Sally Beauty Holdings, Inc. Q3 FY2025 earnings call

• Resilient execution led to 13% EPS growth amidst macro challenges. Comparable sales near flat, adjusted operating margin 9.2% exceeded expectations. - Fuel for Growth initiatives drove operating margin expansion for fourth consecutive quarter. - Sally segment Color category grew 4%, digital marketplace expansion continued. - BSG sales returned to positive territory with expanded distribution and product innovation. - Sally brand refresh completed in 20 locations, expecting 15 more in Q4 and 50 in FY '26. - Happy Beauty stores showing trends, marketing focused on on-trend brands. - Innovation key, with new launches in both segments.

Sally Segment: Color category grew 4%, with color customer count up. Sally e-commerce sales grew 15% to $43 million, representing 8% of segment net sales. Gross margin increased 110 basis points to 60.9%, segment operating margin 15.8% (down 40 basis points). BSG Segment: Net sales approximately flat, comparable sales up 0.5%. BSG e-commerce sales $56 million, representing 14% of segment net sales. Gross margin 39.4% (flat), segment operating margin 12.5% (up 100 basis points).

• Adjusted full-year comparable sales outlook to high end of range (flat vs prior flat to down 1%). - Consolidated net sales expected 75 basis points lower due to foreign exchange rates and fewer stores. - Adjusted operating margin expected 8.6%-8.7% vs prior 8%-8.5%, reflecting planned marketing investment for Sally brand refresh in Orlando.

• Macro uncertainty impacting consumer spending. - Tariff landscape effects on cost of goods. - Potential vendor cost pass-throughs. - Store closure impacts in European operations (19 closures tied to exiting Spain business).

Q: Thoughts on macros impacting Sally vs BSG and store refresh pace?

A: Macro had less impact than feared; Sally's color up 4% but care softer. Store refresh still early, watching metrics with 50 stores planned in FY '26.

Q: Sally store closures and renovated store performance?

A: Slight uptick in closures tied to European exit; renovated stores showing positive in-store metrics but early days.

Q: BSG rebound, new categories in Sally?

A: BSG rebound from transitory Q2 issues; Sally brand refresh stores testing cosmetics, skin care, etc. for new categories.

Q: Driving care category engagement despite macro?

A: Focus on personalization, performance marketing, promotions with value messaging like 'skip the salon'.

Q: Q4 comp breakdown and early trends?

A: Sequential improvement expected in both segments, with Sally's color momentum and BSG's innovation driving growth.