SBH - Earnings call transcript Q4 2019 | Sally Beauty Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Sally Beauty Holdings Q4 and Full-Year Results Conference Call. At this time all participants are in a listen-only mode and later we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions].

As a reminder, this conference is being recorded. I would now turn the call over to your host Mr. Harkins. Jeff sir. ahead, go Please

Jeff Harkins

you, good Beauty to Sally and morning fourth quarter everyone Holdings welcome earnings the Thank conference call.

I made presentation investor site Before that from the that begin, want sallybeautyholdings.com. at out viewed point we our provided to can we be have for a available slide at link supplemental today's call to you

may or Act In Securities as amended. contain XXXX, of during as forecasted such addition, including comments, matters made the within like I'd statements as of of the information information, forward-looking to and business contracts meaning certain this XXA the trend remind XXE Act Section call of you that Section amended, and financial Exchange of XXXX, Securities

and filings update Holdings forward-looking The Form words plan, subject believe, does from estimate, financial with and explanation number similar such can, factors that may, of optimistic XX-K. adjusting intend, potential, These company target, and undertake in provided materially expect, statements its as company are items Those to results to identified Securities Many can to Commission, including and statements of these Beauty project, non-GAAP should, described forward-looking its will, or its are differ phrases. expectations. and measures be its could Report confident, most The Sally actual in earnings a not would, could, words obligation cause a anticipate, our factors use detailed any on or on by Exchange of release revise the recent publicly Annual the has press statements. reconciliations of website. its

by year call and Vice some update Aaron President Chief thoughts an a our Officer; Heather Chief the quarter of provide our fiscal overview fiscal Finance. supply start and financial discuss then today Sally fourth for our company on offering financial touch transformation brief for our Group results, Chris discuss our and are With key efforts financial initiatives and and the XXXX. on XXXX. fourth and Supply plans, giving of Aaron Brickman, Alt, quarter of full-year the full-year will Plutino, our guidance modernization in our store Executive a success, year Financial on and and Chris then roadmap segment Beauty provide transformation President Officer; chain me President on consolidated on will results,

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

Christian A. Brickman

Thank everyone. you, good Jeff morning and

results our in against financial that transformation fourth expectations. is Our the demonstrate tracking quarter our plan well

all chain and to Our assortments, are make efforts experience, guest technology, starting supply impact. an

achieved as store savings For cost as sales the the well same expenses operating segments, overall gross efforts. both growth and enterprise. increase quarter, delivered in our we in from positive margin We the lower modest

and of margin GAAP solid EPS. operating growth in in All yielded ultimately, adjusted earnings this diluted operating a strong both and increase and

the that flow reduce promised. remains, levels, cash strong pieces generated our invest to we together. but addition, all in as fund and debt In are business, Work used to was come starting share the repurchases

guidance. despite associates. our I'm complexity of year XXXX teamwork scale transformation efforts, financial achieved our of by was change we our full incredibly the Yet of fiscal progress. and The and global full-year significant marked proud the

deliver of significant fiscal quarter and in change and our build to to on mark results, However, work top as we to sustainable focus line our still year pivot XXXX complete remains will designed projects expect a fourth many investments, growth.

are gone relationships. changing demand have stores and game. the landscape discussed raising sector. Customers digital the everywhere, we customer call earnings last Competitors supply and and helping technology is their of chain beauty our On

you towards attractive to We We color more and a our responsive and a drive and discussing chain. hair detailed how aggressively spent platform responding gained innovative in intentions marketing traction teams store have also quickly which plan speed. experience. are away a transformation that our with time ahead loyalty and highly and we differentiated key that we position brands our supply results are our improve to efforts message builds modern moving our full at our is new consumer, efficient store care. build take and our We a The off digital highlighted our to and programs, our hair strengthen should younger speak from plans QX

want I three key our update minutes few spend accomplishments to an pillars. a providing on recent transformation our on you of

retail. First, playing Differentiation critical is our customers. with in to win

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our Good to stores. Brands with Fox, color and Arctic consumers drive continue fuel lines. Young, our vivid to In continue growth we and Dye addition, traffic solid contemporary like build younger and momentum Iroiro and to new

line growing We XX% color the fourth in total Vivid in the also with prior business year, versus the quarter color stores. color business overall. our Kuul in select of launched the the XX% also represented color sales

