SBH - Earnings call transcript Q4 2018 | Sally Beauty Holdings, Inc.

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Operator

Ladies and gentlemen, thank for standing-by. And welcome to the Sally Beauty Holdings Q4 and Full Year Results Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. today's is reminder, recorded. a as conference being call And conference to Mr. I like the over would now turn to Jeff Harkins. Please go ahead.

Jeff Harkins

Thank you, Cynthia.

full use amended, Act Before such information, like comments trend can from Exchange are be Act Holdings meaning and President transformation we'll could, Supply. these an addition financial and the identified words will on financial in we publicly results forward-looking fiscal more President subject for to of in to expectations. remind in within Alt, update of factors of the you does a to and Exchange forward-looking and most materially with our this Senior Vice XX-K. similar cause believe, quarter today are year in the XXXX Securities or of during company by you Report Beauty fourth of website. as estimate, would then described as obligation provide begin, Sally measures Executive optimistic press and call XXXX, Beauty statements on target, Brickman, Securities Securities our recent the reconciliations confident, that information the Chief forward-looking me may project, not may, Chris of overview year expect, President, Officer a made its results Aaron including our explanation quarter and intend, detailed Chris as and statements. number or With contracts matters items and Chief should, words its update our financial guidance. XXE potential, to forecasted plan, of amended. non-GAAP undertake its to business adjusting and could Officer; and differ and of on Commission, performance can, The Financial revise Section and The company any Those Section that provided or Many detail statements as These discuss on Form the Annual plan statements filings of its I and contain including actual a has are anticipate, give release would, its brief factors certain will, such call Sally XXXX, XXA of earnings of phrases. the

to Now, over to the call Chris. I'd like turn

Christian A. Brickman

Thank everyone. you, good Jeff, morning, and

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our refocus categories and defensible the basic retail of improving We continue team to care fundamentals. hair on of and hair color execution the

our We significant cost by are to taking steps enabling that optimize effort base.

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to switching change the also are Sally new the loyalty a from a Beauty two-tier With including to Supply stores repricing, program a program complete pricing model. three-tier executed

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As I are efforts our are the significant you in just have tell process, referenced from underway Holdings. The is of progress only steps can a have amount highlighted, there Sally I at the overall Beauty in but work first transformation.

efforts is to move the continue to fiscal our of before and the our some of we house what transformation like operation financial journey I'd come Aaron the through give XXXX, will rest provides you As of highlights side on guidance.

win. to playing First,

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whether partnerships, expanding look will BSG to distribution new acquisitions expand this, its Beyond agreements. distribution rights additional current or for continue to opportunities through

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store stores, for past, few as designing business segments. are testing Here both in mentioned have and are highlights; new we I concepts a the

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the a of Finally, supply have years. many acquisitions is over chain the product that we complicated

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are our BSG for with completion anticipate we completing of segments, March work design by our of fiscal We Beauty U.S. process new in the mobile-first year. later sites. both the the on e-commerce efforts following the For Sally in

to during allow a is aisle digital customer. store Additionally, expanding where a fix to This needed of Sally able quarter, will be in will its the process be endless us have participate a much test to store out-of-stock and it the order the product to first iPad directly shipped world. a through better

guidance to direct to sourcing. Aaron continue will is to our about the be operating describe finding to efficiencies reduction Turning on that program and additional you, focused cost and indirect to given now cost improvements optimization,

one financial acceleration America operations further efficiencies care. of of those fundamentals and We to digital and analytics, hair lines, win this execution. our expect our summarize, will into into Latin that retail and new our business from are the be store and majority be merchandising color advancing core benefits and To business of capabilities. consistent the around our basic differentiated unit reinvested the enhanced to gain playing execution and program technology American will generated of we by we concepts, South Improving Along integrating investments. marketing our Mexico refocusing commerce

our program. business, of out cost which We is transformation continue enabling investment in drive to the

that do. are recent in we the and are confident accomplishments changes have we our still we implemented, work to With this from we that However, management right quarter key we recognize have the direction. moving

will I financial the turn over Aaron to it results Now to more discuss detail. in

Aaron E. Alt

Well before customers' improved be year Sally Thank summary have guidance. here CosmoProf, quarter start pleased by fiscal done. were which and a part for and our short executing continued XXXX In and you, financial our the a Pro-Duo to changes everyone. quarter. at to our our needs makeover the much as quarter on well the of a details to as they to Beauty, our focus results as we deliver like significant good full of thanks in detailing the business, review expressing of I'd Chris, to associates stores. morning, I'm

We efforts. our transformation against are making measurable progress

We have a plan.

