Sally Beauty Holdings Inc. reported slight declines for the fourth quarter because of recent hurricanes.
“Puerto Rico is a fairly large portion of our Sally business,” chief executive officer Chris Brickman said on the company’s earnings call Thursday.
Sally Beauty said hurricanes Harvey, Irma and Maria resulted in store closures starting in August. “The negative impact of the hurricanes on sales growth and same-store sales growth was approximately 80 basis points and 70 basis points, respectively,” the company said.
Net sales were down 0.2 percent year-over-year to $974.2 million, and same-store sales were down 1.4 percent for the quarter. Reported diluted earnings per share were 27 cents, down 25 percent from the year-ago period. That dip was caused by expenses related to the company’s restructuring plan.
“Even after considering the challenges created by the natural disasters in the quarter, which impacted August and September, our revenue fell short of our expectations,” said Chris Brickman, president and chief executive officer. “However, the modest decline in consolidated net sales was offset by the successful completion of our 2017 restructuring plan, tight control of discretionary expenses, the successful refinancing of a large portion of our long-term debt and the continued use of our strong cash flows to acquire shares of our common stock.”
“At the same time, we are making investments in our e-commerce capabilities that will allow us to support two-day delivery to more than 90 percent of U.S. households by the middle of fiscal 2018,” he continued. “In addition, we have planned a number of exciting new product launches and improvements to our CRM, marketing and promotional strategies that we expect will build the foundation to drive future growth.”
Sally Beauty has been experimenting with a two-hour delivery option via Amazon, which executives noted is allowing them to reach a new demographic.
“There’s virtually no or very little overlap with our current customer base,” Brickman said.
Sally executives also said that it would work to compete on price.
“The reason to do this is just to reinforce Sally’s value proposition,” Brickman said, noting that the company would reduce prices on about 20 percent of stockkeeping units that were not exclusive.
“The idea is we want those comparable products to be attractively priced so when the consumer’s in our stores, if they’re matching in their head price to price, they don’t get the perception that Sally is higher priced,” he said.
“Consecutive earnings reports where sales are moderating and margins are plateauing imply that the marketplace is growing increasingly competitive and costs to deliver growth are stretching the capital model,” wrote Stifel analyst Stephanie Wissink in a note.
Sally said Thursday it would also restructure international operations, and increase its e-commerce focus. Sally Beauty spent much of 2017 restructuring North American operations, which cost about $22.7 million. Going forward, the restructuring will be focusing on international operations, especially in Europe, and result in between $12 million and $14 million in restructuring charges.
For the full year, Sally Beauty posted net sales of $3.94 billion, down 0.4 percent year-over-year. Same-store sales were down 0.7 percent. The hurricanes affected full-year numbers by about 20 basis points, the company said. Sally Beauty is projecting flat net sales because of the lingering impact of hurricanes, especially Hurricane Maria.