X growth. Henkel vegan of Olaplex Pravana, BSG Nila to demonstrate results. On Maria brand which treatments, Number launched hair launches the side, brand solid the BSG have the and Number care and excellent also shown X our previous Swedish continue

color color accelerated product for who designed and by results. lightening addition, other Schwarzkopf's and women BlondMe desire growth fantastic blonde high-lift In was products specifically BSG's

exclusive the launch BSG the assortment Elegance. line Finally, expanded their barbering men's with of

retail retail organization. to the our having drive There to more talent fundamental the nothing right Second, than improving fundamentals. is

teams for in successes are fiscal and have the we the had efforts that our We thankful of existing XXXX.

our forward. teams you have As our us may we in carry new marketing and in and capabilities e-commerce new investing raising are read, to game and talent

will Vice to impact immediate new Beauty help and President, Beyond Group Both leaders April this, efforts. both new Systems have delighted and for accelerate our an to Stores our will welcome we are Group. Merchant; Kohn, SBH our Pam these of Chief Holt,

the the program points membership XXXX, active is Rewards we are now drive program launched The members new and X,XXX and checkout goal we At end now we toward at experience A The aggressive customers table by has We morning, million free seamless with we of system have based should of retail. which this the redemption approximately redeemable installation grown the to where, Sally store the earn fiscal accelerated help of beginning of as the Beauty certificates on cash program, new XX to POS exceeded completing are loyalty X,XXX own a fourth time. Sally stores spend. pleased is the Rewards. stakes in rates, also the for our in year our customer's roll-out the quarter our Beauty over point past mark. traffic increasing the where implementation

in Canada We X,XXX by March. States expect the and at roll-out to stores United all be completed

this a effort, our companywide be This As and will be of will it more technology result stores. our loyalty us. faster. less digital our a platforms win It direct our integrated is systems and CRM will streamlined big for offerings with Checkout with will POS for connection for a be risk. provide

subset platform store module of stores and the Group and fulfillment of small West. in we the within Beauty chain the a Lastly, began supply Systems merchandising full testing implemented JDA

very slowly the of will territories other testing roll and business. out we parts to As manage carefully JDA this transition, at full

commerce Third, advancing our digital capabilities.

a point key our experience digital Our compelling connection customers. is with

find During experience. to make e-commerce the for and the with pro fourth shopping need. the the easier site quarter, the navigation search improving to BSG goal included stylus they redesigned it its of better online Enhancements features products

that promotions BSG XXXX. back is In business. we digital priorities addition, focus the consistent monthly used fiscal a the guide stronger will come stores we when focus added and discuss shopping key the and are full-service on with in to year monthly that I

the Last quarter, new Sally the consumer by app Sally Loyalty with new, which times. than The be Program. many mobile has app, XXX,XXX Beauty been continues more Rewards a younger launched downloaded to used joining

category Sally In app, transformation, Before launch addition, as just mobile Commit, part in kiosk completed ColorView, NCAP well sign technology customers our in new we approximately on the drive higher continued it this hair of as Beauty progress the the trial new our our as drive of of a such Color color basket to You stores. combined expertise, of hair technology on Sally to Beauty vivid options, with against color colors. many of our easier for color this easier and priced XXX makes When

we testing the work continue our Finally, in technology new management system. order

this pickup from we capability of as quarter, over buy As full last day and stated from online client online same a buy up store; options ship open service range delivery. store; will, such time,

XXXX fiscal investment year a built for future was we of foundation In which much year during significant growth. the summary,

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spend our I'll minutes segment. a initiatives Now, for few each XXXX key discussing

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to to add In brands on exciting own brand new portfolio and our we building expanding continue focus exclusivity, will addition, a portfolio. while with the

Sally take customers ever, For time the first Beauty. Farouk's to line Sally both professional CHI, and pro will of retail color

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vendor Beauty business gross Sally margins. and has have may consolidation the segment sales continental in represent and impact go-to arisen our XX% of and These the changes strategy, suffered operations European the its declines market its both You that about the challenges recall from in changes to that on operations. relationships, the of

our XXXX, is the than to year fiscal important EBITDA note a operation European is that and $XX profitable business of in contributed million to more it enterprise. However,

deduce, will revenue the significant year. gross doubt this and you were every As quarter because in while challenged, savings delivered no business of is SG&A margin the

