Margin Improvement & Growth Program
Q: Can you discuss the building blocks to margin improvement and the long-term outlook?
A: We are on track to deliver low single-digit top-line growth , which allows us to leverage sales growth for margin improvement. Initiatives like product innovation, marketplaces, Licensed Colorist OnDemand, personalization, and our upcoming brand refresh will support this growth. Our Fuel for Growth program aims to deliver over $40 million in savings in 2025, with a cumulative run rate of $70 million over the program's life. By 2026, we're expecting a run rate of $120 million in savings, contributing to operating margin expansion and aiming for a low double-digit operating margin at the end of our three-year planning cycle.

Comparable Sales Outlook
Q: Will comps likely be negative in the back half due to tougher comparisons?
A: We don't necessarily see comps going negative in the back half, but we expect growth to be lower than the stronger first half due to tougher comparisons. Overall, we remain confident in maintaining low single-digit comp growth and expanding margins, aiming to return to a double-digit operating margin.

Pricing and Product Costs
Q: What is happening with pricing and product costs at retail?
A: We're seeing modest increases in average unit retail (AUR) on both sides of our business. Pricing is expected to stay at a moderate pace, as we've done some tactical pricing but aren't seeing significant vendor price increases. Product costs are under control, with inflation moderating. We have limited exposure to tariffs, with less than 10% of our products coming from China.

Brand Refresh & Store Experience
Q: Why is now the right time for the brand refresh, and what are the key takeaways from Studio by Sally?
A: We feel well-prepared from our test-and-learn initiatives, including Studio by Sally. The brand refresh aims to change how customers experience the store, introducing new floor plans, fixtures, and assortments. We're testing investments averaging $150,000 per store in Orlando. Key learnings from Studio by Sally include lowering fixtures for better visibility, reducing SKU count, and enhancing in-store education and navigation. These elements are being incorporated into the new store experience.

Digital and E-commerce Expansion
Q: What initiatives are planned for the digital and e-commerce side?
A: We've expanded our marketplace program to include DoorDash and Instacart, using our stores as distribution points and reaching new customers. This contributed about $13 million in growth in the past fiscal year. We're focusing on growing our own platforms, with our app seeing strong engagement. Personalization through SMS and CRM is enhancing customer communication, and we're rolling out the brand refresh digitally to present a more modern Sally persona.

Own Brands and Product Mix
Q: How does the strategy of increasing own brands align with modernization efforts?
A: We believe in combining owned brands with national and up-and-coming brands. Our own brands' penetration grew modestly in fiscal '24. Bondbar, an owned brand, became our #5 brand in just 18 to 24 months. We maintain deep partnerships with external brands like Sauce Beauty, Soapbox, and Wella, offering a robust product mix to customers.

Customer Base Growth
Q: Are you seeing benefits from new customers seeking value in a challenging macro environment?
A: Yes, we've seen growth from both new and reactivated customers on the Sally side. New customers are attracted through initiatives like Licensed Colorist OnDemand, possibly including first-time hair colorers. Reactivated customers are drawn by new assortments and customer service. Our loyalty program includes 16 million customers, accounting for 78% of sales.

Happy Beauty Stores Trends
Q: What are you seeing in transaction versus ticket trends for Happy Beauty stores?
A: In Happy Beauty, we continue to see strong average unit retail, indicating customers are purchasing more items per visit. Transaction trends are improving, and we're launching 10 new stores before Black Friday to test locations with higher potential for transaction strength, including strip malls and traditional malls.

BSG Segment Performance
Q: How has BSG trended in terms of transactions versus ticket?
A: BSG saw strong transactions in the quarter, with stylist shopping frequency up low single digits. Units per transaction were slightly lower, but overall, we achieved a positive 1% comp. Color and care categories remain strong, and we've expanded into new brands like Amika, Color Wow, and Moroccan Oil.

Limited Impact from Competitor Closures
Q: Are drugstore closures benefiting your business in any way?
A: We're focused on serving our customer base, with 78% of sales coming from 16 million loyalty program members. While we welcome new customers, we're not specifically targeting gains from competitor closures but are pleased with the positive customer trends we're seeing.