Sally Beauty NYSE: SBH reported fiscal second-quarter 2026 results that came in at the high end of its sales expectations and above its bottom-line guidance, as strength in its Sally Beauty segment offset softer trends in its Beauty Systems Group business.
President and Chief Executive Officer Denise Paulonis said total sales rose 2.3% year over year to $903 million, while comparable sales increased 1.3%. Adjusted operating income was $73 million, and adjusted diluted earnings per share were $0.44. Paulonis said the results reflected “the compounding benefits” of the company’s strategic growth drivers, including marketing, personalization, digital initiatives and product innovation.
The company also generated $73 million in operating cash flow during the quarter. Paulonis said Sally Beauty used that cash to invest in growth, pay down $20 million of debt and repurchase $25 million of shares.
Sally segment drives comparable sales growth
The Sally Beauty segment posted net sales of $521 million, up 4.1% from the prior year, according to Chief Financial Officer Adrianne Lee. Comparable sales in the segment rose 2.5%, with transactions up 1% and average ticket up 1%. In the U.S. and Canada business, comparable sales increased 4.4%, with both comparable transactions and average transaction value up 2%, Paulonis said.
Color remained a key growth category. Paulonis said the core color category rose 11% for the Sally segment and 12% in Sally U.S. and Canada. Nails grew 3%, while fragrance continued to exceed expectations after expanding from the top 1,000 Sally U.S. stores to 2,000 locations during the quarter.
Hair care remained pressured, though Paulonis said performance improved sequentially. The company is preparing a fourth-quarter category reset that will include refined assortments and merchandising changes. During the question-and-answer session, Paulonis said the August planogram reset will remove underperforming SKUs and add about 110 new SKUs, including an expansion of men’s products from 4 feet to 8 feet in stores. She said the men’s category has grown 7% this year.
BSG profitability improves despite flat sales
The Beauty Systems Group segment delivered net sales of $382 million, down 0.1% from the prior year. Comparable sales declined 0.3%, with transactions and average ticket flat, Lee said. Color grew 3%, while care was flat.
Despite the muted top line, BSG profitability improved. Gross margin expanded 110 basis points to 40.9%, and segment operating margin increased 90 basis points to 12.4%. Paulonis said the company is focused on returning BSG to growth by adding new brands, expanding distribution and better communicating its value to stylists.
In response to an analyst question, Paulonis said stylists’ appointment books remain busy, though customers are seeking “easier maintenance lived-in looks” that could reduce visit frequency. She also said promotion remains important for stylists as they manage inflationary pressures.
Digital sales and app engagement gain traction
Global e-commerce sales rose 13% to $108 million, representing 12% of total net sales. Sally e-commerce sales grew 21% to $50 million, while BSG e-commerce sales increased 7% to $57 million.
Paulonis said the updated Sally app has produced stronger engagement, higher-quality conversion, larger average order values, reduced cart abandonment and improved order completion rates. Improved store-level inventory visibility has also led more customers to select buy online, pick up in store, which Paulonis described as the company’s most profitable e-commerce fulfillment option.
The company also launched Sally Beauty on TikTok Shop in March, offering its full owned-brand portfolio and an initial selection of national brands. Paulonis said TikTok is an important platform because “that is TikTok” where the beauty customer is today, though she noted the initiative is still in its early stages.
BSG also rolled out an updated app in April with faster checkout and simplified reordering based on order history. The company said future app capabilities may include education, geotargeting, inventory and personalization.
Store refreshes and new categories remain priorities
Paulonis said the Sally Ignited store refresh program reached 40 completed locations during the quarter, with another 40 planned in the back half of the fiscal year. She said the refreshed stores are performing above the fleet, with stronger units per transaction, average unit retail and average transaction value, along with increased dwell time and cross-category shopping.
The company also continues to test and expand new categories. In Sally stores, fragrance is performing ahead of expectations. In BSG, the company’s skin and spa category launched with Image and Matter of Fact in 250 stores, and another 250 stores are planned for the fourth quarter. Sally Beauty also plans to launch Amika Skin Care in all U.S. and Canadian stores starting in June.
Paulonis said the company’s Fuel for Growth program remains on track to deliver about $45 million in gross margin and SG&A benefits in fiscal 2026, bringing cumulative run-rate savings to $120 million over three years.
Guidance tightened for fiscal 2026
Sally Beauty tightened its full-year sales outlook while maintaining other guidance metrics. The company now expects consolidated net sales of $3.725 billion to $3.750 billion, including about 50 basis points of favorable foreign currency impact. Comparable sales are expected to be flat to up 1%.
The company continues to expect adjusted operating earnings of $328 million to $342 million and adjusted diluted earnings per share of $2.02 to $2.10. Free cash flow is expected to be about $200 million, with 50% deployed to share repurchases. Capital expenditures are expected to be about $100 million.
For the fiscal third quarter, Sally Beauty expects net sales of $932 million to $942 million, comparable sales approximately flat, adjusted operating earnings of $83 million to $89 million and adjusted diluted earnings per share of $0.52 to $0.56.
Paulonis said the company expects the Sally segment to outperform BSG in both the third and fourth quarters, while BSG initiatives are expected to take “a couple quarters” to return the segment to stronger positive performance.
About Sally Beauty NYSE: SBH
Sally Beauty Holdings, Inc is a leading global specialty retailer and distributor of professional beauty supplies, serving both retail customers and salon professionals. The company operates two primary channels: Sally Beauty Supply, which offers a broad assortment of hair color, hair care, styling, and skincare products; and Beauty Systems Group (BSG), which provides salon-quality products and supplies to professional stylists and salon owners. With a focus on catering to diverse customer needs, Sally Beauty offers well-known brands alongside private label lines, positioning itself as a one-stop source for beauty professionals and enthusiasts alike.
Founded in 1964 and headquartered in Denton, Texas, Sally Beauty has grown through a combination of organic expansion and strategic acquisitions.
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