Olivier strategy and led create been I not to conclusion to several even doing We Europe; considering remind launched Mary frequently the on call, assessing retail that for Since leaders path in have we Europe is Beauty North transplants from that American participation what get Global regarding project and and takes struggles. American business the or we've the line progress it? come and and our not Vice approach Sally Head have that business the Europe Sally key elements of the the President transformation by last fix in the earnings and divest we in manner our We Operations been so best our and to similar are the being operation, support top which profitable value Project end, have our the them for the aggressively and Beth the Beauty us is drive options. a to into of preserves of Canada. of forward North tactics taken asked Sourcing idle, fundamentals this Edwards, question, Holdings Operations. you as which search, about shareholder successful and a Rather, with to its team. have downsize you Group with we the the is want is to path Badezet, U.S. search the To of

It contains marketing. first, customer and five elements customer key

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on Third, needs. Much has focused country our savings. achieve effort to borders specific of cost recent standardization across

now in different what are our We starting the to and needs at country be tailoring approach looking each with and customer accordingly.

we new launching brands and with our assortment, product OPI, on new such product the to efforts as addition offering Nine Cloud vegan brands, new the launching focus innovation expansion improving of other Olaplex Four, will territories, the appliances. pipeline and of

also expand with us which will margin assortment, gross our allows own [indiscernible]. increase like brand We our to brands

suffered technology has business and the operations. issues, day-to-day integration, from technology inventory Finally, localized levels impacting

us. local deploying European are global are quickly changing the we focus experts So reinforce investment, and broader work, to behind Like get requires team those and business technology IT and our leadership on our a the relentless hard transformation, execution.

showing that levers, the We are and in look have Canada. the forward Sally here have same and a on progress we we in U.S. to path, working we Beauty

have segment. Now XXXX. turning into made BSG product going Group a to the and XXXX solid guest investments Beauty around significant technology to Systems assortment, built experience and foundation they

launch During including will In BSG XXXX, detailed innovation to BSG BSG as began launch care brands tend include of XXXX, channel from with brands care meet we and the vegan over to a stylists. focus BSG innovation, brand suffered clean process Maria middle will Nila's professional time mid-year that and this lack This the successful European needs exclusive its to increased vegan retail new and the of pipeline. that on new and our of hair be of EX, styling around of in Pro would expanding category. hair line. reinvigorating a continue migrate to headwinds assortment desires hair more brands, the the to especially the a an

assortment. barbering addition, expanded well like and leverage launches X as the as an hair Olaplex X, men's of In Number recent Number solutions BSG treatment will

online to improve refreshed we shop On previously the technology the our and customers. the app to it to experience for directly I the quarter, front, phone fourth mentioned BSG professional e-commerce redesigned as make the we've recently your platform during easier from

then for testing salon as our same an expanding in price. XXXX We bill customers will day online buy convenience will also enhancements leverage additional be in and delivery and these recent

our our to back a will half year. from color, beauty and the select will favorite label providing purchases of roll-out announcement business. the Testing other benefit launch quarter loyalty The A credit to our second additional opportunities private flexibility with rewards their earn run Data of care better hair partnership with customers customers In new be help both program coming in the on BSG Alliance BSG program begin particular, follow recent Sally during national the stores to benefit to Pro by will them and supplies. program. payment with to in card their additional our of will

rights expand for also will BSG add portfolio. distribution additional its opportunities look Finally, acquisition that and its brands could to

Now I will discuss turn in couple more it over a to Aaron of to topics detail.

Aaron E. Alt

review modernization offer Chris. results, an update provide the details fourth store consolidated results, financial Good to you, Thank segment on efforts, today to and to chain five our I financial to finally have full-year full-year objectives perspective discuss guidance. plans, and our our brief a overview our to offer supply morning. consolidated of financial on quarter