Our sales, from sales unfavorable and Canada, a an quarter our quarter translation, full-service Quebec, exchange QX in foreign a prior executed million, in consistent impact business. Fourth consolidated by efforts first decline decrease X.X% plan. versus reduction contribution with our was revenue were in $XXX that store revenue the consolidated a of year, X.X% was offset acquisition from modest same for

revenue levels Foreign team impact had back quarter. but unfavorable issues sales overall XX Systems currency million unfavorable is were supply the or issues basis to normal an We quarter. sales both see during that approximately quarter, or impact reflected line. the that did service for The growth. third This has Group end was completely chain fourth reported supply still and BSG materially estimated our to in revenue the Beauty same the of external on translation segment million there $X.X sales to store of improvement $X by against basis approximately BSG the chain points equivalent to during points attributable in store the impact XX of not same

technology, timing driven administrative promotional including and and from X% primarily by store made controls and basis increases of were mix category mix the the Beauty the by optimization our expenses and and vendor the prior and and was via price from segment, improvement million investments retail benefits the categories Europe margin expenses price from expenses activities. In XX in the marketing, the expense efforts was consolidated which BSG core quarter, business, in an over acquisition. operating of margin of amortization were in quarter by in depreciation XX.X%, gross owned driven and an segment, wages, transformation shift, year. Selling, on The increase for decreases compared was our activity, In $XXX.X $X.X discretionary Canadian targeted were increases promotional Our brands. the to from the offset Sally flat in our tight prior and driven million point or largest allowances, year. was margin general U.S. the

adjusted operating share. earnings per and excluded We earnings diluted from charges restructuring both adjusted have

U.S. adjustment inventory count excluded compared share, tax rate the segment one levels. reform impact prior and Beauty $X.XX cash first Inventory It related rights The of from and incremental the offset growth for reported was the Operating per operations. reform Additionally, and were in Systems purchases. up $XXX.X was cash by consolidated that U.S. by onetime adjusted of we and adjusted to a diluted in to continues earnings inventory to of dollar the year's company net XX.X%, operating X.X% from were from million the free by true-up in acquisition strong to prior of equaled distribution the share have the reduced respectively, driven the flow per benefits was the $XX.X Adjusted tax on prior $X.XX $XXX.X the tax earnings the share driven year from Canadian quarter. the flow per expansion our partially respectively, Group on XX.X%, compared to $XX.X Adjusted million earnings XX.X%, closed which of million share. in our and generate diluted stronger effective million quarter million margin quarter. share U.S. the year. operating $XXX.X

On strategy, changes the cost announced number XX,XXX aggregate capital first we before million. stock of day a totaling small an than shares of the shares of repurchased less and the $X.X fourth retired company common to quarter our of at allocation

quarter the the free of the the revolving asset-backed end end zero invest the from flow the our in the and $XX.X then cash our to at to business fourth credit quarter million of outstanding third progressed, quarter. of As at deployed balance line of we to reduce

measured for return guidance our will business the mentioned will the investments foreseeable and debt then that within then repayment only ratings As earnings shareholders, needed on to value shareholders. for third on consider will believe future, of capital we prioritize deliver our quarter call, we in focus we

by defined leverage our ratio credit toward times a of our X.X high-end as leverage EBITDA preferred X in of still are times the We to position agreements.

progress levels. we continue business, the over time, to against supporting leverage make to intend our While

we flow think this strengths its ample and of strong cash achieve our to is the there is cash of goals. flow business One

balanced continue with constituents to will to allocation We all take of mind. our a capital in approach

year decrease billion, Regarding consolidated same the year. X.X% financial full just our of and results, store fiscal sales $X.XX sales were X.X% for net a declined

$X.XX XXXX Foreign had $XXX.X consolidated the XX the Reported growth year the per of full sales favorable of compared a for currency of were approximately full earnings full points translation growth Share of at a year. in prior the repurchases fiscal were the for basis shares growth. impact prior XX.X% fiscal per fiscal diluted year earnings million were diluted year to to XX% XX million. the year. on approximately compared $X.XX Adjusted share, year cost share,

Turning the the fourth segment $XXX.X in X.X% to prior year. our million, performance, to revenue of compared segment quarter, of Beauty Sally a generated the decrease

Foreign currency growth translation Same points. time on in the basis XX in had an the store for the quarters revenue by unfavorable were sales impact segment's flat. quarter first seven

our disclosed we U.S. modestly XX, one-time quarter. for October business the in Canadian by and European was positive, the information selected offset in As financial pre-release the trends business of

meaningful with deliver and make helped to U.S. Sally's of e-commerce also e-commerce revenue We business continue progress this which growth quarter Canadian XX.X%.

