Sally Net Up 12 Percent in First Quarter

Profits at Sally Beauty Holdings Inc. were up 12 percent to $16.1 million during the first fiscal quarter ended Dec. 31, the company reported.

Profits at Sally Beauty Hold-ings Inc. were up 12 percent to $16.1 million, from $14.3 million a year ago, during the first fiscal quarter ended Dec. 31, the company reported Thursday. Revenues slid 1.6 percent to $645.6 million from $655.8 million in the same period a year ago.

This story first appeared in the February 6, 2009 issue of WWD.  Subscribe Today.

Consolidated net earnings came in at 9 cents a diluted share versus 8 cents in the year-ago period. Non-GAAP adjusted earnings, eliminating mark-to-market adjustments related to interest rate swaps, were flat at 10 cents a diluted share. Wall Street analysts had expected earnings of 13 cents a share, according to Yahoo Finance.

Lower interest expense helped lift profits, while the firm attributed the decline in revenues to $24.8 million in negative currency exchange impact. A negative currency exchange impact of $11 million affected consolidated gross profits as well, which were down 0.9 percent to $303.5 million from $306.2.

Same-store sales rose less than 0.1 percent during the period.

“We delivered solid results given the economic environment, with same-store sales up slightly,” Gary Winterhalter, Sally Beauty Holdings Inc.’s president and chief executive officer, told analysts during a conference call Thursday.

Sally Beauty Supply sales were up 0.2 percent to $410.5 million from $409.6 million a year ago. Same-store sales at the 2,849-unit chain, however, were down 0.2 percent due to a soft economy in the U.K. and a weaker holiday selling environment, the company stated. Operating earnings were down 9 percent to $65.3 million from $71.7 million.

Gross margins at Sally Beauty Supply were a highlight, coming in at 51.9 percent of sales, up 30 basis points from 51.6 percent in the year-ago period.

On the Beauty Systems Group side, revenues were down 4.5 percent to $235 million from $246.2 million due to the impact of foreign currency exchange. Same-store sales at BSG, however, were up 0.8 percent, while gross margins at the 920-store chain were 38.6 percent of sales, up 20 basis points from 38.4 percent a year ago, the firm said. Operating earnings were down 3.8 percent to $20.2 million from $21 million.

Total store count at the end of the most recent quarter was 3,769, an increase of 138 stores from last year. Winterhalter projected organic store base growth of 3 to 5 percent this year, a revision from a previously forecast growth rate of 4 to 5 percent.

“In the near term, we intend to respond to the ongoing economic challenges by focusing on cost containment and prudent capital investments,” stated Winterhalter. “We plan to maintain a solid financial position and a capital structure that provides ample liquidity to reduce debt and invest in long-term growth.

“We remain optimistic about the remainder of the year,” he said.