Before to thanks teams agenda technology positive teams by teams extend transformation want I against made the was to go progress across there, our massive I digital fiscal to my in remarkable. and and enterprise. the The XXXX do stores these our

with start quarter, which $XXX.X financial increased million, the same our financial results base X.X%. sales Consolidated consolidated pleased stores a increase and the essentially driven we basis us of was are our approximately currency quarter with full-year a an deliver XX fourth translations results. help XX by Fourth successful an flat very revenue had We Let's store notwithstanding store to both on same unfavorable store by sales, fewer foreign smaller points. from impact in with year, guidance. prior

business prior e-commerce by grew global the XX.X% versus year. Our

Beauty efforts. line, sales continued the Beauty business our retail U.S. Group demonstrate broadly, to transformation the our Pro On Canadian and and within Sally top business Systems from momentum

margin Significant of increases Sally rate U.S. gross our did the depreciation for including by Canadian Europe. or expenses, Selling, quarter, the quarter year. million challenges was Systems X.X $X.X in general compared Europe. point which businesses in basis administrative million the XX.X%, Beauty Group the $XXX were Consolidated and and decrease in and Supply partially and year. in Beauty in amortization headwinds were XX experience of gross margin of the However, gross a was we offset prior margin prior % to increase

percentage expenses the prior expenses. effort compared with over general basis year. declined As transformation XX.X% discretionary sales; administrative and SG&A benefit a tight control and our decrease XX selling, represents points continued of to of in The expense

earnings the in of approximately GAAP in XX% benefit prior the share, in reduced million for a prior million fourth charges, in a an were to fourth million per and restructuring and million margins per related compared margin lower of increase compared $XXX.X $XXX.X excluding the both the by $XXX.X operating and interest $X.XX in operating diluted prior an operating our lower in in one-time a Adjusted years, net the the Adjusted operating driven were tax and a earnings efforts expenses, transformation respectively and year, and charges the of XX.X% expense. a XX% quarter earnings respectively to operating were compared were and respectively in $X.XX, year year. fourth to GAAP XX%. earnings primarily prior share approximately XX.X% diluted $XXX.X year. $X.XX increase U.S. respectively to and XX.X% adjustment compared the the reform, $X.XX quarter, quarter to

chain the related and quarter driven our which our capital of store technology, Oracle to expense to cash from operations, e-commerce as flow cash sale million, company the generate The and of merchandising projects included payments Net the of the remodels as $XX.X totaled the platform, point for a in was $XXX.X warehouse. maintenance. from Our system, expenditures million quarter. by million primarily proceeds was strong capital $X.X and platforms, in continues which supply JDA well Wisconsin sale based information

levels balance ratio compared X.XX million our $X.X full facility In million quarter million Loan debt million ABL company's debt flow and declined quarter fourth year. for to as in year. prior quarter, was of The had related to total, $XX.X B. Term ABL and in by from free the times. cash the to levels We $XX $XX.X fiscal our end leverage $XX.X again a $XXX zero cash the flow our credit by reduced over million facility used the XX% the we with reduce or our a to up the our Free million credit at the

we million addition, In X.X total at cost repurchased $XX.X a shares of million.

Let's segment turn performance. to

and entire and by fiscal territory by headwind the fourth store store quarter For Sally rate Beauty an same for in XX points Canada driven for basis of Sally represent the in of quarter to impact million segment. in Sally XXXX. same be the businesses which sales quarter, the fourth driven by highest the Beauty store unfavorable XX% foreign primarily fewer currency way of revenue the consolidated The increased generated decrease increase sales The translation U.S. and the approximately Canada the sales the a $XXX.X segment that a X.X%, XX% in the up sales year, of segment Europe by is stores, quarter. Europe's the since same continued of Global softness. X%, XXX compared to the for of prior U.S.

Europe. for to meaningful quarter, business points resulting deliver continue by the year. of from the operating expansion XX favorable with our to also year, basis growth prior weakness million margin XX%. Canada driven offset by to the XX the primarily segment in Sally's XX up of the XX.X% this Canadian We U.S. by to prior basis Gross XX.X% operating the efforts. quarter, U.S. improved revenue points basis with points, the quarter in e-commerce make Segment which an in operating declined increase and expenses compared margin cost X.X% earnings were e-commerce versus and of in Segment progress helped $XX.X savings by

year. $XX.X sales group X.X% beauty store were to turning sales to segment quarter, this by of the in quarter. Now an for the in systems Net fourth X.X% prior increase the increased million our compared segment. Same

approximately unfavorable revenue had growth. points basis on currency Foreign impact XX translation of

margin from quarter, BSG's XX.X% XX Additionally, deliver quarter e-commerce BSGs points a the which was revenue increase in in gross of notable XX.X%. helped e-commerce platform the basis refreshed prior we the growth of year.