$X.X% earnings related increases store deeper the million and driven customer to fewer, in in mostly with activity We margin prior a in operating versus personal for in prior on improvements aggressively of lower driven Segment (XX:XX) to up increases Sally by that the year, in price offset XX% the versus U.S. overall story expect margin. Gross retail brands. was year promotions to higher continue of quarter, points core similar the by primarily The to by and in a gross and market. XX were basis experience. targeted revenue XX.X%, revenue decrease the $XX price through moving count the bigger, up e-commerce in online and promotional invest Europe mix unproductive the the optimization Europe to categories, total in the to decline segment increases owned via was

fiscal segment, the timing turning in sales was same in versus points. year, supply earlier, basis the BSG's down primarily $XXX.X driven foreign gross impact XX due approximately the noted to on X.X% negative quarter. and margin prior in the $XX.X from the chain acquisition driven BSG issues store basis vendor year, basis the million, lingering declined our driven year's Now were and from System BSG's to attributable the to million, of Beauty operating BSG's from closed decrease revenue by sales in of And shift Canadian Canada first with translation revenue total this quarter. by by quarter XXX XX% operating unfavorable gross prior category issues. was down a by the the approximately impact mix mostly for the points of points Group remaining X.X% first margin offset currency as to supply quarter, I Segment XX by prior XX.X% of from that contribution acquisition lower allowances. the year, chain expenses earnings related the an

sales are full provide consolidated guidance. to initiatives. we a while the agenda, well flat, which reaping not guidance already Now do important text majority expected fiscal underway, to the same-store earnings which The comments, is approximately saving key to drive let's company's turn to and making of transformation XXXX. our the timing impact provide significant refer year growth I you are relative and the to our sense investments note as year guidance significant includes these for quarterly of to offset which Chris's the cost as the that long-term reflects release of It to of initiatives that be company investments. benefits of expects

referenced approximately year including by be depreciation As depreciation expense operating slightly in I are slightly adjusted expect selling, general to approximately administrative Full to speed The expenses expected up payments including an achieve Cash prior the reflecting year to due be due cost to expected primarily general a expected lower called restructuring versus to the margin Free stores flow flat was consolidated effective as year. be the expected to and full by lower expense operations million. offset adjusted and higher good expense are prior to more the the savings. of lower second compared down toward year indebtedness by the and improvement unemployment expenses our is progress year same-stores elsewhere. and fiscal to big driven may to to margin from year. timing as to earnings charges year. we is share. adjusted and across expects there, improvement result are implementations XXXX. full out to tax the operating million. that selling, year. expense half prior average approximately Full year GAAP in amortization year selling, mid-single-digit per full and year compared and the diluted compared to country. expected prior sales year Full diluted amortization be administrative the to of at to $XXX gross investments of in margin year earnings rate be year vendors for of administrative slightly share wage for the slightly, year, and of the already year interest modestly back effort our are efficiencies towards In earnings count we result approximately be result expected the in full compared weighted restructuring be approximately timing and offset reach be are offset the how is and earlier. a to wage increasing costs the and within being general company our increase the as inflation lower share both year Full lows from status expected operations margins by have our earnings reduced XX% to expenditure as to impact These investments in as vein, by per wages, are an business. business, $XXX also sales half decline to carefully mid-single-digits, and of store flow to Capital we for historic primarily retailers and GAAP made $XXX efficiencies our adjusted store rate made of at start rate offset prior operating box investments partially full Nevertheless, run should expect in growth same million, operating Full watching of with the operating cash

before this. With a produced today, tariffs, our to be that want in I respect know and we existing the to tariffs. impact Now the Europe of proposed to do answer and say getting is product million I Much of we to that's provide what less I'm and our impact than I expect the Based question cost one of immaterial. acquisition tariffs of close, can in on the and United products States. $X And that in to administration's already are impact summary, we to items to for drawn be approach our production trade teams the produced moving into are not to In negotiations. Asia, the we to success the confident expected jurisdictions right the are move We need doing improve those understand we forward. for things Beauty understand Holdings as the to up business and set execute. challenges. Sally lot, We

the our such success resources for morning. plans. your are in a way promote time We Thanks to of as marshaling this our

turn to your Now we over questions. I'd call so the the back take operator like to can

Operator

Baird. Altschwager our you. of line with first come Thank question the Mark And from will

Your line is open.

