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Sally Beauty Profits Jump in Fourth Quarter

Sally Beauty Holdings Inc. reported improved fourth-quarter results Thursday, but missed Wall Street analysts' expectations of 15 cents per diluted share.

Sally Beauty Holdings Inc. reported improved fourth-quarter results Thursday, but missed Wall Street analysts’ expectations of 15 cents per diluted share.

This story first appeared in the November 21, 2008 issue of WWD.  Subscribe Today.

The 3,773-store beauty retailer netted bottom-line profits of $21.5 million, or 12 cents a diluted share, up 27.4 percent from $16.9 million, or 9 cents, in the year-ago quarter.

“We executed well,” Gary Winterhalter, president and chief executive officer of Sally, told analysts during a conference call on Thursday morning. “We had a good year,” he added, noting that both the Sally Beauty Supply and Beauty Systems Group chains “did well on key strategic initiatives.”

Sales for the three months ended Sept. 30 were up 5.1 percent to $672.2 million, from $639.7 million. At Sally Beauty Supply, which includes 2,844 stores globally, sales were up by 4.3 percent to $429.3 million, from $411.4 a year ago. Sales at BSG, which includes 929 stores, came in at $242.9 million, up by 6.4 percent from $228.3 million last year.

Same-store sales for the quarter were up 2.6 percent, Winterhalter said. Same-store sales at BSG were up 6.9 percent, thanks to new brands brought into the chain, whose stores were also expanded into Canada. At Sally Beauty Supply, same-store sales were up 0.9 percent, below the 2.4 percent gain of a year ago.

New brands like Femme Couture, China Glaze and Paris Hilton — and growth from existing brands like Goldwell, Joico and ISO — helped drive a 6.6 percent increase in gross profits to $314.9 million, from $295.4 million a year ago. Quarterly operating profits, though, were down 2.7 percent to $70.9 million, from $72.9 million in the year-ago period.

Winterhalter noted that the redesigned e-commerce site sallybeauty.com now features some 6,000 products.

For the full year, profits vaulted 74.4 percent to $77.6 million or 42 cents a share, from 44.5 million, or 24 cents, in 2007. Full-year sales reached $2.65 billion, up 5.3 percent from $2.51 billion last year.

“It’s going to be a very difficult Christmas,” cautioned Winterhalter. However, the firm’s average ring is between $12 and $22, so “if consumers trade down from expensive liquids and appliances, that could help us this season.

“The economic outlook in the U.S. and U.K. remains challenging,” he said, “but we have resiliency in a down economy,” he added, expressing confidence in consumers’ beauty buying habits.