Sally Beauty first quarter sales creep up 0.5 percent, gross margin down 30 points

It was a challenging quarter in terms of revenue growth for Sally Beauty. The company clocked in sales of $994.96 million, just 0.5 percent ahead of the same period prior-year.


Photo: Sally Beauty/ Instagram


Same-store sales decreased 2.2 percent in Q1, impacted partly by the lingering effect of the hurricanes that disrupted operations in Puerto Rico in the fourth quarter of fiscal 2017. The company’s Sally Beauty Supply (SBS) business has a strong presence of cash-and-carry retail stores in Puerto Rico.
 
The Texas-based beauty-supplies distributor did however report a 49% rise in first-quarter net income and 67% higher earnings per share, which they said benefited from the recent U.S. tax reform.
 
“Business in the first quarter was impacted by a continuation of disappointing traffic trends in our U.S. Sally Beauty stores and the residual impact of the hurricane. However, we were pleased to have exceeded our expectations for both reported and adjusted diluted earnings per share, even after excluding the net benefits from U.S. Tax Reform,” said Chris Brickman, President and Chief Executive Officer
 
The specialty retailer reported $0.68 earnings per share for the quarter, topping analysts’ consensus estimates of $0.42.
 
Gross margin for the first quarter was 48.9%, a decrease of 30 basis points compared to the prior year driven by shifts towards the lower-margin international businesses and strategic pricing reductions in the SBS segment.
 
Mr. Brickman said that the declines in gross margin were offset by the benefits of an accelerated restructuring program it began in 2017, which includes a tighter control of discretionary expenses and restructuring of international operations.
 
The company’s Beauty Systems Group (BSG) business has just expanded its Canadian footprint by acquiring a “profitable distributor” in the province of Quebec.
 
“We believe that these strategic investments combined with the on-going benefits from U.S. Tax Reform, will keep us on the path to long-term earnings growth,” Brickman concluded.

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