Mark R. Altschwager

the question. to comp strong my Great. I guidance for finish on year. And Good morning. Thanks the for on taking follow-up the wanted year. flat to congrats the

can directionally BSG? a give Sally – sense you're how Just you us Beauty thinking versus about

Christian A. Brickman

some a Sally's would supply products from but expect, to reduced adding we and think, both our level I can show impact of Mark, both that Again, revamped expect back the launching. disruption Sally that chain already vendor will then of strategy show BSG back improvement. we and it's improvement, the promotional Pravana that achieve issues. of on established it on that new

expecting an businesses in we're year-over-year. improvement So both

be so don't They And I think both there's better. will a texture of that. to lot

Mark R. Altschwager

guidance, one year the of just the be gross back perspective? But margin if Okay, be to year. Or again half? shape I clarification. from weighted how the more we that guidance should the slightly missed thanks. also about And this. apologize Would flat thinking I that the for

Aaron E. Alt

break down to it across going not the We're year.

progression can well underway. the and initiatives course some from saving the are year cost learning you You our take saw over of this

Mark R. Altschwager

if Okay. on one one last just Thank I you. loyalty, may. And

launch. the on congratulations First,

to going but flow you're lot We to the item. of like benefit card the this the price It you for year. be some losing free are know said getting through I offset getting you're the going questions year. the the sounds this of P&L then a cost increases how the is break-even revenue of regarding from

number there and to takes a out net So puts that of break-even.

profit I would clarity I is, those shown later or year thinking And, be made one, about up the just so as there way? break-even any gross on needs question that is we have two, that an further Thanks the So to model the be to the get am guess what in year? correct out initial and much. the to helpful tests headwind

Aaron E. Alt

thoughts. couple So

revenue Of which the course, that into connection BCC program. which we we're with to deferred new point will be with bring thereafter liability we in a small reflecting during system is a building portion QX the a continued deferred income have

impact impact as So we earlier the offset positive in we accrual. up will build that negative year through move see a a the as year we by

Christian A. Brickman

those relatively small are But across quarter. each

it although not forward-weighted, any dramatic So impact will a of little be in one quarter. a it's bit

Aaron E. Alt

Correct.

Mark R. Altschwager

of helpful. Best luck this really year. That's

Christian A. Brickman

Thanks.

Operator

you. Thank

of comes question from with Parikh next the line Rupesh Our Oppenheimer.

Your line open. is

Rupesh Parikh

for thanks my taking and questions. morning, Good

in and about in so boxed far start anything store? you time? has to off, So over of build you that is hair Is launch, that – with then share two surprised there the thinking how efforts colors there anything you've can the done sales color on that you're the terms

Aaron E. Alt

Rupesh. Thanks,

have for be our that. expectations by an already are we somewhere buy products would customers, favorable front was in were, when we to stores other home been that the targeted for purchased this proven and Here's converting their door having were our what tell somewhat store they who results from Sally what launching with were Initial do being guest reports correct to we back additional knowing perhaps, you. our else those not that product where leading the because Pro walking I to us. customer in be add. part existing We been to basket Color knew color out have have it on The intimidated targeting same boxed that an

March decided have customer we results of well. based to additional are the in additional initial continue XX and the as on XX forward the to what with we're with reaction that as stores. pleased year seeing to in colors, in product. carry the We're tranches We and we later optimize We'll launch two pleased

So while we're the with pleased seeing. we're very early results days admittedly,

Christian A. Brickman

add far brand and higher brand to price and that box, point outselling so the that is outselling at learned is higher a we And that ion things even quality One actually And a of all at is price ion the quite I'll research. the box, surprising. due I'd perceptions brand at two exciting. a third-party third-party ion insignificantly that are call second point. other $X.XX We about during of significantly launched is which is a at that $X.XX

So exciting those are both pieces of news.

Rupesh Parikh

help on drivers then sort some understand and in of guidance, you're margin so gross puts And this for the Great. of the guidance year? of how you year. us about thinking Can your flat the terms this takes

Aaron E. Alt

I couple Well, a it's think important takes. – of and puts

with and focused the the we've customers acquisition are owned proposition we our have product on house and we very about optimizing traffic couple we understand We the first to our board make for we we and across sure very cadence. both our receiving of the value pricing (XX:XX). to time, but on to impacts want also admittedly, the At the same we that those they're carry the value right want as side stores brand promotional both been vendors to of are focused working ensuring of on drive of the the now that that as our is, cost house a and branded side The talking on quarters, costs. are

So business of optimizing both the Sally the and pricing it. promo product on the BSG with well, starting structure as around increasingly the cost acquisition focused we're first well as as and the business

Rupesh Parikh

in granularity I'll slip share then allocation, capital quickly And versus can current guidance on one pay-downs more, your us debt in more embedded any of is there in you about how buybacks Great. to think Okay. give terms range?

Aaron E. Alt

first bottom down will to, of we fiscal then year that in before, not materializes. of to consider we're pay need to to the we invest where business see guided only X.X out assuming We'll then And how our caveat, the are range. leverage will we important we that will repurchasing debt the ratio we the shares repurchase with in the Yes, I've going XXXX called as shares.

Rupesh Parikh

Thank Okay, great. you.