million, margin. work us have efforts BSG's started see on more to calls, been and do, and to our progress this gross key focus while front margin improve BSG's and we've recent our efforts stabilize to area will points still lower stated earnings BSG continue on by expenses basis gross for earnings efforts. has operating margin gross There an we As XX% compared XXX opportunity prior is in more by store same in our of margin on driven we a to transformation $XX.X to from for XX.X%, increase coming expansion, quarters. an and were increase the improved Segment Segment year. operating operating sales,

Now our results. year turning to consolidated financial full

For X.X%, fewer of foreign GAAP diluted in were XXXX the fiscal the full for share, earnings fiscal year, prior consolidated share, increase Adjusted approximately the sales compared X.X% fiscal XX of an consolidated were increase a year Europe. unfavorable net decrease store billion, full per basis sales diluted $X.XX X.X%. in were earnings same year. at and translation $X.XX increased an XX challenges X.X% per to driven stores, points, $X.XX by currency of

current $XX million or is attributed million net Cash approximate make expenditures in the of to accounts from pending proceeds million to all first the of the projects $XXX we're totaled was primarily vendors expenses. the the compared and our in and full cash operations decrease -- XX.X% $XXX.X prepaid of decline cash cash the get Texas discounts. with for and payable a for flow year, Including, million, year $XX.X for with $XX.X year. accounts prior our from year investment sure made paid Free the to flow in Wisconsin, to in full warehouses capital and scooping of million $XX.X $XX.X payments payable $XXX.X million. The $XXX.X were was million million attributed million. offsetting sale Capital the expenditure half

BSG's and with Now we finalized XX finished switching the Texas, our distribution quarter well distribution Alaska, in in for McCall in Nebraska. is new as distribution our service lease Texas, fiscal after across of centers, business. nodes operations begin second platforms, to with by States the Canada. efforts, new e-commerce and and and to Sally this over network started our year and expected chain will full center We the CosmoProf centers North Eventually service XXXX. closing which the supply distribution modernization United Armstrong as stores foot XX Wisconsin franchise square XXX,XXX We've

freight XXX progress on-time on now we continue have as pooling Most new this pooling of lowering service improving to costs, went our benefit will stores and in to delivery We make We quarters. delivery XXX our stores delivery over damages sights. on business, our another to of a over reducing BSG the and will arrangements. also early effort follow. expand stores Sally Europe the to next this model the is couple of result of

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A words few brief on stores.

in the almost As the of we across is and With corporate BSG, stores Canada. competitive network our to U.S. we a X,XXX large U.S. in and laid of the owned Pro and QX, believe close advantage. out consumer that in the Canada locations and Sally are we

training median provide convenience experts. locations when our as with store Our paired associates color

supply in wants physical it, for wants what us. cost way, capabilities we wants she wholly cannot our Our at now a online price our business of she are digital others. able makes to traditional efficient own retailers and own and building store growing a be the When both really her with footprint. be sense when chain, both by their network can who digital give is going that replicated retailers this with she we with combined out In where digital channel those who and those are are an

stores. in We our will invest to continue

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guidance to let's XXXX. year full turn for Now fiscal our

Before walking to you through the I numbers, context. reiterate want some

our and our quarter, color competition, categories already penetration, last color generation. fiscal exclusive discussed care, Chris what strong our cash strategic from and our differentiates First, on our strong progress flow and training stores, during pillars. the in brand discussed XXXX of we from our core owned our company

XXXX, fiscal with in these continue pillars, as enhancements. will but foundations will of efforts transformation Our we same the on build

a of During initiatives fiscal list XXXX, we behind long put us.

