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Sally Beauty's Q2 adjusted EPS rises 4.8% as comparable sales grew 1.3% year over year.
SBH adjusted gross margin expands 80 bps to 52.8%, supported by product margin improvements.
Sally Beauty tightens FY26 sales outlook while maintaining earnings and cash flow guidance.
Sally Beauty Holdings, Inc. (SBH - Free Report) delivered second-quarter fiscal 2026 results, wherein both the top and bottom lines increased year over year and surpassed the Zacks Consensus Estimate.
SBH’s Q2 Key Performance Metrics
SBH delivered adjusted earnings of 44 cents per share for the second quarter of fiscal 2026, beating the Zacks Consensus Estimate of 41 cents. The figure increased 4.8% from 42 cents in the year-ago quarter.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
The company posted consolidated net sales of $903 million, up 2.3% year over year from $883.1 million and above the Zacks Consensus Estimate of $899.3 million. Net sales included a 150-basis-point favorable impact from foreign currency translation despite operating 47 fewer stores.
Comparable sales growth was 1.3%, supported by strong 4.4% growth at Sally U.S. and Canada, partially offset by a 30-basis-point decline at Beauty Systems Group (BSG).
Global e-commerce sales increased 13% year over year to $108 million, representing 12% of fiscal second-quarter net sales.
SBH’s Segmental Performance
In the Sally Beauty Supply segment, net sales rose 4.1% year over year to $521.2 million from $500.6 million, which came above the Zacks Consensus Estimate of $510 million. The segment delivered comparable sales growth of 2.5%, which also came higher than the Zacks Consensus Estimate of 1.1% growth. The Global Sally Beauty segment benefited from strong Color category growth of 11%, while the Care category declined 6% year over year.
Sally Beauty’s e-commerce sales increased 21% year over year to $50 million and represented 10% of the segment's net sales, with Sally Beauty’s U.S. and Canada e-commerce sales rising 28%. Gross margin expanded 10 basis points to 61.3%, supported by higher product margin from the Fuel for Growth program, while segment operating margin declined 40 basis points to 15% due to higher planned expenses.
BSG delivered net sales of $382.2 million, down 0.1% year over year from $382.6 million. The Zacks Consensus Estimate for segment sales is pegged at $389 million. The BSG segment’s comparable sales were down 0.3%.
BSG benefited from 3% growth in the Color category, while Care sales remained flat. E-commerce sales increased 7% to $57 million and represented 15% of segment net sales. Gross margin expanded 110 basis points to 40.9%, supported by higher product margins from the Fuel for Growth program, while segment operating margin improved 90 basis points to 12.4%.
Sally Beauty’s Margin & Cost Performance
SBH’s adjusted gross margin expanded 80 basis points year over year to 52.8% from 52% in the prior-year period, reflecting improved product margin across both segments. The company attributed the gain largely to benefits from its Fuel for Growth program.
On the cost side, adjusted selling, general and administrative (SG&A) expenses totaled $403.5 million, which increased from $383.7 million in the prior-year period. Adjusted SG&A expenses as a percentage of sales increased 130 basis points to 44.7% from 43.4% a year earlier. Management cited higher labor and other compensation-related costs, rent and unfavorable foreign exchange impacts as key drivers, partially offset by Fuel for Growth benefits.
SBH produced adjusted operating earnings of $73 million, which declined 2.8% from $75.2 million in the prior-year period. The adjusted operating margin of 8.1% contracted 40 basis points from 8.5% in the prior-year period.
Adjusted EBITDA reached $104.3 million, declining 0.5% from $104.8 million in the prior-year period. Adjusted EBITDA margin declined 40 basis points to 11.5% from 11.9% in the prior-year period.
Sally Beauty’s Financial Position
The company ended the quarter with $157.4 million in cash and no outstanding borrowings under its revolving credit facility. In the second quarter of fiscal 2026, the company‘s operating cash flow was $73.3 million, while free cash flow totaled $44.1 million.
Capital allocation continued to favor balance-sheet strength and shareholder returns. During the quarter, SBH repaid $20 million of term loan debt and repurchased 1.7 million shares for $25 million, ending the period with a net debt leverage ratio of 1.5x.
