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Sally Beauty Q4 Earnings Beat Estimates on Sales Growth & Cost Control
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Key Takeaways
Sally Beauty's Q4 adjusted EPS rose 12.7% to 62 cents, while sales increased 0.6% to $952.5 million.
SBH's e-commerce sales grew 8% to $113 million, while adjusted operating margin expanded 60 bps to 10%.
Sally Beauty projects fiscal 2027 sales of $3.77-$3.81 billion and adjusted EPS of $2.20-$2.30.
Sally Beauty Holdings, Inc. (SBH - Free Report) delivered fourth-quarter fiscal 2026 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and increased year over year.
SBH's Q4 Key Performance Metrics
Adjusted earnings rose 12.7% year over year to 62 cents per share, beating the consensus estimate of 60 cents. Earnings per share rose 22.4% year over year to 60 cents.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Net sales increased 0.6% to $952.5 million, exceeding the consensus mark of $948 million. Consolidated comparable sales increased 0.9%, while global e-commerce sales grew 8% to $113 million, representing 12% of quarterly revenues. The digital business recorded its 12th consecutive quarter of growth, reflecting continued investments in redesigned applications, marketplaces and personalized customer engagement.
SBH’s Segmental Performance
Sally Beauty Supply's (“SBS”) net sales increased 1.6% year over year to $550.3 million. This was above the Zacks Consensus Estimate of $547 million. Comparable sales advanced 2%, driven by 1.1% transaction growth and a 0.9% increase in average ticket. Color sales increased 7%, while Care declined 7%. Segment e-commerce sales grew 13%, including 19% growth in the United States and Canada.
SBS' gross margin contracted 70 basis points to 60.6%, reflecting unfavorable category and brand mix. However, operating earnings increased 2.6% to $88.4 million, while operating margin expanded 20 basis points to 16.1%.
Beauty Systems Group (“BSG”) net sales declined 0.8% to $402.2 million. The Zacks Consensus Estimate for segment sales is pegged at $401 million. Comparable sales fell 0.6%, as transactions decreased 1%, partly offset by a 0.4% increase in average ticket. Color and Nail sales increased 2% and 11%, respectively, while Care declined 3%. E-commerce sales rose 3% to $59 million.
BSG's gross margin remained flat at 40%, while operating earnings increased 1.2% to $51.9 million. Operating margin expanded 30 basis points to 12.9%, aided by disciplined expense management.
SBH's Digital Expansion & Growth Initiatives
Customer acquisition and digital engagement remained central to Sally's growth strategy. Licensed Colorist OnDemand attracted new shoppers, with more than 40% of its fiscal fourth-quarter customers being new to Sally. These customers spent 85% more and shopped twice as frequently as nonusers.
The company expanded its Sally Ignited footprint to 80 stores during fiscal 2026. Management highlighted comparable sales growth of 8-10% across its monitored test stores, alongside improvements in traffic, transaction values and cross-category shopping.
For fiscal 2027, Sally plans approximately 100 additional Ignited locations, targeting 180 stores by year-end. Product initiatives include the Ion Care relaunch, expanded fragrance offerings and a chain-wide rollout of L.A. Girl cosmetics during the fiscal second quarter.
Sally Beauty's Margin & Cost Performance
Consolidated adjusted gross margin for this Zacks Rank #4 (Sell) company declined 30 basis points year over year to 51.9%.
Adjusted selling, general and administrative expenses totaled approximately $400 million, decreasing $5 million from the prior-year quarter. Lower legal expenses and Fuel for Growth savings helped offset higher rent and advertising costs.
Adjusted operating earnings increased 7% to approximately $95 million, while adjusted operating margin expanded 60 basis points to 10%.
Adjusted EBITDA increased 7.3% to $126 million, with the corresponding margin expanding 80 basis points to 13.2%.
The company completed its three-year Fuel for Growth program, achieving cumulative run-rate savings of $120 million. Management expects continued operating efficiencies to help offset inflationary pressures and investments in growth initiatives.
