistributed foreign earnings), the Company expects the
consolidated effective tax rate for fiscal year 2018 to be in the
range of 28% to 29%. Additionally, the Company expects a
significant portion of the benefits from U.S. tax reform will flow
through directly to net earnings.
Full year GAAP operating earnings are expected to decrease by
11% to 13% due primarily to the decline in same store sales, gross
margin declines, restructuring costs in fiscal year 2018 and
expenses related to the previously disclosed data security
incidents. Full year adjusted operating earnings are expected to
decline by 8% to 10%, driven primarily by the decline in same store
sales, gross margin declines and slightly higher adjusted selling,
general and administrative expenses.
The Company continues to expect full year benefits from its debt
refinancing, lower average share count and the benefits of U.S. tax
reform to result in double-digit growth in both GAAP and adjusted
diluted earnings per share.
Fiscal 2018 Third Quarter Segment Results
Sally Beauty Supply
- Net sales were $591.6 million in the
quarter, a decrease of 0.6% compared to the prior year. Foreign
currency translation boosted the segment’s revenue growth in the
quarter by 130 basis points. Same store sales decreased
1.6%.
- At the end of the quarter, net store
count was 3,775, a decrease of 51 from the prior year.
- Gross margin decreased 60 basis points
to 55.4% in the quarter, driven primarily by increased coupon
redemptions and a geographic revenue mix shift towards the
segment’s lower margin international business.
- GAAP operating earnings were $94.9
million in the quarter, a decrease of 9.5% versus the prior year.
GAAP operating margin was 16.0%, a 160 basis point decrease from
the prior year.
Beauty Systems Group
- Net sales were $404.7 million in the
quarter, an increase of 0.4% compared to the prior year. Foreign
currency translation increased the segement’s revenue growth by
approximately 40 basis points. Same store sales declined 2.9%.
- At the end of the quarter, net store
count was 1,395, up 33 from the prior year, driven by the H. Chalut
Ltée acquisition and the net increase in CosmoProf stores.
- Gross margin decreased 110 basis points
to 40.9% in the quarter, driven primarily by opportunistic
purchases in the prior year that were not repeated this quarter and
increased promotional activity.
- GAAP operating earnings were $62.0
million in the quarter, a decrease of 7.9% versus the prior year.
GAAP operating margin in the quarter was 15.3%, a 140 basis point
decrease from the prior year.
- At the end of the quarter, total
distributor sales consultants were 837 compared to 839 in the prior
year.
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. 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,
investor.sallybeautyholdings.com. The conference call can be
accessed by dialing (866) 233-3845 (International: (612) 234-9959).
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. A replay of the earnings
conference call will be available starting at 9:30 a.m. Central
Time, August 2, 2018, through August 9, 2018, by dialing (800)
475-6701 or if international, dial (320) 365-3844 and reference the
conference ID number 451023. Also, a website replay will be
available on investor.sallybeautyholdings.com
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH) is an international
specialty retailer and distributor of professional beauty supplies
with revenues of approximately $3.9 billion annually. Through the
Sally Beauty Supply and Beauty Systems Group businesses, the
Company sells and distributes through 5,170 stores, including 184
franchised units, and has operations throughout the United States,
Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom,
Ireland, Belgium, France, the Netherlands, Spain and Germany. Sally
Beauty Supply stores offer up to 8,000 products for hair, skin, and
nails through professional lines such as OPI®, China Glaze®,
Wella®, Clairol®, Conair® and Hot Shot Tools®, as well as an
extensive selection of proprietary merchandise. 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 Aquage®,
intended for use in salons and for resale by salons to retail
consumers. For more information about Sally Beauty Holdings, Inc.,
please visit 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. Words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“project,” “target,” “can,” “could,” “may,” “should,” “will,”
“would,” or similar expressions may also identify such
forward-looking statements.
