Executive Summary

Q3 FY2025 net sales were $0.933B (-1.0% y/y); GAAP gross margin expanded 50 bps to 51.5% and adjusted operating margin rose 30 bps to 9.2%, delivering adjusted EPS of $0.51 (+13% y/y) and GAAP EPS of $0.44 (+22% y/y) .
Versus consensus, SBH delivered a clear EPS beat and a slight revenue beat: EPS $0.51 vs $0.42*, revenue $933.3M vs $929.3M*; 5 EPS estimates and 4 revenue estimates underpin the consensus. The beat was driven by strong gross margin and disciplined SG&A from Fuel for Growth (EPS and revenue estimates from S&P Global)* .
Management raised FY2025 adjusted operating margin guidance to 8.6–8.7% (from 8.0–8.5%) and tightened comp outlook to approximately flat (high end of prior range), citing resilient margin profile and execution on strategic pillars .
Balance sheet and capital deployment stayed constructive: $113M cash, net debt leverage 1.7x; Q3 cash from operations $69M, operating FCF $49M; $21M term loan repayment and $13M buybacks; Q4 plan includes ~$20M buybacks and ~$20M debt repayment .

What Went Well and What Went Wrong

What Went Well

“Fuel for Growth… drove double-digit earnings per share growth and a fourth consecutive quarter of adjusted operating margin expansion,” underscoring durable profitability improvements (adjusted operating margin 9.2%) .
BSG returned to positive comps (+0.5%) with operating margin up 100 bps to 12.5%, aided by expanded distribution and innovation (e.g., K18) .
Digital acceleration: e-commerce sales reached $99M (10.6% of net sales), supported by marketplaces (DoorDash, Instacart, Uber Eats, Amazon, Walmart) and LCOD engagement, which lifts ATV ~25% and trips vs non-LCOD customers .

What Went Wrong

Consolidated comps dipped (-0.4%); SBS comps -1.1% as consumers were “more choiceful” in care, reflecting macro caution; SBS operating margin fell 40 bps to 15.8% y/y .
Adjusted EBITDA declined modestly (-1.3% y/y) to $115.3M; SG&A as % of sales rose 60 bps on an adjusted basis (42.7% vs 42.1%), reflecting labor and IT cost pressures .
Store count shrank by 35 y/y (including Spain exit), and BSG DSCs fell by 48, a headwind to topline coverage despite targeted refreshes and relocations .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Net Sales ($USD Billions)	$0.938	$0.883	$0.933
GAAP Diluted EPS ($)	$0.58	$0.38	$0.44
Adjusted Diluted EPS ($)	$0.43	$0.42	$0.51
GAAP Gross Margin (%)	50.8%	52.0%	51.5%
GAAP Operating Margin (%)	10.7%	7.9%	8.4%
Adjusted Operating Margin (%)	8.4%	8.5%	9.2%
Adjusted EBITDA Margin (%)	11.7%	11.9%	12.4%
Consolidated Comparable Sales (%)	+1.6%	-1.3%	-0.4%

Segment performance:

Segment Metric	Q1 2025	Q2 2025	Q3 2025
SBS Net Sales ($USD Millions)	$525.4	$500.6	$526.8
SBS Gross Margin (%)	59.6%	61.2%	60.9%
SBS Operating Margin (%)	15.2%	15.4%	15.8%
BSG Net Sales ($USD Millions)	$412.4	$382.6	$406.5
BSG Gross Margin (%)	39.7%	39.8%	39.4%
BSG Operating Margin (%)	12.2%	11.5%	12.5%

Key KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
Global E-commerce Sales ($USD Millions)	$99	$94	$99
E-commerce % of Net Sales	10.6%	10.7%	10.6%
Consolidated Store Count	4,453	4,446	4,425
Cash and Cash Equivalents ($USD Millions)	$105.5	$92.2	$112.8
Inventory ($USD Millions)	$1,006.0 (Mar 31)	$1,006.0 (Mar 31)	$1,005.4 (Jun 30)
Adjusted EBITDA ($USD Millions)	$110.2	$104.8	$115.3
Operating Free Cash Flow ($USD Millions)	$57.0	$32.2	$49.1

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Comparable Sales	FY 2025	Flat to down 1%	Approximately flat (high end of prior range)	Raised (tightened upward)
Consolidated Net Sales vs Comps	FY 2025	~100 bps lower than comps (FX)	~75 bps lower than comps (FX + ~30 fewer stores)	Improved
Adjusted Operating Margin	FY 2025	8.0–8.5%	8.6–8.7%	Raised
Q3 Adjusted Operating Margin (intra‑quarter)	Q3 2025	8.0–8.5% (Q2 guide)	Actual 9.2%	Beat
Q4 Adjusted Operating Margin	Q4 2025	N/A	Expected down modestly y/y on planned marketing step-up	New disclosure

