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Sally Beauty Holdings, Inc. (SBH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 delivered modest top-line growth and strong margin expansion: net sales $0.94B (+0.7% YoY), comparable sales +1.6%, GAAP operating margin 10.7% (+330 bps), adjusted operating margin 8.4% (+50 bps) .
  • EPS: GAAP diluted $0.58; adjusted diluted $0.43, reflecting a $26.6M gain from the sale of the corporate HQ excluded in adjusted figures .
  • Guidance: FY2025 comps maintained at flat to +2% and adjusted operating margin 8.5–9.0%; consolidated net sales now expected ~100 bps lower than comps due to FX; Q2 comps guided ~flat with adjusted OM 8.0–8.3% .
  • Stock-relevant catalysts: continued Fuel for Growth savings ($40–45M in FY2025), margin durability, and K18 distribution launch across BSG on April 1, bolstering innovation and category leadership .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion from lower shrink and supply chain efficiencies lifted consolidated gross margin +60 bps to 50.8% and GAAP operating margin +330 bps to 10.7% .
  • Strategic initiatives drove comps across both segments for the third consecutive quarter; Sally Beauty e-commerce accelerated (marketplaces DoorDash/Instacart) with Sally US e-commerce +24% and broader e-commerce $99M (10.6% of sales) .
  • Management expects $70M cumulative Fuel for Growth benefits in FY2025, supporting margin expansion and SG&A leverage: “we are on track to capture $40–45 million of savings in full year fiscal 2025” .

Quotes:

  • “Q1 marks a third consecutive quarter of comparable sales growth across both business units as well as a second consecutive quarter of increased profitability and adjusted operating margin expansion.” — CEO Denise Paulonis .
  • “Adjusted operating margin of 8.4% increased 50 basis points… adjusted EBITDA margin of 11.7% was up 20 basis points.” — CFO Marlo Cormier .
  • “DoorDash and Instacart both delivered outstanding results in the quarter… Sally e-commerce business grew 18% YoY and 24% in the U.S.” — CEO Denise Paulonis .

What Went Wrong

  • FX headwinds: ~60 bps drag on consolidated net sales; FY net sales guidance updated to ~100 bps lower than comps due to FX .
  • January macro disruptions (harsh flu season, weather, LA wildfires, “new administration headlines”) pressured traffic, prompting Q2 comp guide of ~flat .
  • Mix pressure at BSG reduced product margin despite efficiencies; BSG gross margin +30 bps YoY but offset by brand mix headwinds .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$0.93 $0.94 $0.94 $0.94
Diluted EPS ($)$0.35 $0.36 $0.46 $0.58
Adjusted Diluted EPS ($)$0.39 $0.45 $0.50 $0.43
Gross Margin (%)50.2% 51.0% 51.2% 50.8%
Operating Margin (%)7.4% 7.6% 8.8% 10.7%
Adjusted Operating Margin (%)7.9% 8.9% 9.4% 8.4%

Segment Breakdown

Segment MetricQ1 2024Q3 2024Q4 2024Q1 2025
Sally Beauty (SBS) Net Sales ($MM)$523.2 $536.5 $534.1 $525.4
SBS Gross Margin (%)58.6% 59.8% 60.4% 59.6%
SBS Operating Margin (%)14.8% 16.2% 17.4% 15.2%
Beauty Systems Group (BSG) Net Sales ($MM)$408.1 $405.8 $401.0 $412.4
BSG Gross Margin (%)39.4% 39.4% 39.0% 39.7%
BSG Operating Margin (%)10.9% 11.5% 11.0% 12.2%