Christian A. Brickman

bet. You

Operator

you. Thank

from of the line question Company. next Our Oliver Chen & with comes Cowen

open. Your line is

Ross Collins

on Collins is for This Oliver. our Ross Hey, good for taking morning. Thanks questions.

you a Just cost of the are to the expected to speak think mentioned, what half as initiatives more term inflect bit efficiencies of back of on just in the bit to opportunity embedded hear about? versus can these kind more which of, longer a kind to XXXX, your in guidance

Christian A. Brickman

resource, to process. too brands, examples, they just case, we've just to price done. a stay that's same and change a you're amount and quickly. some to in not the we've other and when from change to packaging as example, where it other specific. one the bottle actually that cases, suppliers moving Well, price moved by and vendor bidding we direct you only give flows also takes we significant But owned that our an of get In another, vendor, cases, a winning in vendor production longer their sometimes P&L with you the And won't get changed pretty

is of margin others point already to already take that probably a P&L, are months flow the are in is although year So through. as – long as are the some the going or the in to six improvements

it getting There's it's takes slow throughout that's which to So done, year, into lot expected as the is why through the year. build that go why work a build it of a we we time. and goes

Ross Collins

to so of side, Thanks what to secondly I supply could chain just versus Thank Got be any guess what done then forward? sort been speak of it. moving thinking about timing you. kind more much. parameters then remains bit has the And addressed about BSG a you on be there? And

Christian A. Brickman

it we You as brand on quarter-over-quarter, saw the are OPI. their bet. Listen, issues has do Happy released, quarter, to Nioxin the Last going. lingering and you some those got and execution. still in significantly Henkel better focused much numbers There improved primarily Coty that. with

see into we an issue. continues but quarter, still to gone improved Nioxin has As impact. have some OPI be lingering this we

get as describe yet. to I it guess it would I continues So better, but gone it's all not

Ross Collins

Thanks it. Got much. so

Operator

Thank you.

comes Nomura/Instinet. the of Simeon Our Siegel next question from with line

line Your is open.

Simeon Avram Siegel

morning. guys. Thanks, Good

Christian A. Brickman

morning. Good

Simeon Avram Siegel

have in that so like concepts by flat COGS just you one, Impressive the Sally, a mentioned could on look savings could I year. there spoken mix in by does up about raised put at think gross that we that given price And were context earlier speeding up so guidance quantify concept? you what there. element, to the margin prices then all? help congrats in had just reductions vendors, payments the versus, think, follow And the to prior gains you I

Thanks. that story reduction are us? price So the is behind –

Aaron E. Alt

Couple thoughts.

around aren't the the breakdown over the a segments of question consolidated on We a will we've to still providing guidance in converted relative to expectation across and to basis. the from year. the the business, the your progress two-tier pricing, course answer model provided We've three-tier will well. guests more as that our to apparent model the be The with value Sally be

mean And decline. so, cases, forward. that that where will appropriately have in be as cases, that some prices In will mean prices customers with will we should relationship the will our more be carry some they we given

Christian A. Brickman

what margins strategy, some driving on in is the benefit proved which effective but going last a I'd but deeper, as in Sally be sales total drive deeper thing would the forward that That will describe of both in also stores. quarters, believe we performance, cutting margin. seeing the promotions, to only around traffic add to is, promotional we're quarter improved gross key of is number categories then going fewer, has focused with we more bigger, back from and some the the And

to going any in we that can we'll you're try and Sally obviously well. learnings So to and extend BSG see as

Simeon Avram Siegel

the North South is And then how constructive Europe in just the Americas, profitability strategic Americas? the doing Thanks. terms given and commentary America Okay. around of versus

Christian A. Brickman

through our we Continental top-line increased know, great focus our year. We between business time, the last most U.K. as out we'll forward. It is of little integration took growth. going And point but in significant slow Europe the at on a efforts describe that profitability I our that of on restructuring growth that and this now year-over-year. So a Europe we're really now past cost has business, as went which in deal a is focus really been you expectation

Simeon Avram Siegel

the of Great. for luck Thanks Best a year. guys. lot,

Christian A. Brickman

you. Thank

Operator

you. Thank

with line the from comes America question of Olivia Bank Tong Lynch. next Our Merrill of

Your line is open.