SBH's Financial Position
Sally Beauty ended fiscal 2026 with cash and cash equivalents of $158 million and no outstanding borrowings under its asset-based revolving credit facility. Inventory increased 1% year over year to approximately $1 billion.
Fiscal fourth-quarter operating cash flow totaled $75 million, while free cash flow reached $47 million. During the quarter, the company repaid $20 million of term loan debt and repurchased 2.6 million shares for $42 million, ending with a net debt leverage ratio of 1.4 times.
Sally Beauty's Outlook
For fiscal 2027, management expects consolidated net sales of $3.77-$3.81 billion and comparable sales growth of 1-2%. Adjusted operating earnings are projected at $334-$347 million, with adjusted earnings per share of $2.20-$2.30.
Capital expenditures are expected to approximate $140 million, while free cash flow is projected at $200 million.
For the first quarter of fiscal 2027, consolidated net sales are expected between $945 million and $955 million, with comparable sales growth of 0.5-1.5%. Adjusted operating earnings are forecasted at $75-$80 million, while adjusted earnings per share are projected at 48-52 cents.
The company has risen 24% over the past three months compared with the industry’s 4.6% growth.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and earnings calls for growth of 24% and 18.9%, respectively, from the year-ago reported numbers. ELF delivered a trailing four-quarter earnings surprise of 80.5%, on average.
Ulta Beauty, Inc. (ULTA - Free Report) operates as a specialty beauty retailer in the United States, Mexico, and Kuwait and currently holds a Zacks Rank #2 (Buy). ULTA delivered a trailing four-quarter earnings surprise of 7.6%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings calls for growth of 7.1% and 12.9%, respectively, from the year-ago reported numbers.
BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) is a leading membership-based warehouse club operator concentrated primarily in the eastern half of the United States. It currently has a Zacks Rank #2. BJ’s Wholesale delivered a trailing four-quarter earnings surprise of 4.8%, on average.
The Zacks Consensus Estimate for BJ’s current fiscal-year sales and EPS indicates growth of 11.7% and 6.8%, respectively, from the prior-year reported levels.
View the Zacks #1 Rank List
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Sally Beauty Q4 Earnings Beat Estimates on Sales Growth & Cost Control
Key Takeaways
Sally Beauty Holdings, Inc. (SBH - Free Report) delivered fourth-quarter fiscal 2026 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and increased year over year.
SBH's Q4 Key Performance Metrics
Adjusted earnings rose 12.7% year over year to 62 cents per share, beating the consensus estimate of 60 cents. Earnings per share rose 22.4% year over year to 60 cents.
Sally Beauty Holdings, Inc. Price, Consensus and EPS Surprise
Sally Beauty Holdings, Inc. price-consensus-eps-surprise-chart | Sally Beauty Holdings, Inc. Quote
Net sales increased 0.6% to $952.5 million, exceeding the consensus mark of $948 million. Consolidated comparable sales increased 0.9%, while global e-commerce sales grew 8% to $113 million, representing 12% of quarterly revenues. The digital business recorded its 12th consecutive quarter of growth, reflecting continued investments in redesigned applications, marketplaces and personalized customer engagement.
SBH’s Segmental Performance
Sally Beauty Supply's (“SBS”) net sales increased 1.6% year over year to $550.3 million. This was above the Zacks Consensus Estimate of $547 million. Comparable sales advanced 2%, driven by 1.1% transaction growth and a 0.9% increase in average ticket. Color sales increased 7%, while Care declined 7%. Segment e-commerce sales grew 13%, including 19% growth in the United States and Canada.
SBS' gross margin contracted 70 basis points to 60.6%, reflecting unfavorable category and brand mix. However, operating earnings increased 2.6% to $88.4 million, while operating margin expanded 20 basis points to 16.1%.
Beauty Systems Group (“BSG”) net sales declined 0.8% to $402.2 million. The Zacks Consensus Estimate for segment sales is pegged at $401 million. Comparable sales fell 0.6%, as transactions decreased 1%, partly offset by a 0.4% increase in average ticket. Color and Nail sales increased 2% and 11%, respectively, while Care declined 3%. E-commerce sales rose 3% to $59 million.
