Howard B. Bernick

Plans may now be in place for Alberto-Culver to sell its beauty supplies business, Sally Holdings Inc., and move forward as a consumer products company, but the beauty firm still had to deal with a few hurdles in the third quarter.

NEW YORK — Plans may now be in place for Alberto-Culver to sell its beauty supplies business, Sally Holdings Inc., and move forward as a consumer products company, but the beauty firm still had to deal with a few hurdles in the third quarter.

Alberto-Culver’s third-quarter earnings dropped 42.9 percent, pulled down by a $50 million termination fee paid to Regis Corp. after its planned merger with Sally Holdings failed.

In the three months ended June 30, the maker of Alberto VO5 and Nexxus hair care products earned $30.5 million, or 33 cents a diluted share, down from $53.4 million, or 57 cents, the previous year. Following the collapse of the Regis deal, Alberto-Culver decided in June to split its consumer and distribution businesses into two independent companies and sold 47.5 percent of its Sally businesses to a fund managed by Clayton, Dubilier & Rice. The rest of Sally is owned by Alberto-Culver shareholers.

Alberto-Culver will focus on its consumer products portfolio, which in addition to Alberto VO5 and Nexxus includes TRESemmé, St. Ives, Motions and Soft & Beautiful.

Excluding the termination fee and other expenses, earnings in the third quarter would have been $65 million, or 69 cents, Alberto-Culver said, which would compare with $55.8 million, or 60 cents, in the prior-year period.

Quarterly net sales were $952.7 million, up 6 percent from $898.9 million.

Alberto-Culver credited the Nexxus and TRESemmé hair care brands with leading sales growth on the consumer products side.

The company upped its advertising spending by more than 30 percent to support its brand portfolio, president and chief executive officer Howard B. Bernick said during a conference call Thursday afternoon. He noted that the company spent $18 million to advertise Nexxus during the quarter, and that year to date, the relaunched brand is profitable due to “handsome gross margins” and strong name recognition.

The company stated that Sally’s store business “generated another consistent quarter of sales and earnings growth” and that its Beauty Systems Group continued to recover from a tough fiscal 2005. In the third quarter, BSG recorded more than a 25 percent pre-tax operating earnings increase.

In the nine months, Alberto-Culver earned $139.5 million, or $1.50, down from $151.9 million, or $1.63, a year ago. Net sales were $2.8 billion, up 6.4 percent.

This story first appeared in the July 28, 2006 issue of WWD. Subscribe Today.

Following the separation of Alberto-Culver consumer products and Sally’s, Carol Lavin Bernick will retain her role as executive chairman of Alberto-Culver. V. James Marino will step down as president of Alberto-Culver Consumer Products Worldwide to assume the post of president and ceo of Alberto-Culver, succeeding Howard B. Bernick, who plans to retire. Gary Winterhalter will continue as president of Sally Beauty Co. and, following the transaction, will become ceo and join the company’s board.

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