Sally Beauty’s Future Outlook
Looking ahead, this Zacks Rank #3 (Hold) company tightened its fiscal 2026 net sales outlook to $3.725 billion-$3.75 billion from the previous range of $3.71 billion -$3.77 while maintaining other guidance metrics.
Comparable sales are expected to range from flat to up 1%, with adjusted operating earnings projected to be between $328 million and $342 million. Adjusted earnings per share are expected to be in the range of $2.02-$2.10. Capital expenditure is expected to be $100 million, with $200 million of anticipated free cash flow.
For third-quarter fiscal 2026, the company expects net sales in the range of $932 -$942 million. Adjusted operating earnings are projected to be between $83 million and $89 million, and adjusted earnings per share are envisioned to be in the range of 52-56 cents. Management said fiscal fourth-quarter sales are expected to improve sequentially, reflecting ongoing strength at Sally and initiatives aimed at improving BSG performance.
The company’s shares have lost 10.1% in the past six months compared with the industry’s decline of 11.9%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Petco Health & Wellness Company, Inc. (WOOF - Free Report) operates as a pet specialty retailer, focusing on enhancing the lives of pets, pet parents, and its Petco partners in the United States, Mexico, Puerto Rico, and Chile. At present, WOOF sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WOOF’s current fiscal-year sales and earnings indicates growth of 1% and 58.3%, respectively, from the year-ago figures. WOOF delivered a trailing four-quarter earnings surprise of 275%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States. At present, Five Below sports a Zacks Rank of 1.
The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies growth of 11.3% and 19.2%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 63.4%, on average.
Tapestry, Inc. (TPR - Free Report) provides accessories and lifestyle brand products in North America, Greater China, the rest of Asia, and internationally. At present, TPR flaunts a Zacks Rank of 1.
The Zacks Consensus Estimate for TPR’s current fiscal-year sales and earnings implies growth of 12.6% and 36.3%, respectively, from the year-ago figures. TPR has delivered a trailing four-quarter earnings surprise of 15.6%, on average.
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Sally Beauty Q2 Earnings Beat Estimates, Gross Margin Expands
Key Takeaways
Sally Beauty Holdings, Inc. (SBH - Free Report) delivered second-quarter fiscal 2026 results, wherein both the top and bottom lines increased year over year and surpassed the Zacks Consensus Estimate.
SBH’s Q2 Key Performance Metrics
SBH delivered adjusted earnings of 44 cents per share for the second quarter of fiscal 2026, beating the Zacks Consensus Estimate of 41 cents. The figure increased 4.8% from 42 cents in the year-ago quarter.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
The company posted consolidated net sales of $903 million, up 2.3% year over year from $883.1 million and above the Zacks Consensus Estimate of $899.3 million. Net sales included a 150-basis-point favorable impact from foreign currency translation despite operating 47 fewer stores.
Comparable sales growth was 1.3%, supported by strong 4.4% growth at Sally U.S. and Canada, partially offset by a 30-basis-point decline at Beauty Systems Group (BSG).
Global e-commerce sales increased 13% year over year to $108 million, representing 12% of fiscal second-quarter net sales.
SBH’s Segmental Performance
In the Sally Beauty Supply segment, net sales rose 4.1% year over year to $521.2 million from $500.6 million, which came above the Zacks Consensus Estimate of $510 million. The segment delivered comparable sales growth of 2.5%, which also came higher than the Zacks Consensus Estimate of 1.1% growth. The Global Sally Beauty segment benefited from strong Color category growth of 11%, while the Care category declined 6% year over year.
Sally Beauty’s e-commerce sales increased 21% year over year to $50 million and represented 10% of the segment's net sales, with Sally Beauty’s U.S. and Canada e-commerce sales rising 28%. Gross margin expanded 10 basis points to 61.3%, supported by higher product margin from the Fuel for Growth program, while segment operating margin declined 40 basis points to 15% due to higher planned expenses.
