Back to top

Image: Bigstock

Sally Beauty's (SBH) Q3 Earnings Top Estimates, Sales Up Y/Y

Read MoreHide Full Article

Sally Beauty Holdings, Inc. (SBH - Free Report) reported impressive third-quarter fiscal 2021 results, with the top and the bottom line beating the Zacks Consensus Estimate as well as increasing year over year. Sales increased across both the segments in which the company operates.

Sally Beauty benefited from solid consumer demand and efficient execution strategies during the quarter. Improving macro factors in the United Sates coupled with lifting of pandemic-inflicted curbs in international markets drove the company’s performance.

Q3 in Detail

Sally Beauty reported adjusted earnings of 68 cents per share, which surpassed the Zacks Consensus Estimate of 62 cents. The metric compares favorably against a loss of 11 cents reported in the year-ago quarter. The upside can be attributed to solid top-line growth and better gross margin performance.

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 net sales of $1,022.4 million beat the Zacks Consensus Estimate of $985.2 million. Also, the metric increased 45% year over year. Consolidated same-store sales surged 44.7%, mainly attributed to positive impacts in the United States from improving consumer confidence as well as easing of pandemic-induced restrictions in international territories. Favorable foreign currency rates benefited sales to the tune of nearly 260 basis points (bps).

Global e-commerce sales represented 7% of net sales during the quarter. The company’s online business reflected gains from focus on digital capabilities as well as implementation of strategic initiatives around fulfillment and customer engagement. Sally Beauty operated 84 less stores compared with the year-ago quarter’s levels.

Consolidated gross profit surged 59.8% to $514.4 million from $321.8 million reported in the year-ago quarter. Consolidated gross margin expanded 470 bps to 50.3% on the back of elevated gross margin in the Sally Beauty Supply segment. This was somewhat offset by reduced gross margin at Beauty Systems Group unit.

The company reported selling, general and administrative (SG&A) expenses of $386.5 million, which increased $71.9 million mainly due to impacts of the year-ago quarter’s savings from furloughed employees, rent abatements and reduced advertising costs. As a percentage of sales, SG&A expenses were 37.8%, down from 44.6% posted in the prior-year quarter. Management was impressed with its massive expense leverage in the quarter under review.

Adjusted operating earnings increased to $128.7 million from $16 million reported in the year-ago quarter. Adjusted operating margin expanded from 2.3% to 12.6% in the third quarter.

Segment Details

Sally Beauty Supply: Net sales in the segment surged 45.1% to $602.7 million, mainly owing to positive impact in the United States from improving consumer confidence and easing restrictions in international markets. Favorable foreign exchange had a positive impact of 370 bps on sales. Global segment same store sales jumped 43.3%.

Net store count at the end of the quarter was 3,611, lower by 80 stores from the year-ago quarter’s level.

Beauty Systems Group: Net sales in the segment increased 44.8% to $419.7 million. Positive impact from the easing of pandemic-induced restrictions, which resulted in increased operating capacities in salons. Also, higher demand drove the upside. Foreign-currency translations had nearly 120 bps positive impact on results. Further, total same store sales rallied 47.8%.

Net store count at the end of the quarter was 1,367, down by 4 stores from the year-ago quarter’s level. Total distributor sales consultants at the end of the quarter were 724 compared with 651 in the year-ago period.

Other Financial Aspects

The company ended the reported quarter with cash and cash equivalents of $270.3 million, long-term debt including capital leases of $1,383.1 million and total stockholders’ equity of $222.3 million.

During the third quarter, cash flow from operations was $86.2 million, while capital expenditures amounted to $17.8 million.

Outlook

The company notified that it is maintaining a cautious view owing to an uncertain environment, supply chain disruptions and potential restrictions as well as closures amid the pandemic. The company expects fiscal fourth-quarter net sales to be flat or up 2% year over year.

Zacks Investment Research
Image Source: Zacks Investment Research

Price Performance

Shares of this Zacks Rank #2 (Buy) company have surged 55.1% so far this year against the industry’s decline of 9.6%.

Some Solid Retail Picks

Ulta Beauty Inc. (ULTA - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods, Inc. (DKS - Free Report) , currently sporting a Zacks Rank #1, has a long-term earnings growth rate of 7.1%.

Five Below, Inc. (FIVE - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 32.6%.