Sally Beauty Q4 Earnings Call Highlights

Key Points

• Fiscal 2026 results improved: Q4 sales rose 0.6% to $953 million and adjusted EPS climbed 13% to $0.62; full-year adjusted EPS increased 9.5% to $2.08.
• Performance varied by segment: Sally Beauty comparable sales grew 2%, led by 7% growth in color and 13% growth in e-commerce, while care sales fell 7%. BSG comparable sales declined 0.6%, though its decline moderated from the prior quarter.
• Fiscal 2027 outlook points to continued growth: Sally Beauty forecasts sales of $3.77 billion–$3.81 billion and adjusted EPS of $2.20–$2.30, with 50% of free cash flow earmarked for share repurchases. It also plans about 100 Sally Ignited store openings and remodels.

Sally Beauty NYSE: SBH reported higher sales and earnings for fiscal 2026 and forecast further growth in the coming year, as gains in its consumer-facing business helped offset softer comparable sales in its professional segment.

For the fourth quarter, net sales rose 0.6% to $953 million, while comparable sales increased 1%. Adjusted diluted earnings per share rose 13% to $0.62, and adjusted operating margin expanded to 10% from 9.4% a year earlier.

For the full year, the beauty products retailer posted net sales of $3.73 billion and adjusted diluted earnings of $2.08 per share, up 9.5%. Adjusted operating margin was 9%.

President and CEO Denise Paulonis said the company expects its Sally business to grow faster than its Beauty Systems Group, or BSG, segment in fiscal 2027, although management expects BSG to return to growth.

Color Growth Helps Offset Softer Care Sales

The Sally Beauty segment posted its fifth consecutive quarter of positive comparable sales, with a 2% increase. Comparable sales rose 3.8% in Sally U.S. and Canada. Segment net sales increased 1.6% to $550 million, while operating margin expanded 20 basis points to 16.1%.

Color sales rose 7% across the Sally segment, but care sales declined 7%. Paulonis attributed much of the care weakness to the planned fiscal 2027 relaunch of the ion care line and short-term supply challenges affecting a handful of products. She said the company expects care performance to improve as it refreshes assortments, improves product availability and relaunches ion.

Digital sales were a source of growth. Fourth-quarter e-commerce sales rose 13% across the Sally segment and 19% in Sally U.S. and Canada. Paulonis pointed to marketplaces and the redesigned Sally app as contributors.

The company also continued to attract customers through Licensed Colorist OnDemand, its consultation service. More than 40% of customers using the service in the fourth quarter were new to Sally, Paulonis said. Those customers spent 85% more and shopped twice as frequently as customers who did not use the service.

At BSG, fourth-quarter net sales fell 0.8% to $402 million and comparable sales declined 0.6%, an improvement from the third-quarter trend. Color sales increased 2% and nail sales rose 11%, while care sales declined 3%. Segment operating margin rose 30 basis points to 12.9%.

Paulonis said stylists’ appointment books remained busy and core color services were strong, but add-on services were inconsistent as consumers faced inflationary pressures. Management plans to use customer research, more personalized marketing and digital tools to increase BSG’s share of stylists’ spending.

Fiscal 2027 Outlook and Spending Plans

Chief Financial Officer Adrianne Lee outlined fiscal 2027 guidance that includes:

• Net sales of $3.77 billion to $3.81 billion and comparable sales growth of 1% to 2%.
• Adjusted operating earnings of $334 million to $347 million and adjusted diluted earnings of $2.20 to $2.30 per share.
• Capital expenditures of approximately $140 million and free cash flow of approximately $200 million.
• Deployment of 50% of free cash flow to share repurchases.

For the fiscal first quarter, the company expects sales of $945 million to $955 million, comparable sales growth of 0.5% to 1.5% and adjusted earnings of $0.48 to $0.52 per share.

Lee said the full-year outlook assumes consumers remain resilient and the company continues to face inflation in labor, rent and transportation. Paulonis added that, at the midpoint of guidance, Sally Beauty will need ongoing cost savings to offset inflation and investments in growth initiatives.

The company completed its three-year Fuel for Growth program in fiscal 2026, achieving $120 million in cumulative run-rate savings across gross margin and selling, general and administrative expenses. Lee said the cost-conscious practices developed through the program will continue.

Store Concepts Move Toward Expansion

Sally Beauty plans to add approximately 100 Sally Ignited locations in fiscal 2027 through new stores and remodels, bringing the total to about 180 by year-end. Openings are expected to be weighted toward the second half.

Paulonis said comparable sales in the Ignited test group were running in the 8% to 10% range. The company had previously determined it needed roughly 10% growth over a two-year period to meet its cost of capital, she said. If momentum continues, management sees potential to scale the concept by around 200 locations annually beyond fiscal 2027.

The company is also expanding its Happy Beauty concept ahead of the holiday season. After closing or converting nine of its original 20 stores, it ended September with 11 locations and expects to open 10 new mall stores in the first quarter. Its e-commerce offering launched at the end of the fourth quarter as part of the Sally website.

In fiscal 2026, Sally Beauty generated $323 million in operating cash flow and $210 million in free cash flow. It repaid $80 million of debt and repurchased $113 million of stock during the year, ending the period with $158 million in cash and no borrowings outstanding under its asset-based credit facility.

About Sally Beauty (NYSE:SBH)

Sally Beauty Holdings, Inc. is a specialty retailer and distributor of professional beauty products. It serves both individual consumers and salon professionals through retail stores, online channels and professional distribution. The company operates Sally Beauty, which sells products such as hair color and care items, styling tools, nail products and skincare. Its CosmoProf business supplies salons and other beauty professionals with products, equipment and related educational resources. Sally Beauty traces its roots to a beauty supply store opened in New Orleans in 1964.

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