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, risks
and uncertainties related to: anticipating and effectively
responding to changes in consumer and professional stylist
preferences and buying trends in a timely manner; the success of
our strategic initiatives, including our store refresh program and
increased marketing efforts, to enhance the customer experience,
attract new customers, drive brand awareness and improve customer
loyalty; our ability to successfully implement our long-term
strategic and growth initiatives; our ability to efficiently manage
and control our costs and the success of our cost control plans,
including our recent restructuring plans; the highly competitive
nature of, and the increasing consolidation of, the beauty products
distribution industry; the timing and acceptance of new product
introductions; shifts in the mix of products sold during any
period; potential fluctuation in our same store sales and quarterly
financial performance; our dependence upon manufacturers who may be
unwilling or unable to continue to supply products to us; our
dependence upon manufacturers who have developed or could develop
their own distribution businesses which compete directly with ours;
the possibility of material interruptions in the supply of products
by our third-party manufacturers or distributors or increases in
the prices of the products we purchase from our third-party
manufacturers or distributors; products sold by us being found to
be defective in labeling or content; compliance with current laws
and regulations or becoming subject to additional or more stringent
laws and regulations; the success of our e-commerce businesses;
diversion of professional products sold by Beauty Systems Group to
mass retailers or other unauthorized resellers; the operational and
financial performance of our franchise-based business; successfully
identifying acquisition candidates and successfully completing and
integrating desirable acquisitions; opening and operating new
stores profitably; the volume of traffic to our stores; the
challenges of conducting business outside the United States; the
impact of Britain’s separation from the European Union and related
or other disruptive events in the United Kingdom, the European
Union or other geographies in which we conduct business; rising
labor and rental costs; protecting our intellectual property
rights, particularly our trademarks; the risk that our products may
infringe on the intellectual property rights of others;
successfully updating and integrating our information technology
systems; disruption in our information technology systems; a
significant data security breach, including misappropriation of our
customers’, employees’ or suppliers’ confidential information, and
the potential costs related thereto; the costs and diversion of
management’s attention required to investigate and remediate a data
security breach and to continuously upgrade our information
technology security systems to address evolving cyber-security
threats; the ultimate determination of the extent or scope of the
potential liabilities relating to our past or any future data
security incidents; our ability to attract and retain highly
skilled management and other personnel; severe weather, natural
disasters or acts of violence or terrorism; the preparedness of our
accounting and other management systems to meet financial reporting
and other requirements and the upgrade of our existing financial
reporting system; our substantial indebtedness; the possibility
that we may incur substantial additional debt, including secured
debt, in the future; restrictions and limitations in the agreements
and instruments governing our debt; changes in interest rates
increasing the cost of servicing or refinancing our debt; and the
costs and effects of litigation.
Additional factors that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements can be found in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2017,
as filed with the Securities and Exchange Commission. 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 Diluted Earnings Per
Share and (4) 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 costs related to the previously disclosed
data security incidents 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 costs related to the previously disclosed data security
incidents 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 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 costs related to the
previously disclosed data security incidents 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
capital expenditures. 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 capital expenditures.
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 Continued; 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 June 30,
Nine Months Ended June 30, 2018
2017
PercentageChange
2018 2017
PercentageChange
Net sales $ 996,283 $ 998,043 -0.2 % $ 2,966,568 $ 2,964,122
0.1 % Cost of products sold 502,913
495,404 1.5 % 1,500,247
1,481,669 1.3 % Gross profit 493,370 502,639 -1.8 %
1,466,321 1,482,453 -1.1 % Selling, general and administrative
expenses (1) 378,598 367,247 3.1 % 1,118,345 1,101,355 1.5 %
Restructuring charges 12,544 5,054
148.2 % 24,513 14,265
71.8 % Operating earnings 102,228 130,338 -21.6 %
323,463 366,833 -11.8 % Interest expense 24,501
26,969 -9.2 % 73,779
80,616 -8.5 % Earnings before provision for
income taxes 77,727 103,369 -24.8 % 249,684 286,217 -12.8 %
Provision for income taxes 19,501
36,830 -47.1 % 46,823
106,860 -56.2 % Net earnings $ 58,226 $
66,539 -12.5 % $ 202,861 $ 179,357
13.1 % Earnings per share: Basic $ 0.48 $ 0.49
-2.0 % $ 1.63 $ 1.28 27.3 % Diluted $ 0.48 $ 0.49
-2.0 % $ 1.62 $ 1.28 26.6
% Weighted average shares: Basic 120,901 135,450 124,331
139,888 Diluted 121,673 136,159
125,111 140,634
Basis PointChange
Basis PointChange
Comparison as a
percentage of net sales
Consolidated gross margin 49.5 % 50.4 % (90 ) 49.4 % 50.0 % (60 )
Selling, general and administrative expenses 38.0 % 36.8 % 120 37.7
% 37.2 % 50 Consolidated operating margin 10.3 % 13.1 % (280 ) 10.9
% 12.4 % (150 )
Effective tax
rate
25.1 % 35.6 % (1,050 ) 18.8 %
37.3 % (1,850 ) (1) For the three and nine
months ended June 30, 2018, selling, general and administrative
expenses include $7.9 million of expenses incurred in connection
with the data security incidents.
