Guidance Unchanged Despite Strong Q3
Q: Why is full-year guidance unchanged despite strong Q3 margins?
A: Although we modestly exceeded expectations in Q3, we feel maintaining our full-year guidance is appropriate given the current macro environment. We're pleased with the progress of our strategic initiatives, especially with the Sally brand, and we expect to build upon positive top-line growth and improve adjusted operating profit and margins in Q4. We don't see any material changes in trends but believe holding guidance is the right decision now.

Promotional Impact on Margins
Q: How is the promo situation affecting BSG and expectations for Q4?
A: In BSG, we're seeing strong sales trends, with a higher take rate on promotions like the customer appreciation sale, which has been similar to Q2 levels. While promotions are partially funded by vendors, we also contribute, affecting margins. We feel customers are responding well, and we're in a healthy spot. In Sally, customers remain frugal and price-sensitive. We've adjusted our promotional strategy to offer value while improving average unit retail and driving frequency, focusing on traffic-driving discounts rather than quantity discounts. Both trends are consistent entering Q4.

Gross Margin Improvements
Q: Can supply chain efficiencies in Sally be leveraged in BSG?
A: We're seeing nice gains across both businesses from our supply chain efforts, which are part of our Fuel for Growth program targeting $20 million in 2024. These efficiencies benefit both segments. However, in BSG, we're offsetting some gains due to unfavorable fixed cost absorption and product margin pressure from brand mix.

Consumer Frugality Impact
Q: How is consumer frugality affecting your banners?
A: In Sally, customers remain frugal, purchasing driven by need, and are price-sensitive, leaning into promotions amid inflation. We've adjusted our promotional strategies in Q3 to meet consumers where they are while improving our average unit retail and benefiting from strategic initiatives like marketplaces and Licensed Colorist OnDemand. We feel good about the trajectory to deliver positive comps in Q4. In BSG, salon demand trends are stable with no near-term catalysts for change, benefiting from expanded distribution and product innovation.

Product Innovation and Pipeline
Q: What does the new product pipeline look like compared to last year?
A: We're feeling good about the pipeline. We've expanded Moroccan Oil into California, and we continue to have distribution gains with existing brands. We have a nice pipeline of new products coming in, especially on the BSG side, which sets us up to leverage our scale. Although we can't share specifics now, the trajectory looks positive, combining territory expansion, distribution gains, and new products.

Salon Stabilization
Q: How are salon trends compared to historical levels?
A: Stylists report that customers are returning for regular services at a generally healthy pace, approaching pre-COVID levels. While chain salons are experiencing less health, our exposure is mainly to independent stylists and smaller salons, so we feel good about where we are. We acknowledge that customers may trade up or down, but stylists are optimistic, and we're building our assumptions accordingly without hearing different news.

Category Trends in Hair, Nail, Color
Q: Do you expect current trends in hair, nail, and color to continue?
A: Yes, we expect the positive trajectory in color and hair categories to continue. In Sally, nails are fueled by new innovation, and we're feeling good about that as well. Overall, we don't anticipate substantial changes from what we're seeing now in any of these categories.