of inventory like presentation, In come including XXXX. eventually slide day see and of our fiscal additional new efforts. also pickup out, in others within guests continued the the delivery, from digital fulfillment will fiscal Growth to to is launch come pivot growth deliver growth, growth from continue in improvement initiatives revenue in complete on will and sales. will in X,XXX SBH Canada the assortment will growth roll same XXXX, model will Beauty pivot in expansion Some in-stock and BSG and our and and the POS buy With our same store we from online Canada. and continued positions store such and Beauty, as store. U.S. in Armstrong U.S., experience, locations Sally capabilities Sally our ship McCall across and both BSG, you Growth

come come growth the the sales full-service store come nationwide. a are as to from our franchise within store we from force of as our key stabilization from against banner sales. in from effort will will investments store largest starting BSG Growth in well branch distribution to country. from relaunched synergistic growth that acquisition Beauty will come on in base. come immediately will an existing Growth will and Sally Growth Growth across consumers to brand And new QX business business our both same existing for base optimize business BSG models. our accretive rights International, targeted BSG to focus as our

grow reinvigorating Consolidated of domestic our in by XXXX and backdrop, the With XXXX. couple reversing fiscal since is particularly here Work revenue respect specific that regions specific top is existing businesses. remains, in overall with downward X% all our financial year approximately line a retail revenue the to of and our international guidance. X%, to trend operations, of to expected wholesale

XX to will Our store fleet grow XX stores. by

We store of up and individual to circumstances grow. will will the dictate, store Consolidated X.X%. the X.X% relocate and remodel, will actively to our in overall sales but as close, range portfolio continue be stores same

We pricing to To continued modestly. or as and opportunity and at to tariffs This full margin of our we result year gross regardless other productively that of is our gross impact increase efforts. working a end, prior-year actions Sally both see of margins cost at see our sourcing our the impacting increasing need respond vendors. savings, with true BSG international to more

year by and With also continued impacted respect the SG&A, technology to and wage year be will The markets. talent in investments merchandising key will our increased the builds marketing in rising elsewhere. impacted of Sally Beauty, by digital, in and be rates expectations investment capability an marketing,

things. be full result, offset by a percentage SG&A, also two sales, in As of investment a modestly. SG&A This as year will will increase

fund cost structure. pursue This us to success was to SG&A continue for see investments. opportunity effort we savings we story our XXXX, in opportunities fiscal larger a and within further First, our

without are gross in approximately be impacting to this to of margin growth end, flat. our have the full-year rates been expected call, earnings will expected achieve also GAAP by low-single increases over the to on negatively earnings the bottom the line be Second, operating digits. increase adjusted to Full-year operating To deployed discussing are year. course that that we pivot

to our XX%. approximately tax expect We rates be

increase EPS adjusted diluted this single and All digits. of low-to-mid should GAAP full-year by lead to

to With year million to $XXX $XXX year range we for be expected invest. million. the from approximately cash to expenditure Capital to respect of are as expected flow, in the $XXX continue is full million full operations for to flow be cash the

in We to flow range free strong generate million to expect million. cash the of $XXX $XXX

We investments in relation will focus node. optimizing our new JDA continue supply making our to inventory to our chain implementation levels, and on while

of that the the X.X our sheet, balance we leverage continue year. our to on you efforts the course can On expect times bring will over down

also equity we advantage market with us, year. market QX saw opportunities to may of as of this take present our to will the them as in We respect

do Now provide not guidance. we quarterly

implementation overall, model POS However, QX, say relaunch QX, of no delivery it our investment profit including back QX, for QX and quarters. the brand year. slightly our our CAPEX in in and inventory that And continued in our you morning. work given initiatives, to our of expect QX be would changes transformation heavier completion implementation and OPEX, QX we distribution, be Thank fair the QX, the to and in be to in revenue and skewed this opportunities particular, time half to your

Heather turn so back operator, over Chris and take to the and to Now call questions. your I I'd the like

Operator

with Company. instructions] Oliver to of Chen [Operator go the you. and Thank We'll line Cowen

Your line is open.

Ross Collins

for good This Ross, Oliver. morning. question. for our is Hi, taking Thanks on

to margin, can Beauty the Just looking how BSG Thanks. Sally that then the to opportunities coming on you improve you they And expansion the in we should in BSG? I gross the toward just more do bit your speak you moving year to guidance COGS, into can mentioned you attribute that fourth for XXXX? your what or exist of at think at so the more about expansion margins, speak guess, and a quarter, gross

Aaron E. Alt

question. Great

Here's give saw the context we effort margins Beauty, expanding metric In I were businesses. reflecting both gross at the in that and Sally improving behind would fourth quarter, significant putting we BSG both you. the

was Some the year. by in it pricing of earlier driven

by from driven the better Some of it contributions more -- vendors far as relationships there. with was as

changes Some around discipline was were better of it by ensuring that driven we systems. our implementing across

we've on a a We by the half analytics for category, quarters the have last been put around deep and gross doing business. dive by margin the two

as the as that progress have the to Sally of the that margin the say we the notwithstanding that apply would in look European and we gross we business modest QX opportunities equally we European business I at we for of over and That in made the what is year. that trends you continue is, true, at to Canada BSG had exist so we the believe course, at learnings And to course in do the and business. U.S.