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (In thousands) (Unaudited)
June 30,2018
September 30,2017
Cash and cash equivalents $ 76,855 $ 63,759 Trade and other
accounts receivable 94,585 92,241 Inventory 950,978 930,855 Other
current assets 42,089 55,223 Total
current assets 1,164,507 1,142,078 Property and equipment, net
296,614 313,717 Goodwill and other intangible assets 611,849
618,096 Other assets 22,742 25,116
Total assets $ 2,095,712 $ 2,099,007 Current
maturities of long-term debt $ 68,992 $ 96,082 Accounts payable
310,488 307,752 Accrued liabilities 166,505 166,527 Income taxes
payable 3,148 2,233 Total current
liabilities 549,133 572,594 Long-term debt, including capital
leases 1,769,314 1,771,853 Other liabilities 33,774 20,140 Deferred
income tax liabilities 69,700 98,036
Total liabilities 2,421,921 2,462,623 Total stockholders' deficit
(326,209 ) (363,616 ) Total liabilities and
stockholders' deficit $ 2,095,712 $ 2,099,007
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Segment Information (In thousands) (Unaudited)
Three Months Ended June 30, Nine Months Ended June
30, 2018 2017
Percentage Change
2018 2017
PercentageChange
Net sales: Sally Beauty Supply ("SBS") $ 591,583 $ 594,880 -0.6 % $
1,757,272 $ 1,760,732 -0.2 % Beauty Systems Group ("BSG")
404,700 403,163 0.4 % 1,209,296
1,203,390 0.5 % Total net sales $ 996,283 $
998,043 -0.2 % $ 2,966,568 $ 2,964,122 0.1 %
Operating earnings: SBS $ 94,912 $ 104,880 -9.5 % $ 271,834
$ 294,245 -7.6 % BSG 62,039 67,327 -7.9
% 186,553 193,630 -3.7 % Segment
operating earnings 156,951 172,207 -8.9 % 458,387 487,875 -6.0 %
Unallocated expenses (1) (42,179 ) (36,815 ) 14.6 % (110,411
) (106,777 ) 3.4 % Restructuring charges (12,544 ) (5,054 ) 148.2 %
(24,513 ) (14,265 ) 71.8 % Interest expense (24,501 )
(26,969 ) -9.2 % (73,779 ) (80,616 ) -8.5 % Earnings
before provision for income taxes $ 77,727 $ 103,369
-24.8 % $ 249,684 $ 286,217 -12.8 %
Segment gross margin:
2018 2017
Basis PointChange
2018 2017
Basis PointChange
SBS 55.4 % 56.0 % (60 ) 55.2 % 55.8 % (60 ) BSG 40.9 % 42.0 % (110
) 41.0 % 41.6 % (60 ) Segment operating margin: SBS 16.0 %
17.6 % (160 ) 15.5 % 16.7 % (120 ) BSG 15.3 % 16.7 % (140 ) 15.4 %
16.1 % (70 ) Consolidated operating margin 10.3 %
13.1 % (280 ) 10.9 % 12.4 % (150 ) (1) Unallocated
expenses, including share-based compensation expense, consist of
corporate and shared costs and are included in selling, general and
administrative expenses. For the three and nine months ended June
30, 2018, unallocated expenses include $7.9 million of expenses
incurred in connection with the data security incidents.
Supplemental Schedule 2
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands, except
per share data) (Unaudited)
Three Months Ended
June 30, 2018
As Reported(GAAP)
RestructuringCharges (1)
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 378,598 $ - $
(7,935 ) $ 370,663 SG&A expenses, as a percentage of sales 38.0
% 37.2 % Operating earnings 102,228 12,544 7,935 122,707 Operating
margin 10.3 % 12.3 % Earnings before provision for income taxes
77,727 12,544 7,935 98,206 Provision for income taxes (3)
19,501 3,324 2,301
25,126 Net earnings $ 58,226 $ 9,220
$ 5,634 $ 73,080 Earnings per
share: Basic $ 0.48 $ 0.08 $ 0.05 $ 0.60 Diluted $ 0.48
$ 0.08 $ 0.05 $ 0.60
Three Months Ended June 30, 2017
As Reported(GAAP)
RestructuringCharges (1)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 367,247 $ - $
367,247 SG&A expenses, as a percentage of sales 36.8 % 36.8 %
Operating earnings 130,338 5,054 135,392 Operating margin 13.1 %
13.6 % Earnings before provision for income taxes 103,369 5,054
108,423 Provision for income taxes (3) 36,830
1,162 37,992 Net earnings
$ 66,539 $ 3,892 $ 70,431
Earnings per share: Basic $ 0.49 $ 0.03 $ 0.52 Diluted $
0.49 $ 0.03 $ 0.52
(1) Restructuring charges represent costs and expenses incurred in
connection with the 2017 Restructuring Plan disclosed in February
2017 and the 2018 Restructuring Plan disclosed in November 2017.