Olivia Tong

little much. was this imagine I could the well. the Clairol I a so Hey, to from wondering morning. pricing first. would three-tiers could about bit the going do boxed And little Thank better, are versus ion talk margins compare? us margins? better a more as How color then good little you bit and a they the give is system two-tiers if two-tier margins detail you on Obviously, price very you

of can great. you. give idea little bit if So, would magnitude order be of of you terms a Thank us in that

Christian A. Brickman

Okay.

is we list question, and we first our in correctly if was the the then the had discount a program, a price, to BCC price card, previous a had program, went Pro we had price. three had card purchased So, price, – which you a tiers. remember pay-for-discount who that which We the the customer

and eliminated BCC then on price We normal the there's the and that have effectively a becomes shelf now just list Pro price.

for product through you different today. then are or that in mail you then come only the that get through you rewards the come that's those free program, thing loyalty is exist for sign-up certificates. a And redeem can discount So, two the if tiers to you that $X email

on price. price now prices shelf, ticket. shelf. So, on really on There's Pro not then it's And hidden just major the actually simpler is three there's one the

moves program So, And consumer second from will more I customers. of and, it question. believe it the us customer simplifies experience your the and to allow which database pay-for-discount away we significantly forgot a importantly, us grow

Olivia Tong

Hi.

around margins, question was yes. second The the

Christian A. Brickman

X,XXX margins tell overall the of between in gross ion to is of significant third-party the would margin accretive margin be brand. the the you brand to ion and between difference is points I brand X,XXX difference And around products. would two There basis range Sally. the The a

Olivia Tong

being think the fiscal a – relatively – I investment a like year-over-year was Got SG&A up it. terms in XXXX year. as in XXXX, what, of And then up fiscal heavy

XXXX? associated improving XXXX cost we for profile, those So, about quite a much whether that XXXX, clearly, in of laid will initiatives beyond out XXXX, be XXXX you cetera? be you forward, incremental your taken as has you. for been that is And go cost? How the relative there projects with Thank it few already online the to talked some of things et

Aaron E. Alt

of scoop saving rate across not slight achieve the should lines will across will investment you to company, focus the relative initiatives for profile every what the savings investments initiatives run the is of did on some offsetting is course of during those a our that refer of key heard in also significant. XXXX over and corporation. in XXXX that the XXXX cost significant we over take on Here's did both virtually initiatives We about in savings. you the to have incremental OpEx away savings and components of uptick are to XXXX, savings result and in SG&A scooping XXXX it. we will way the cost achieve think We to run margin against action And savings The across get said, rate those incremental that we take four cost XXXX we're Chris as a That initiatives, the significant to significant. part making. the the

to we the XXXX. fair we as cost however, forward, to you carry we would, be of provided that expect go as these long-term part It savings to that are going call, have not As just forward to carry not guidance guided away. we

the in so, point the a future, And some run benefit once a rate we be achieve to corporation. that profile should at right, investment

Olivia Tong

so you Appreciate Thank much. it. it. Got

Operator

Thank you.

from Our Morgan next Gutman Stanley. with Simeon line of question the comes

is open. Your line

Simeon Ari Gutman

Good morning. Thanks.

Do elevated? about talk early. happening referenced this Can for CapEx know with think stay I of Aaron us at you it's does and that? sense envision year, cycle, thinking the don't heard of next the give you if answer, length investment a mentioned last realize that's I I the priorities that it. bump that cash. you I the about you just

Aaron E. Alt

beyond me asking you XXXX? Are

Simeon Ari Gutman

Exactly.

Aaron E. Alt

company continue a As more have invest investment be from I to high I would point today, an here the and rigorous do than XXXX over basis we it on to perhaps we will time – in observe will we smarter sit while and about need a perspective. think that that

Simeon Ari Gutman

bit the guess And out I a and little guess helpful. to sensitivity Okay, Aaron, I'm for trying I maybe year. outlook feel Chris to that's the both next for

would or ask next which it for upside margins if heavily this I'll there's so potential leans way, that be to more year, And comps one likely? more

Christian A. Brickman

isolate, hard it, really that's time probably think point at I think hard in answering time. a I'd hard guess this that's margin. Yeah, Simeon, to I have really to about. But

Simeon Ari Gutman

Fair.

Aaron E. Alt

answer under have way. my Simeon, to Yeah, that, be a lot we that would

Christian A. Brickman

Yeah.

Aaron E. Alt

in growth, Right? down investing We XXXX but it are to return bring business purposefully same which the and cost designed have initiatives offset time, investments to we're beyond. us our the at to to to the help structure carry in forward

tried or of how XXXX. from And I over together be to guidance one about you on package that. indexing I beyond the We've productive other. cautious way so, as giving fit be the you would as be we the detail can't course will can much give

Simeon Ari Gutman

can can sounds you not do as the about if on especially costs think of that's you confident feel things improving, if like feels you and mean Maybe comment, can No, Yeah. but I fair. the margin? that's as line is better. in it visibility some control I top that's control I But something it paraphrase around

Aaron E. Alt

to we going provided not do. the did we we would hit have said were we that could what weren't confident We we if guidance

Simeon Ari Gutman

Great.

Okay. Thanks, guys.

Operator

you. Thank

Davidson. comes question from Weiser the Linda line next D.A. of with Bolton Our

Your line is open.

