Sally Beauty lowers full-year expectations on disappointing first quarter

By

Obi Anyanwu

Published
Feb 3, 2017

Sally Beauty on Thursday released its first quarter fiscal 2017 results. The company is disappointed by the start of the fiscal year; consolidated net sales increased 0.2% to $999.6 million and same store sales increased 0.4%.

 
According to President and CEO Chris Brickman, sales growth and gross margins for the company fell below expectations due to the retail environment and promotional activity.
 
Brickman added, “We are today announcing a comprehensive restructuring plan and other aggressive cost reduction initiatives that we expect will meaningfully lower our cost structure without compromising our ability to serve the customer and execute on our strategic priorities. These actions should enable us to deliver low-to-mid single digit adjusted operating income growth in fiscal 2017 despite lowering our full year same store sales outlook to a range of flat to low-single-digit growth.”

Sally Beauty Supply sales decreased 1.9% to $589.9 million and gross margin increased 10 basis points driven by improvements in the UK and Europe. The Beauty Systems Group sales increased 3.3% due to same store sales growth of 2.6%, new store openings and the acquisition of Peerless Beauty in September.
 
The company also announced plans to test a new loyalty program this spring to improve store conversion and customer engagement.
 
First quarter net earnings increased 32.2% to $55.8 million and diluted earnings per share were $0.39 compared to $0.28 in the previous year and adjusted diluted earnings per share of $0.43 also from the previous year. In addition, gross margin for the quarter declined 30 basis points.
 
Sally Beauty updated its full year guidance now expecting same store sales to be in range of flat to low-single-digit growth compared to the prior guidance of 3%. Full year consolidated gross margin is expected to expand in range of 20 to 30 basis points and adjusted SG&A is expected to range from 34.1% to 34.4% of sales.