KPIs

KPIQ1 2024Q3 2024Q4 2024Q1 2025
Comparable Sales (Consolidated, %)-0.8% +1.5% +2.0% +1.6%
E-commerce Sales ($MM)N/A$92 $91 $99
E-commerce % of Net SalesN/A9.7% 9.8% 10.6%
Total Stores (Consolidated)4,475 4,460 4,460 4,453
BSG Distributor Sales Consultants656 659 652 639
Cash & Equivalents ($MM)N/A$97 $108 $106
Inventory ($MM)N/A$1,022 $1,037 $1,006
Net Debt Leverage (x)N/A2.2x 2.0x 1.9x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable SalesFY2025Flat to +2% Flat to +2% Maintained
Adjusted Operating MarginFY20258.5%–9.0% 8.5%–9.0% Maintained
Consolidated Net Sales vs CompsFY2025Net sales ≈ comps (flat to +2%) Net sales ≈ comps minus ~100 bps (FX) Lowered (FX)
Comparable SalesQ2 FY2025N/A~Flat YoY New
Consolidated Net Sales vs CompsQ2 FY2025N/A~100 bps lower than comps (FX) New
Adjusted Operating MarginQ2 FY2025N/A8.0%–8.3% (up 40–70 bps YoY) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024)Previous Mentions (Q4 FY2024)Current Period (Q1 FY2025)Trend
Fuel for Growth cost savingsQ3: $4.8M savings; adjusted OM 8.9% Q4: $5.5M savings; adj OM 9.4% FY25 target $40–45M; cumulative ~$70M; margin expansion sustained Improving
Marketplace & e-commerceQ3: e-comm $92M (9.7%); Sally returned to positive comps Q4: e-comm $91M (9.8%); comps +2% e-comm $99M (10.6%); DoorDash/Instacart strong; Sally e-comm +24% US Improving
Product innovation & distributionQ3: BSG comps +2.6%; expanded distribution Q4: BSG acquired Exclusive Beauty Supplies; territory expansion K18 distribution launching April 1; pipeline across Amika/Moroccanoil/Color Wow Strengthening
Supply chain & shrinkQ3: GM aided by lower distribution/freight; shrink actions underway Q4: GM +60 bps; efficiencies drive margin GM +60 bps; lower shrink and logistics costs drive margin Sustained benefit
Tariffs/macroQ3: Not highlightedQ4: Not highlightedMacro disruptions in Jan (flu, weather, wildfires); tariff exposure <10% Asia; playbook ready Transitory headwinds

Management Commentary

  • Strategic momentum: “Our ongoing focus on advancing our strategic pillars enabled growth in net and comparable sales, gross margin expansion and year-over-year improvement in profitability.” — CEO Denise Paulonis .
  • Customer reach and brand moat: “Sally is the #2 retailer of hair color for at-home use… over 15 million active known customers… BSG is the largest North American distributor of hair color and care…” — CEO Denise Paulonis .
  • Margin durability: “Adjusted operating margin of 8.4% increased 50 bps… adjusted EBITDA margin of 11.7% was up 20 bps… on track to capture $40–45 million of savings in full year fiscal 2025.” — CFO Marlo Cormier .
  • e-commerce acceleration: “DoorDash and Instacart both delivered outstanding results… Sally e-commerce business grew 18% YoY and 24% in the U.S.” — CEO Denise Paulonis .
  • FY trajectory: “We have conviction that the business is squarely on a path to deliver our long-term algorithm of low single-digit sales growth, mid- to high single-digit operating profit growth, and our return to a low double-digit operating margin.” — CEO Denise Paulonis .

Q&A Highlights

  • Q2 dynamics and back-half outlook: BSG lapping load-ins and calendar, with January macro noise; traffic near flat but frequency improving among loyal cohorts; back-half catalysts include K18 launch and innovation .
  • Margin cadence: Fuel for Growth benefits continue quarterly; expect gross margin expansion to moderate in back half as shrink and promo changes lap .
  • Promotional environment: Intensity and frequency roughly flat YoY; focus on value and unit volume to drive demand .
  • Tariffs: Limited exposure (<10% of product from Asia/China); contingency playbook includes vendor shifts and selective pricing .

Estimates Context

  • S&P Global consensus estimates for Q1 FY2025 could not be retrieved due to API rate limits; result comparisons vs consensus are unavailable at this time [GetEstimates error].
  • Based on company-reported metrics, revenue modestly exceeded prior year while margins expanded; we would expect modest upward revisions to adjusted margin trajectories if FX headwinds abate and Fuel for Growth savings track to plan .

Key Takeaways for Investors

  • Margin quality improving: Lower shrink and logistics costs plus disciplined promotions expanded OM to 10.7% GAAP; adjusted OM up 50 bps — supportive for multiple expansion if sustained .
  • Comps resilience amid macro noise: Both segments posted positive comps; Q2 guided ~flat, signaling transitory headwinds rather than structural demand weakness .
  • E-commerce and marketplace acceleration: DoorDash/Instacart traction and in-store fulfillment are driving incremental, more profitable growth, with e-commerce rising to 10.6% of sales .
  • Category leadership and innovation: K18 distribution and expanded partnerships (Amika, Moroccanoil, Color Wow) reinforce BSG’s moat and should aid back-half sales/mix .
  • FX risk embedded: FY net sales guide updated to ~100 bps below comps due to FX; monitor currency trends as a swing factor for reported growth .
  • Capital allocation: Debt paydown (Term Loan B -$41M), buybacks ($10M) and 1.9x net leverage provide flexibility to invest and return capital .
  • Near-term trade setup: Expect choppy Q2 prints vs flat comps; focus on margin cadence and marketplace/e-comm KPIs; back-half catalysts (K18 launch) could support sentiment and revisions .