(2) Charges from data security incidents are included in
selling, general and administrative expenses and represent expenses
(including assessments by credit card networks, remediation costs,
and other costs and expenses) incurred in connection with the data
security incidents disclosed earlier. (3) The income tax
provision associated with restructuring charges for the fiscal
years 2018 and 2017 was calculated using a 26.5% and 23.0% tax
rate, respectively, since realization of a tax benefit for portions
of these expenses are currently not deemed probable. The income tax
provision associated with charges from data security incidents was
calculated using an effective tax rate of 29.0%.
Supplemental Schedule 3
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands)
(Unaudited)
Three Months Ended June 30,
Nine Months Ended June 30, Adjusted EBITDA:
2018 2017
PercentageChange
2018 2017
PercentageChange
Net earnings $ 58,226 $ 66,539 -12.5 % $ 202,861 $ 179,357
13.1 % Add: Depreciation and amortization 27,419 29,255 -6.3 %
81,428 83,972 -3.0 % Interest expense 24,501 26,969 -9.2 % 73,779
80,616 -8.5 % Provision for income taxes 19,501
36,830 -47.1 % 46,823
106,860 -56.2 % EBITDA (non-GAAP)
129,647 159,593 -18.8 % 404,891 450,805 -10.2 % Share-based
compensation 2,387 2,378 0.4 % 8,237 8,590 -4.1 % Restructuring
charges 12,544 5,054 148.2 % 24,513 14,265 71.8 % Charges from Data
Security Incidents 7,935 -
100.0 % 7,935 -
100.0 % Adjusted EBITDA (non-GAAP) $ 152,513 $
167,025 -8.7 % $ 445,576 $ 473,660
-5.9 %
Basis PointChange
Basis PointChange
Adjusted EBITDA as a
percentage of net sales
Adjusted EBITDA margin 15.3 % 16.7 %
(140 ) 15.0 % 16.0 % (100 )
Operating Free Cash Flow: 2018
2017
PercentageChange
2018 2017
PercentageChange
Net cash provided by operating activities $ 102,480 $ 63,440 61.5 %
$ 281,930 $ 222,847 26.5 % Less: Payments for property and
equipment, net (23,492 ) (17,209 ) 36.5
% (62,171 ) (66,529 ) -6.6 % Operating
free cash flow (non-GAAP) $ 78,988 $ 46,231
70.9 % $ 219,759 $ 156,318 40.6
% Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Store Count and Same Store Sales (Unaudited)
As of June 30, 2018 2017
Change Number of stores: SBS: Company-operated
stores 3,758 3,807 (49 ) Franchise stores 17 19 (2 ) Total SBS
3,775 3,826 (51 ) BSG: Company-operated stores 1,228 1,196 32
Franchise stores 167 166 1 Total BSG 1,395 1,362 33
Total consolidated 5,170 5,188 (18 ) Number of BSG
distributor sales consultants 837 839 (2 ) BSG distributor
sales consultants (DSC) include 265 and 257 sales consultants
employed by our franchisees at June 30, 2018 and 2017,
respectively. In addition, at June 30, 2018, DSC count includes 38
sales consultants employed by Chalut, a Canadian distributor of
professional beauty products, prior to the Company's acquisition of
Chalut in December 2017.
Three Months Ended
June 30, Nine Months Ended June 30, 2018
2017
Basis PointChange
2018 2017
Basis PointChange
Same store sales growth (decline): SBS
-1.6 % -0.8 % (80 ) -1.9 % -1.3 % (60 ) BSG -2.9 % 2.8 % (570 )
-1.8 % 1.4 % (320 ) Consolidated -2.0 % 0.3 % (230 ) -1.9 % -0.4 %
(150 ) 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 internet-based sales and the effect of store expansions, if
applicable, 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/20180802005085/en/
Sally Beauty Holdings, Inc.Jeff Harkins, 940-297-3877Investor
Relations
Sally Beauty (NYSE:SBH)
Historical Stock Chart
From Aug 2024 to Sep 2024
Sally Beauty (NYSE:SBH)
Historical Stock Chart
From Sep 2023 to Sep 2024