BSG delivered net sales of $382.2 million, down 0.1% year over year from $382.6 million. The Zacks Consensus Estimate for segment sales is pegged at $389 million. The BSG segment’s comparable sales were down 0.3%.
BSG benefited from 3% growth in the Color category, while Care sales remained flat. E-commerce sales increased 7% to $57 million and represented 15% of segment net sales. Gross margin expanded 110 basis points to 40.9%, supported by higher product margins from the Fuel for Growth program, while segment operating margin improved 90 basis points to 12.4%.
Sally Beauty’s Margin & Cost Performance
SBH’s adjusted gross margin expanded 80 basis points year over year to 52.8% from 52% in the prior-year period, reflecting improved product margin across both segments. The company attributed the gain largely to benefits from its Fuel for Growth program.
On the cost side, adjusted selling, general and administrative (SG&A) expenses totaled $403.5 million, which increased from $383.7 million in the prior-year period. Adjusted SG&A expenses as a percentage of sales increased 130 basis points to 44.7% from 43.4% a year earlier. Management cited higher labor and other compensation-related costs, rent and unfavorable foreign exchange impacts as key drivers, partially offset by Fuel for Growth benefits.
SBH produced adjusted operating earnings of $73 million, which declined 2.8% from $75.2 million in the prior-year period. The adjusted operating margin of 8.1% contracted 40 basis points from 8.5% in the prior-year period.
Adjusted EBITDA reached $104.3 million, declining 0.5% from $104.8 million in the prior-year period. Adjusted EBITDA margin declined 40 basis points to 11.5% from 11.9% in the prior-year period.
Sally Beauty’s Financial Position
The company ended the quarter with $157.4 million in cash and no outstanding borrowings under its revolving credit facility. In the second quarter of fiscal 2026, the company‘s operating cash flow was $73.3 million, while free cash flow totaled $44.1 million.
Capital allocation continued to favor balance-sheet strength and shareholder returns. During the quarter, SBH repaid $20 million of term loan debt and repurchased 1.7 million shares for $25 million, ending the period with a net debt leverage ratio of 1.5x.
Sally Beauty’s Future Outlook
Looking ahead, this Zacks Rank #3 (Hold) company tightened its fiscal 2026 net sales outlook to $3.725 billion-$3.75 billion from the previous range of $3.71 billion -$3.77 while maintaining other guidance metrics.
Comparable sales are expected to range from flat to up 1%, with adjusted operating earnings projected to be between $328 million and $342 million. Adjusted earnings per share are expected to be in the range of $2.02-$2.10. Capital expenditure is expected to be $100 million, with $200 million of anticipated free cash flow.
For third-quarter fiscal 2026, the company expects net sales in the range of $932 -$942 million. Adjusted operating earnings are projected to be between $83 million and $89 million, and adjusted earnings per share are envisioned to be in the range of 52-56 cents. Management said fiscal fourth-quarter sales are expected to improve sequentially, reflecting ongoing strength at Sally and initiatives aimed at improving BSG performance.
The company’s shares have lost 10.1% in the past six months compared with the industry’s decline of 11.9%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Petco Health & Wellness Company, Inc. (WOOF - Free Report) operates as a pet specialty retailer, focusing on enhancing the lives of pets, pet parents, and its Petco partners in the United States, Mexico, Puerto Rico, and Chile. At present, WOOF sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WOOF’s current fiscal-year sales and earnings indicates growth of 1% and 58.3%, respectively, from the year-ago figures. WOOF delivered a trailing four-quarter earnings surprise of 275%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States. At present, Five Below sports a Zacks Rank of 1.
The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies growth of 11.3% and 19.2%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 63.4%, on average.
Tapestry, Inc. (TPR - Free Report) provides accessories and lifestyle brand products in North America, Greater China, the rest of Asia, and internationally. At present, TPR flaunts a Zacks Rank of 1.
The Zacks Consensus Estimate for TPR’s current fiscal-year sales and earnings implies growth of 12.6% and 36.3%, respectively, from the year-ago figures. TPR has delivered a trailing four-quarter earnings surprise of 15.6%, on average.