Linda Bolton Weiser

now, putting two and of separate were idea the the overlap. product also, of change Yes, some space do electricals? of was brands How on for very then comments lines just with hi. until your does risks retailers your into the brand ion shelf Up that I wondering plan BSG. to further two any bringing the about electricals the reduce and And into no ion overall BSG? you see

see associated So with risk Thanks. do that? any you

Christian A. Brickman

to will our assortment as we've mentioned, in we back, Listen, electricals. pare continue

And so, back brands opportunity third-party be as do will you pared think do will there's that can that. that be imagine, we to of and some

that that or channels because credibility in categories electricals, then the our changes category that brands consumers brand our shops like salons it sell order think our And to build plans So ion as it's margins very we terms be of see continues vendors products and in protect their their have given actually we for suites, if owned with to the I available well it brand. in our using that think don't products protect that ion view think professional there. products And in logical of to their able professionals we through elsewhere. we or the it's in good multiple risk, as aren't should ion

we way a as clear. So a headwind we a very great category-specific category it's and to risk a of for no, strategy see want to make see stabilize and we But deal that's been the it that us. don't

Linda Bolton Weiser

Thank you.

Operator

Thank you.

the of with Steph from Wissink question comes Jefferies. next Our line

Your line is open

Stephanie Wissink

could. have just a few you. questions, if housekeeping Thank We we

a with lift last that we then one if I D&A, higher guided pricing of have you. over of transactions. as should couple the to that expect The what And I versus of and your could over couple flat you sense patterns first reconcile just a some the the us grow e-comm, in sense if the you on of percentage total expect how you us today price is that give of years? give is next lift next the sales of we've follow-up seen could the Thank are? a guidance, Simeon's can you sense a things a think the will trying step-up increases. fairly where some comp but on the give to you just of magnitude? the increases to just in Are And it's year-to-year, Can some just Just CapEx question us D&A? years on meaningful those the the pockets then of

Aaron E. Alt

Sure. lot a There's there.

me know for forward carry it just Let as what X% missed. you if The I this north off I current we – year. me enterprise can across the sorry, of see penetration can is and digital rattle X% let

that is digital and our I compete you of can as the from segment are we XXXX. as high did a growth omni-channel this actually carry a indicate platforms to to that investment we're effectively as in from capital of here forward. sit ensuring to perspective investments a able retailer is significant I a point we tell that earlier we purposes from perspective. today our of part as expect profile guided grow. continue But rates by support around the comments We making, believe Chris's where investment we've don't for

have a investing the out POS is We rolling of significant as North that are digital But which Mexico, the before really have investment, investment are you those in investment well. store store we Similarly, so as as as investment system we That's course, significant we're is house. heard invested across that some carry and year-over-year, Europe the or the of a concept continuing as expansions are of is is a investment development well. the e-commerce our There investment carrying across we apps Chris refer the buy American we in experience for then, stores. to buckets incremental launch investment. capital There significant forward. are JDA, well. as businesses an commerce-based all of already replatforming That us BSG in a is the the of the over new in which well of there. And

to that investments maintenance with have we store have base, capital are Of course, naturally we as and we well. retailer rate, because traditional run a a make repair

So those $XXX fiscal all-in total about million XXXX. for

Christian A. Brickman

pricing program shift BCC on on And X% the that from single BCC discount a to the price, in to the if side, think you the range. average, was X% about

we some little cases, price. raised some the and board just peanut didn't And others actually butter. take so, across we away. But goes bit. like BCC discount didn't In the we that we a In price it raise reversed cases,

XX%, on and much X% and the competitiveness selling. were the brand, the very the of product between is price we the category of or dependent uniqueness it the So

using just lot SKU-by-SKU butter. didn't peanut repricing. like treat to a we team So the look did The Revionics did work it of before we

Aaron E. Alt

walk the we've that impression That's the don't with house. please And prices not... across away raised

Christian A. Brickman

absolutely That is not.

Aaron E. Alt

...how out. this played

to in are we We The guests optimizing. as providing we're Sally carry value our forward.

Stephanie Wissink

If guidance using could that is guys. $X.XX baseline, adjusted as on the EPS? the baseline, the so EPS great, just, one I your Aaron, the That's

Aaron E. Alt

Yes.

Stephanie Wissink

Okay. Thank you very much.

Operator

Thank you.

Reuter next of from the comes Our Bill question with of America. line Bank

is line Your open.

William Michael Reuter

Good morning.

Aaron E. Alt

Hi. Good morning.

