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Sally Beauty Holdings, Inc. (SBH)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 delivered modest topline growth and margin expansion: net sales $947.1M (+1.3% YoY), gross margin 52.2% (+100 bps), adjusted operating margin 9.4% (+0 bps vs Q3; +60 bps vs Q2), and adjusted EPS $0.55 (+10% YoY), all above internal expectations and ahead of Wall Street consensus on revenue and EPS .
  • Strength in professional hair color and digital marketplaces drove comps +1.3%; Sally gross margin rose to 61.3% (+90 bps) and BSG gross margin to 40.0% (+100 bps), with BSG operating margin up 160 bps YoY .
  • FY 2026 guidance introduced: net sales $3.71–$3.77B, adjusted operating earnings $328–$342M, adjusted EPS $2.00–$2.10, capex ~$100M, FCF ~$200M; Q1 2026 guidance: net sales $935–$945M, adjusted EPS $0.43–$0.47 .
  • Strategic drivers—Fuel for Growth ($46M FY25; $74M cumulative run-rate), Licensed Colorist On-Demand (~5,000+ weekly consultations), marketplace expansion (Sally US/Canada e-commerce +34% YoY)—provide durable margin and sales tailwinds; caution noted on lower-income consumers given 40+ days of government shutdown .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based margin strength: consolidated gross margin 52.2% (+100 bps YoY); Sally 61.3% (+90 bps), BSG 40.0% (+100 bps), supported by Fuel for Growth, sourcing optimization, and promotional efficiencies .
    • Color category momentum: color up 7% overall in the quarter (Sally +8%, BSG +5%), underscoring core category resilience and brand strength .
    • Digital acceleration: e-commerce $105M (11.1% of net sales); Sally US/Canada e-commerce +34% YoY aided by marketplaces (DoorDash, Instacart, Uber Eats, Amazon, Walmart) .

  • What Went Wrong

    • Sally care softness persisted; management cited consumer “choiceful” behavior and trade-down in ancillary categories despite strength in core color .
    • SG&A pressure: adjusted SG&A $405M (+$14M YoY), driven by labor, bonus, rent, and IT, partially offset by Fuel for Growth savings .
    • Traffic/mix dynamics at BSG: transactions up 6% but lower average ticket (-4%) as stylists buy closer to need, impacting basket size despite healthy customer books .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Net Sales ($USD Millions)$883.1 $933.3 $947.1
GAAP Diluted EPS ($)$0.38 $0.44 $0.49
Adjusted Diluted EPS ($)$0.42 $0.51 $0.55
Gross Margin (%)52.0% 51.5% 52.2%
GAAP Operating Margin (%)7.9% 8.4% 8.4%
Adjusted Operating Margin (%)8.5% 9.2% 9.4%
Global E-commerce ($USD Millions)$94 $99 $105
Comparable Sales (Consolidated, %)-1.3% -0.4% +1.3%

Segment Performance

Segment MetricQ2 2025Q3 2025Q4 2025
Sally Net Sales ($USD Millions)$500.6 $526.8 $541.6
Sally Gross Margin (%)61.2% 60.9% 61.3%
Sally Operating Margin (%)15.4% 15.8% 15.9%
BSG Net Sales ($USD Millions)$382.6 $406.5 $405.5
BSG Gross Margin (%)39.8% 39.4% 40.0%
BSG Operating Margin (%)11.5% 12.5% 12.6%

KPIs and Operating Metrics

KPIQ2 2025Q3 2025Q4 2025
Sally Comparable Sales (%)-0.3% -1.1% +1.2%
BSG Comparable Sales (%)-2.7% +0.5% +1.4%
Consolidated Store Count4,446 4,425 4,422
Cash from Operations ($USD Millions)$51.1 $69.4 $120.9
Free Cash Flow ($USD Millions)$32.2 $49.1 $78.0
LCOD Weekly Consultations~4,500 ~4,700 5,000+

