Sally Beauty Holdings, a leader in professional hair color, recently announced the financial results for its third quarter ended June 30, 2023.
The third quarter consolidated net sales were $931 million, a decrease of 3.2 percent compared to the prior year. The company was operating 352 fewer stores at the end of the quarter compared to the prior year. Foreign currency translation had a favorable impact of 20 basis points on consolidated net sales for the quarter. At constant currency, global e-commerce sales increased 3 percent compared to the prior year to $83 million or 8.9 percent of consolidated net sales for the quarter.
Consolidated comparable sales increased 0.6 percent, driven primarily by Sally Beauty’s strong sales recapture rates from the company’s recent store optimization efforts, mostly offset by the continuation of stylist demand trends seen over the last several quarters at Beauty Systems Group.
Denise Paulonis, president and chief executive officer of the company, said, “We are pleased to report another solid quarter with net sales of $931 million, Adjusted Gross Margin of 51 percent, Adjusted EBITDA of $119 million and free cash flow of $32 million. Three quarters into our fiscal year, we are on track with our operating initiatives and the financial guidance we originally laid out for fiscal 2023.”
“Our teams remain focused on fueling growth through our core strategic initiatives – enhancing customer centricity, driving innovation and increasing operating efficiency. Of note, we continue to pilot a number of growth driving initiatives, including Cosmo Prof Direct, Studio by Sally and Happy Beauty Co. When combined with our focus on innovation and owned brands, we are confident that our strategies will continue to build upon our modern and dynamic retail platform, taking us well into the future. Importantly, we remain steadfast in our commitment to enhance value for our customers and shareholders over the long-term,” Paulonis added.
Consolidated gross profit for the third quarter was $474.7 million compared to $490.2 million in the prior year, a decrease of 3.2 percent. Consolidated GAAP gross margin was 51.0 percent, flat compared to the prior year. Adjusted Gross Margin, which excludes the true-up of a non-cash inventory write-down in the fourth quarter of fiscal 2022 related to the company’s previously announced distribution center consolidation and store optimization plan, was 50.9 percent, a decrease of 10 basis points compared to 51.0 percent in the prior year. Higher product margin at Sally Beauty, driven by pricing leverage and higher owned brand penetration, was offset by lower margin at Beauty Systems Group resulting from an unfavorable sales mix shift between the segment’s stores and expanded Regis partnership, as well as a shift in some distribution center costs from selling, general and administrative expenses into gross margin.
Selling, general and administrative (SG&A) expenses totaled $384.2 million, a decrease of $6.8 million compared to $391.0 million in the prior year. The decrease was driven primarily by the savings from the company’s previously announced distribution center consolidation and store optimization plan, lower advertising costs and prudent cost control, partially offset by higher labor and accrued bonus expenses. As a percentage of sales, SG&A expenses were 41.3% compared to 40.7% in the prior year.
GAAP operating earnings and operating margin in the third quarter were $90.1 million and 9.7 percent, compared to $99.2 million and 10.3 percent, in the prior year. Adjusted Operating Earnings and Operating Margin, excluding the company’s restructuring efforts and COVID-19 related net expenses, were $89.8 million and 9.6 percent, compared to $100.6 million and 10.5 percent, in the prior year.
GAAP net earnings in the third quarter were $50.8 million, or $0.46 per diluted share, compared to GAAP net earnings of $46.6 million, or $0.43 per diluted share in the prior year. Adjusted Net Earnings, excluding the company’s restructuring efforts, COVID-19 related net expenses, the loss on extinguishment of debt, and other adjustments, were $53.3 million, or $0.49 per diluted share, compared to Adjusted Net Earnings of $59.8 million, or $0.55 per diluted share in the prior year. Adjusted EBITDA in the third quarter was $118.8 million, a decrease of 7.5 percent compared to the prior year, and Adjusted EBITDA Margin was 12.8 percent, a decrease of 50 basis points compared to the prior year.
Visit the company's website on sallybeautyholdings.com/investor-relations.