BSG's gross margin remained flat at 40%, while operating earnings increased 1.2% to $51.9 million. Operating margin expanded 30 basis points to 12.9%, aided by disciplined expense management.
SBH's Digital Expansion & Growth Initiatives
Customer acquisition and digital engagement remained central to Sally's growth strategy. Licensed Colorist OnDemand attracted new shoppers, with more than 40% of its fiscal fourth-quarter customers being new to Sally. These customers spent 85% more and shopped twice as frequently as nonusers.
The company expanded its Sally Ignited footprint to 80 stores during fiscal 2026. Management highlighted comparable sales growth of 8-10% across its monitored test stores, alongside improvements in traffic, transaction values and cross-category shopping.
For fiscal 2027, Sally plans approximately 100 additional Ignited locations, targeting 180 stores by year-end. Product initiatives include the Ion Care relaunch, expanded fragrance offerings and a chain-wide rollout of L.A. Girl cosmetics during the fiscal second quarter.
Sally Beauty's Margin & Cost Performance
Consolidated adjusted gross margin for this Zacks Rank #4 (Sell) company declined 30 basis points year over year to 51.9%.
Adjusted selling, general and administrative expenses totaled approximately $400 million, decreasing $5 million from the prior-year quarter. Lower legal expenses and Fuel for Growth savings helped offset higher rent and advertising costs.
Adjusted operating earnings increased 7% to approximately $95 million, while adjusted operating margin expanded 60 basis points to 10%.
Adjusted EBITDA increased 7.3% to $126 million, with the corresponding margin expanding 80 basis points to 13.2%.
The company completed its three-year Fuel for Growth program, achieving cumulative run-rate savings of $120 million. Management expects continued operating efficiencies to help offset inflationary pressures and investments in growth initiatives.
SBH's Financial Position
Sally Beauty ended fiscal 2026 with cash and cash equivalents of $158 million and no outstanding borrowings under its asset-based revolving credit facility. Inventory increased 1% year over year to approximately $1 billion.
Fiscal fourth-quarter operating cash flow totaled $75 million, while free cash flow reached $47 million. During the quarter, the company repaid $20 million of term loan debt and repurchased 2.6 million shares for $42 million, ending with a net debt leverage ratio of 1.4 times.
Sally Beauty's Outlook
For fiscal 2027, management expects consolidated net sales of $3.77-$3.81 billion and comparable sales growth of 1-2%. Adjusted operating earnings are projected at $334-$347 million, with adjusted earnings per share of $2.20-$2.30.
Capital expenditures are expected to approximate $140 million, while free cash flow is projected at $200 million.
For the first quarter of fiscal 2027, consolidated net sales are expected between $945 million and $955 million, with comparable sales growth of 0.5-1.5%. Adjusted operating earnings are forecasted at $75-$80 million, while adjusted earnings per share are projected at 48-52 cents.
The company has risen 24% over the past three months compared with the industry’s 4.6% growth.
Image Source: Zacks Investment Research
Stocks to Consider
e.l.f. Beauty, Inc. (ELF - Free Report) provides cosmetics and skin care products worldwide and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and earnings calls for growth of 24% and 18.9%, respectively, from the year-ago reported numbers. ELF delivered a trailing four-quarter earnings surprise of 80.5%, on average.
Ulta Beauty, Inc. (ULTA - Free Report) operates as a specialty beauty retailer in the United States, Mexico, and Kuwait and currently holds a Zacks Rank #2 (Buy). ULTA delivered a trailing four-quarter earnings surprise of 7.6%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings calls for growth of 7.1% and 12.9%, respectively, from the year-ago reported numbers.
BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) is a leading membership-based warehouse club operator concentrated primarily in the eastern half of the United States. It currently has a Zacks Rank #2. BJ’s Wholesale delivered a trailing four-quarter earnings surprise of 4.8%, on average.
The Zacks Consensus Estimate for BJ’s current fiscal-year sales and EPS indicates growth of 11.7% and 6.8%, respectively, from the prior-year reported levels.