Sally Beauty Holdings, Inc. SBH reported solid fourth-quarter fiscal 2024 results, wherein the top and bottom lines increased year over year. Also, earnings beat the Zacks Consensus Estimate, whereas net sales missed the same.
The company concluded the fiscal fourth quarter on a strong note, driven by momentum across the Sally Beauty and Beauty Systems Group segments. Positive comparable sales and healthy gross margins led to expanded operating margins. Heading into fiscal 2025, the company remains focused on driving profitable growth, enhancing customer centricity, expanding high-margin brands, fostering innovation and improving operational efficiency.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
More on SBH’s Q4 Results
Sally Beauty’s adjusted earnings were 50 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents. Also, the metric increased from 42 cents in the year-ago period.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Consolidated net sales of $935 million lagged the Zacks Consensus Estimate of $936 million. However, the metric rose 1.5% year over year. Adverse currency rates hurt net sales by 30 basis points.
Consolidated comparable sales rose 2% year over year due to improved trends in new and returning customers at Sally Beauty, reflecting the progress of key initiatives. Moreover, Beauty Systems Group contributed to this growth with strong momentum, driven by expanded brand offerings and territory distribution.
The company operated 26 fewer stores than the year-ago quarter. At constant currency rates, global e-commerce sales accounted for 9.8% of the total consolidated net sales for the quarter.
Sally Beauty’s Margin & Cost Details
The consolidated gross profit was $479.2 million, up 2.7% from $466.6 million in the year-ago quarter. The adjusted gross margin expanded 60 basis points to 51.2%. The upside was primarily driven by reduced distribution and freight costs from supply-chain efficiencies.
Adjusted operating earnings were $88 million, up from $79.3 million in the year-ago quarter. The adjusted operating margin expanded 80 basis points from 8.6% to 9.4% in the fiscal fourth quarter.
This Zacks Rank #4 (Sell) company’s adjusted selling, general and administrative expenses were $391.2 million, up $3.9 million year over year. Elevated labor, other compensation-related costs and advertising costs fueled the increase. However, this was partly mitigated by $5.5 million in savings from the company’s fuel for growth initiative. As a percentage of sales, the metric stood at 41.8% compared with 42% in the prior year.
Adjusted EBITDA was $118.1 million, representing a rise of 8.1% from the previous year. The adjusted EBITDA margin stood at 12.6%, reflecting an increase of 70 basis points from the prior-year period.
SBH’s Q4 Sales Insights by Segments
Sally Beauty Supply: Net sales in the segment climbed 1.8% year over year to $534.1 million. Adverse foreign exchange movements had a negative impact of 50 bps on sales. Segmental comparable sales saw a rise of 2.6% in the quarter due to improved trends among new and returning customers as key initiatives advanced. The net store count at the end of the quarter was 3,129. Segmental e-commerce sales at cc stood at $38 million, contributing 7.1% to the segment’s net sales.
Beauty Systems Group: Net sales in the segment increased 1% year over year to $401 million. Currency headwinds hurt sales by 10 bps. The segment’s comparable sales increased 1.3%, driven by ongoing momentum at Beauty Systems Group due to expanded brand offerings and territory distribution. The net store count at the end of the quarter was 1,331. Total distributor sales consultants at the end of the quarter were 652 compared with 670 in the year-ago period. Segmental e-commerce sales at cc were $53 million, contributing 13.3% to the segment’s net sales.
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Sally Beauty’s Financial Health Snapshot
SBH ended the fiscal fourth quarter with cash and cash equivalents of $108 million, long-term debt, including capital leases of $978.3 million, and total stockholders’ equity of $628.5 million.
In the fiscal fourth quarter, the company provided cash flow from operations of $110.7 million. The operating free cash flow was $73 million. Capital expenditure was $37.4 million for the period.
In the quarter, the company leveraged its strong cash flow to acquire assets from Exclusive Beauty Supplies in Florida for $7.5 million, fully repay the remaining $45-million balance on its asset-based revolving credit line, and repurchase 0.8 million shares through its share repurchase program for $10 million.
SBH’s FY25 Outlook
The company’s guidance for the first quarter of fiscal 2025 indicates consolidated net sales and comparable sales of flat to 2% growth from that reported in the prior year, with an adjusted operating margin between 8% and 8.4%.
For fiscal 2025, consolidated net sales and comparable sales are anticipated to be flat to up 2% year over year, with an adjusted operating margin of 8.5-9%.
In fiscal 2025, the company expects to generate $300-$325 million in cash through a combination of operating cash flow and net proceeds from the sale of its building. This cash will be allocated toward capital expenditure, growth investments, returning value to shareholders and strengthening the balance sheet. Management expects capital expenditure of $120 million for fiscal 2025.
Shares of this company have gained 8.9% in the past three months compared with the industry’s growth of 0.2%.
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