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Sally Beauty's (SBH) Q1 Earnings Top Estimates, Sales Down

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Sally Beauty Holdings, Inc. (SBH - Free Report) reported first-quarter fiscal 2021 results, with the top line missing the Zacks Consensus Estimate and declining year over year. Nevertheless, the bottom line surpassed the consensus mark and registered growth. Management refrained from providing any formal guidance for fiscal 2021.

Q1 in Detail

Sally Beauty reported adjusted earnings of 50 cents per share, which surpassed the Zacks Consensus Estimate of 47 cents. Also, the metric increased 6% year over year. The upside can be attributed to increased gross margin and cost savings.

Consolidated net sales of $936 million missed the Zacks Consensus Estimate of $959.8 million. Also, the metric declined 4.5% year over year. The top line was mostly affected by coronavirus-induced hurdles like temporary store closures in international markets, capacity restrictions in some markets as well as salon closures in California and parts of Canada for some part of the quarter. Also, reduced store count compared with the year-ago quarter’s levels was a reason. Nevertheless, positive impact of favorable foreign currency rates to the tune of nearly 40 basis points (bps) offered some respite. Consolidated same-store sales declined 3.7%, while global e-commerce sales surged 48%.

Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise

 

Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise

Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote


Consolidated gross profit declined to $470.7 million from $474.8 million reported in the year-ago quarter. Nevertheless, consolidated gross margin expanded 190 bps to 50.3% on the back of reduced promotions in the Sally unit.

SG&A expenses fell $11.8 million to $366.2 million in the quarter owing to reduced labor expenses and lower advertising costs. SG&A, as a percentage of sales, increased to 39.1% from 38.6% reported in the year-ago quarter mainly due to reduced sales volume.

Adjusted operating earnings increased to $104.5 million from $96.9 million reported in the year-ago quarter. Adjusted operating margin expanded from 9.9% to 11.2% in the quarter.

Segment Details

Sally Beauty Supply: Net sales in the segment declined 3.8% to $547.7 million owing to pandemic-led temporary store closures and capacity restrictions in certain markets. Also, reduced number of stores compared with to year-ago quarter’s levels, was a drag. Nonetheless, favorable foreign exchange impact of nearly 50 bps on sales. Further, global same store sales fell 3.3%.

Net store count at the end of the quarter was 3,645, lower by 58stores from the year-ago quarter’s level.

Beauty Systems Group: Net sales in the segment dropped 5.5% to $388.4 million thanks to coronavirus-induced temporary salon closures and capacity restrictions in certain markets. Foreign-currency translations had nearly 10 bps positive impact on results. Further, total same store sales declined 4.6%.

Net store count at the end of the quarter was 1,384, up by 15 stores from the year-ago quarter’s level. Total distributor sales consultants at the end of the quarter were 702 compared with 740 in the year-ago quarter.

Other Financial Aspects

The company ended the reported quarter with cash and cash equivalents of $537.6 million, long-term debt including capital leases of $1,798.2 million and total stockholders’ equity of $98.9 million.

In the quarter, cash flow from operations was $39 million, while capital expenditures amounted to $15.5 million.

Price Performance

Shares of this Zacks Rank #3 (Hold) company have surged 68.3% in the past three months compared with the industry’s growth of 14.4%.

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