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Operating Margin (%)FY 20258.0%–8.5% 8.6%–8.7% Raised
Adjusted Operating Margin (Actual)FY 2025N/A8.9% Beat guidance
Consolidated Net Sales ($B)FY 2026—$3.71–$3.77 New
Comparable Sales (%)FY 2026—Flat to up 1% New
Adjusted Operating Earnings ($M)FY 2026—$328–$342 New
Adjusted Diluted EPS ($)FY 2026—$2.00–$2.10 New
Capital Expenditures ($M)FY 2026—~$100 New
Free Cash Flow ($M)FY 2026—~$200 New
Consolidated Net Sales ($M)Q1 2026—$935–$945 New
Adjusted Operating Earnings ($M)Q1 2026—$75–$80 New
Adjusted Diluted EPS ($)Q1 2026—$0.43–$0.47 New
Long-Term TargetsFY 2026–FY 2028—Sales +1–3%; Adj. OE +3–5%; Adj. EPS +10%+; Capex $90–$120M; FCF ~$200M annually New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/analytics & personalizationEnhanced media mix model; personalization ramping; LCOD ~4.5–4.7K/week Explicit plan to incorporate AI to deepen personalization; LCOD >5K/week; higher LTV, +2 transactions/year Strengthening
Supply chain & tariffsLimited tariff exposure (~20% of COGS); mitigation via vendor cost-sharing, modest pricing, sourcing diversification Expect to maintain margin profile; offset tariff impacts via vendor cost-sharing, sourcing, modest price moves Managed risk
Consumer/macroQ2 flu/wildfires weighed; stylists’ appointment books recovered in Q3 Low-income softness tied to 40+ days of government shutdown; broader consumer “choiceful” behavior Mixed; cautious
Product performanceColor resilient; care softness at Sally; BSG innovation (K18, Color Wow) Color up 7% overall; care still mixed; BSG operating margin +160 bps YoY Color strong; care stabilizing
Digital/marketplacesSally US/Canada e-com +29% (Q2); +21% (Q3); partners include DoorDash, Instacart, Uber Eats, Amazon, Walmart Sally US/Canada e-com +34% YoY; total e-com 11% of sales Accelerating
Format/refresh“Sally Ignited” pilot (20–35 stores); KPIs UPT/AUR/ATV trending above fleet 30 stores refreshed; plan for 50 more in FY26; fragrance added to 1,000 stores Scaling

Management Commentary

  • “We concluded the year with fourth quarter results that exceeded our expectations, highlighted by solid topline growth and healthy gross margins that drove 10% adjusted EPS growth and robust free cash flow.” — CEO Denise Paulonis .
  • “Color was up 7% overall, 8% in Sally and 5% in BSG… marketplaces continued to overperform on the Sally side… LCOD program with 5,000–6,000 consultations a week” .
  • “We generated an incremental $46 million in benefits through our Fuel for Growth program in fiscal 2025, building our cumulative run rate benefits to $74 million.” — CFO Marlo Cormier .
  • “Sally US and Canada’s e-commerce sales increased 34% over the prior year and comprised 9% of total sales.” — CEO Denise Paulonis .
  • “We expect to maintain our healthy margin profile in fiscal 2026 and anticipate we can continue to offset potential cost-of-goods impacts related to tariff increases through cost-sharing with vendors, sourcing optimization, and modest price increases on select products.” — CFO Marlo Cormier .

Q&A Highlights

  • Category dynamics: color strength across both segments; care improvement at BSG via innovation; Sally care softness addressed via promotional design and personalization tactics .
  • Demand patterns: BSG transactions up, ticket down as stylists buy closer to need; underlying customer books healthy .
  • Macro headwinds: management flagged low-income consumer softness during 40+ days of government shutdown; cautious near-term outlook with expectation of improvement through the year .
  • Tariffs: limited exposure (~20% of COGS), mitigation via vendor cost-sharing, modest price actions, and sourcing optimization; no material FY25 impact due to inventory timing .
  • Sally Ignited: 30 stores refreshed with higher dwell time and cross-category shopping; plan to expand 50 stores in FY26 within capex budget; fragrance rollout to 1,000 stores as a quick “lift and shift” .

Estimates Context

MetricPeriodConsensusActualBeat/Miss
Revenue ($USD Millions)Q4 2025933.1*947.1 Beat
Primary EPS ($)Q4 20250.478*0.55 Beat
Revenue ($USD Billions)FY 20253.686*3.701 Beat
Primary EPS ($)FY 20251.828*1.90 Beat

Values retrieved from S&P Global.*

Implications:

  • Significant beats on both Q4 revenue and EPS likely driven by gross margin expansion (Fuel for Growth, sourcing and promotional efficiencies) and color/category strength; FY25 totals also above consensus .

Key Takeaways for Investors

  • Margin durability: Fuel for Growth run-rate savings ($74M cumulative; targeting ~$120M by end FY26) and ongoing sourcing/promotional optimization underpin gross margin resilience despite tariff noise .
  • Core category resilience: professional hair color remains a defensible core, driving comps and offsetting softness in care; supports sustained EPS growth and cash generation .
  • Digital leverage: marketplace partnerships and personalization are scaling, with e-commerce now 11% of sales; expect continued mix benefits and customer acquisition .
  • Measured growth plan: FY26 guidance implies steady top/bottom-line progression with disciplined capex ($100M) and FCF ($200M), plus long-term targets for EPS growth 10%+ annually including buybacks .
  • Near-term caution: management highlighted low-income pressure amid government shutdown; expect comps approximately flat in Q1 2026 and improvement thereafter as innovation and refresh programs scale .
  • Tactical watch items: care category recovery at Sally; BSG ticket trends; tariff pass-through dynamics; execution on Sally Ignited expansion and fragrance/cosmetics category tests .
  • Capital allocation: continued deleveraging (term loan repayments) and buybacks ($20M in Q4; $53M FY25) support EPS and balance sheet strength .