Sally Beauty's earnings were up, but the firm lowered its guidance.

Neiman Marcus Group’s Donald Grimes is going to Sally Beauty Holdings, which the company announced at the same time as a full-year earnings dip.

Grimes, who will be senior vice president, chief financial officer and chief operations officer, is cfo and chief operations officer of Neiman Marcus. Before Neiman’s he was with Wolverine Worldwide as senior vice president and cfo from 2008 to 2015. Sally Beauty’s former cfo, Mark Flaherty, unexpectedly resigned in late September.

“Don is an accomplished executive with significant financial and operational expertise in the retail industry,” said Sally Beauty Holdings chief executive officer Chris Brickman. “His broad experience will be an asset to us as we build upon our strategy and prioritize our opportunities for long-term growth.”

“Why Don Grimes is attractive to Sally Beauty is he brings more capital markets experience as a cfo to the organization … he has experience with both the equity and debt capital markets,” said Martin Okner, managing director at advisory firm SHM Corporate Navigators. “I think that’s really attractive to Sally Beauty, which is really hitting an inflection point as a publicly traded company right now. Their growth has slowed during the past three years.”

“Having Don Grimes as cfo should signal to the market that the company is really embarking on a new direction, and a direction positioned towards growth and taking their core beauty business to the next level,” Okner continued. “If you look at Sally Beauty’s product mix and how it’s changed [between 2013 and 2015] it is highly reflective in the slowdown in consumer interest in hair products as well as nail products. What you’re seeing is more weight towards devices and electronics.”

For the quarter, Sally posted net earnings of $52.6 million, down 6.3 percent year-over-year. Adjusted diluted earnings per share were 36 cents. Net sales were $976.4 million, a 1.3 percent gain from the prior-year period.

For the full year, net earnings were $222.9 million, down 5.2 percent from the prior-year period. That number includes the impact of $32.6 million in special items. Net sales for the fiscal year were $3.95 billion, up 3.1 percent from 2015. Adjusted earnings per share were $1.72, up 12 percent.

The company’s stock closed down about 14 percent, at $24.84.

On the company’s earnings call, Brickman emphasized that the company had made many changes in the past year, including revamping store interiors and changing up the marketing strategy to heighten the company’s focus on digital. “All of those things, though absolutely necessary, are disruptive to some extent,” he said.

In stores, Sally has added CND nail, and is looking at adding another significant nail brand in 2017, Brickman said. Styling tools is also looking brighter than before, he said. “We’ve got a new Ion Magnesium line that we’ve developed ourselves,” Brickman said. “Hair extensions has continued to be a problem.…I expect extensions may still be a negative next year, but the other two, nails and appliances, we expect to turn around.”

The business is also going to start testing a new points-based loyalty program. “We’re going to test it in two states next year,” Brickman said. “It does require investment to test it, but we do think it’s necessary to think about the next generation of what loyalty can be.”

The Sally Beauty Supply unit had $583.9 million in net sales for the quarter, up slightly from $582.3 million in the prior-year period. The unit’s operating earnings were $96.9 million, down about 1 percent from $97.9 million in the year-ago period. Sales were driven by new store openings and an increase in same-store sales.

For the full year, Sally Beauty Supply had $2.36 billion in sales, up 1.5 percent from 2015. Same-store sales gained 1.7 percent, the same growth as in 2015. Operating earnings were $409.8 million, down 0.6 percent from $412.4 million in fiscal 2015. Sales were driven by same-store growth and new store openings (the unit ended the year up 108 net stores).

The company’s Beauty Systems Group had a 2.8 percent year-over-year increase in sales for the quarter, bringing in $392.5 million, with same-store sales growth of 1.9 percent, down from 7.4 percent in the prior-year period. The unit had operating earnings of $61.9 million, a 7 percent increase year-over-year. Sales were driven by same-store growth, new store openings and the full-service business, the company said.

For the full year, the unit had $1.59 billion in sales, a 5.5 percent year-over-year increase from $1.5 billion in the prior year. Same-store sales growth was also 5.5 percent, down from 5.7 percent for 2015. The BSG unit had $254.5 million in operating earnings, up 10.1 percent from $231.2 million for 2015.

Sally also issued guidance for fiscal 2017, anticipating same-store sales growth of about 3 percent and consolidated organic store growth of between 2 and 3 percent. Capital expenditures are expected to be less than $135 million.

“In Sally, our in-store investments are mostly behind us and the Sally team is focused on the next phase of customer conversion and engagement. We believe BSG business will continue to gain channel share and work toward becoming the indisputable partner of choice for stylists and manufacturers,” Brickman said.

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