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Marketplaces & E-commerce	Strong growth; +18% Sally e-comm; DoorDash/Instacart, expansion to Uber Eats	Sally U.S./Canada e-comm +29%; marketplaces scaling	Global e-comm $99M (10.6%); marketplaces cited as a key driver	Improving
LCOD (Licensed Colorist on Demand)	~75 colorists; >4,000 consultations/week; ATV +23% vs non-LCOD	Gaining traction; ATV ~25% higher; higher frequency	>90 colorists; ~4,700 consultations/week; ATV $35 (+25% vs non-LCOD)	Improving
Tariffs/Macro	Exposure limited; mitigation via vendor cost-sharing, pricing, sourcing	Limited COGS exposure (~20% split China/Western Europe); mitigation plan	Maintain healthy GM amidst changing tariffs; limited exposure reiterated	Stable/managed risk
BSG innovation & distribution	K18 partnership announced; strong brand pipeline	K18 launch April 1; distribution expansions (Color Wow, Moroccanoil)	BSG comps positive; launches performing well; Unite added in Q4	Improving
Sally brand refresh	Orlando pilot; 8 stores refreshed	>30 stores by FY-end; testing format	20 completed; +15 more in Q4; focus on nails/cosmetics/fragrance	Scaling
Consumer behavior	Value focus; steady in Q1	Choppy Q2; flu/weather; care category softness	“Choiceful” in care; color strong; macro uncertainty persists	Mixed

Management Commentary

CEO: “Ongoing financial rigor, coupled with our fuel for growth initiative, drove double-digit earnings per share growth and a fourth consecutive quarter of adjusted operating margin expansion…we are raising our adjusted operating margin guidance for full year fiscal 2025.” .
CFO: “Adjusted gross margin expanding 100 basis points to 52%…we captured an incremental $12 million of pretax Fuel for Growth benefits in Q3, enabling $31 million year-to-date; we remain on track for $40–45 million for FY25 and ~$120 million run-rate savings by FY26.” .
CEO on LCOD: “More than 90 licensed colorists averaging over 4,700 consultations per week…LCOD customers had an average transaction value of $35 (~25% higher) and are averaging one more trip annually versus non‑LCOD customers.” .

Q&A Highlights

Macro split by segment: SBS softness concentrated in care as consumers trade to value, while color grew 4%; BSG rebounded as flu/weather impacts receded, with transactions +6% but tickets lower as stylists buy closer to need .
Store refresh cadence: Management proceeding deliberately to read returns; ~35 refreshed stores by FY-end and ~50 more in FY26, within normal CapEx envelope .
Care category playbook: Emphasis on personalization/performance marketing and promotion design (e.g., single-item offers, “skip the salon” messaging) to re-engage value-sensitive customers .
Tariffs: ~20% COGS exposed (split China/Western Europe); limited FY25 impact; mitigation via cost sharing, modest pricing, sourcing optimization; confidence in maintaining margin profile .
Q4 outlook: Sequential topline improvement expected in both segments; management flagged Q4 adjusted operating margin down modestly y/y due to planned marketing step-up supporting the brand refresh .

Estimates Context

Results vs S&P Global consensus for Q3 FY2025:

Metric	Consensus	Actual
Primary EPS ($)	0.42*	0.51
Revenue ($USD Millions)	929.3*	933.3
EPS – # of Estimates	5*	N/A
Revenue – # of Estimates	4*	N/A

Values marked with an asterisk were retrieved from S&P Global.
Interpretation: Clear EPS beat and slight revenue beat, driven by 100 bps adjusted gross margin expansion (to 52.0%) and tight SG&A control under Fuel for Growth .

Key Takeaways for Investors

Profitability trajectory remains positive: adjusted operating margin hit 9.2% and FY guidance raised to 8.6–8.7%, supported by structural gross margin strength and Fuel for Growth savings; this underpins potential estimate revisions upward on margins/EPS .
BSG momentum is re-accelerating on innovation (K18, Unite) and distribution, with operating margin up 100 bps to 12.5%; watch continued adoption and category mix effects on BSG gross margin .
Sally’s color category is the anchor (color +4% at SBS), while care remains the swing factor; marketing/promo refinements aim to stabilize care—monitor comp trajectory in Q4 alongside planned brand-refresh marketing step-up .
Cash generation and deleveraging are intact: $69M CFO and $49M operating FCF in Q3; net debt leverage 1.7x; near-term capital returns and repayment (~$20M each in Q4) provide support .
Structural tariff risk appears manageable (~20% COGS exposure; mitigation toolkit ready), reducing downside scenarios to margin in FY25 .
Digital/marketplaces plus LCOD are durable traffic and ATV drivers; continued scaling should sustain e-commerce penetration (~10–11%) and engagement metrics .
Tactical catalyst: The guidance raise and consistent margin expansion are likely stock-relevant; near-term watch items include Q4 comps, care recovery, and ROI from Orlando brand refresh marketing .

Sally Beauty Holdings, Inc. (SBH)·Q3 2025 Earnings Summary