William Michael Reuter

terms on that the talk a POS color good the little functions year. and around be are I about that implementing I would I risks any of I you're duplicative how could some timing such have guess a yourself of, you maybe guess the have guess, of to you helpful. running system position parallel can you. us little bit that, ERP tried Oracle gave giving guess, next guys that bit color challenges you rollout in Thank reduce You processes,

Aaron E. Alt

in both have risk as with The and history haven't paved as by And the who are initiatives we in of we how the being impacting approach is is connection paid retailers the to appropriate road impacted careful with that JDA very implementations. our other implementation underway. ERP attention that to well being

And time in so, an doing we're it. taking internally got in us team and expert both it. We've supporting doing our externally

going be on process portion a to start will that part in portfolio of issues implementation it to are of of segregated We the small so the that business. arise, our a piece extent our one

We will learn and we push so and ever test will there ahead. as expand thereafter carefully we then

we the an we're behind forward. fast I us where going go as to as much implementation would is As to love have slow to we this area go carry know rapidly,

William Michael Reuter

Okay. And just then one follow-up.

online make the know that's online whole segment increased companies as there? and You don't I from that one like meaning, a X% the competitive any, look there you dynamics headwinds Are the are about channel, previous in e-commerce. are business whether seeing what of to the questions any just of talked competition – that of trying the professional I guess,

Christian A. Brickman

In Yeah. it's but yes, some isolated. cases,

It's professional it retail. it's ago, those north was end into And mainly And easier business. a latter of part XX% today that is electrical are really we've and than push or the little or be touch pushing of whether channels that which the the like retail biggest mentioned. as towards in So are on of as segment. categories BSG's here single it's the through XX those the lifecycle always bit business, the part little others not it's of Amazon business, a to we've does just brands, It years their more has in that inherent appliances, Ulta mentioned of at say. occurred color

say, of hair in board, It's would and specific I and care, focus the to. there. it yes, electricals, the would point I categories brands competition not on across portions be areas would in So hair and does care is there mature more

Aaron E. Alt

the keep with that the online exclusive areas. BSG of have us to always more with to advantages our have important to it's relationships with that mind much And majority brand is in the important or key it's keep that difficult one makes otherwise products of the competitive it respect in But that to make we business. business we compete – up with

William Michael Reuter

you. to others. good. I'll Sounds Thank pass

Operator

Casella to from of go Carla JPMorgan. line We'll the you. Thank

Your is line open.

Carla Casella

a count? closing more you've you to on numbers just either little Thanks. set about give specific cadence? Hi. stores. about store I X% you Can of this have talk for you year? Or color think Can X% talked your more

Aaron E. Alt

guided provide you on is, we The I last of considering update would our gross were closing I that X%, our portfolio. call, X%

see and of opportunities. baked And I optimize that plans, where would of benefit having you decline the in closer you or guide to stores the of will the net we now portfolio number counsel we that context With of the X%. course, market will, across that the

Carla Casella

care you're few natural and switchover bringing you products, from you in interesting then talked those habits existing – lines And for or new customers? type. organic the new in new are lines the terms is hair more seeing great. Okay, a When about type of seeing of purchasing it and

Christian A. Brickman

Clearly, natural is segments. both. push business a It's be going to big both across

in into just As be but many year, next competitors, in is it. tend all we for those of what channel, what's go exclusivity, cases, which Maria indie got we not is consumer products. can get exclusivity, we lot pro with the And the complete And seeing we're great Nila. products to smaller versus from demand a

increase excited an the many a consumers of see path for down push and the opportunity exclusive ways, us we as that to our about actually, platform. it strength in are So

Carla Casella

on just Okay, you last ticket trending give by that's sense and from sales. if anything month? your you traffic same and/or given a Have clarification And fourth can how one into then of store versus great. third been quarter, quarter month

Christian A. Brickman

we don't traffic ticket. in at but break two No, apart. we're really down better getting those slightly general, But is

Carla Casella

you. Thank Great.

Operator

turn you comments. for that, with And I'd over you. like Chris, back closing it to to Thank any

Christian A. Brickman

systems, questions recognize the in fully reinvest order have our our growth. concepts, our to platform, Thank loyalty drive we CRM need our in capabilities, our our and To compensation your and you, strategy. both merchandising store summarize, store technology, upgrade associated today. everyone, and aggressive to business to we for future And merchandising e-commerce plans our

long differentiated earnings have through of care while investments in other categories are be We we hair faced categories and Despite consumer our expect for that color competition. the growth and and believe today. reduction strategic and joining headwinds, categories to funded care growth us term to Thank announced these will sustained these on previously these for program. in We path accelerate largely keep growth. cost healthy retail investments sector of professional you our color the leader the increasing the us established and highly hair

Operator

and today. ladies that for you Service. TeleConference And using Executive you. conclude AT&T does call Thank for your and Thank conference your for patience gentlemen,

You may disconnect. now

Sally Beauty (SBH) 8 Nov 182018 Q4 Earnings call transcript