Ross Collins

Thank it. you. Got

Operator

Thank you.

America. the Olivia of Tong Next with we'll go Bank of line to

open. Your line is

Olivia Tong

morning. thanks, good Great,

a a and on low SG&A, of bit perspective little want digit single implying you of a increase on I First, talked your multitude guide. initiatives. Looks to the like you're

the last that what's Thanks. think So And spend, of And to better help you you versus on extent understand us want after enough EPS? do the then digital view perform the thing, it's things can to view sales modest? to dropping what of investments both and on your do I one capabilities? also of -- the that all may guess sorry, the implementation of to your in reinvestment do retail the find you as some on margin, gross

Aaron E. Alt

we of how on profit going basics am around want continue operate. the away take modest. were definition progress in provide I opportunities not to couple inherent of and top XXXX. thoughts. Okay, second enterprise. fiscal made unlock that a as the in unlocking within our done XXXX growth will business the I more we some good so overall your you to SG&A, transformation identifying of opportunities behind those additional what mindset That -- But is has that of we drive the the structure, business the getting into on the line really the is our that of us, as part carry we But even to question SG&A and basics is can

good XXXX things behind of views some and list forward list data, prepared technology in that us. we into that more have granular you And have But gotten you better to do the of carry we've able still see because at do. a presentation, to news, And so, build significant of things we remarks, on done. alluded my change we're can the laundry look if and That's to of the as progress. -- the business foundation better I

we to investment We're do so come. out. call comfortable the right to capital And we called with the level you're more fact have out that of that

relative margins the of of the that provide have in our did elsewhere were that cost sales, SG&A SG&A way We growth context business line. single out purposeful appropriately. to the improve We're the to the the we margin margin, guiding gross gross can impact manage to in we sorry we take comfortable -- digit or of the out combination and opportunity call on low-to-mid -- gross to EPS the

we going on to deliver love to course, what But the to Of our deliver. over to would try we're and knitting for promised. we stick moment,

Christian A. Brickman

mindset, Yeah. our that And hopefully, on it focus heard the the is I Olivia prepared remarks think, growth. you on in

We drive year. in that we invest go as first is our and into will opportunities bias profitable growth the to

Olivia Tong

helpful, in their alternative Cody explore you. follow-up, announced could third business. just or quarter that I professional Very obviously, they're thank If to looking

There was potential given years, the your change, of Clairol last lot on few on or would the over So perspective a in perspective in love supply obviously your Wella hands volatility and again. potentially deal interested so changing deal. challenges that

Aaron E. Alt

that make customers. their of supply them think be behind are sure with jointly largest enjoyed obviously that and as we'll hope them I work in of We've relationship them strong We've our that largest -- and to through customer manage we're well and and chain we'll with the a and customers another, most But one transition U.S. that listen, and business that already changes managed their vendors. of the to working Well, done brands. the with and drive support can I stably growth long our there's one if we're partner. for they're our would we

Olivia Tong

enough. so Thanks Fair much.

Operator

Thank you.

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

open. is line Your

Rupesh Parikh

taking morning. my for question. Good Thanks

X%, your can then ticket of to and about U.S. strength? the you're the comp back if going what perspective provide Canada Sally on Supply comp So and you was wondering the more contribution from how feeling of Beauty sustainability recent was I traffic

Aaron E. Alt

Great, question.

causal helpful business with categories traffic on that in to assortment our and increased with some some saw me factors newness, the overall. as the start to helped start Then Let well, of did. within we our made with return for care, we our was color improvements success the I why other with, the expansion, drive certainly of the basket comp. that really we and focus

is our as calls, improvements QX, we overall. what release that the the been rising of we traffic model, both don't per as to you tide the a of service customer which part the course assortment tied seen in disclosure numbers, believe particularly have traffic making in the we se, year, is we've over as will tell well I While of

respect with performing as better we retailers at to than is same look data, that in see that regions other traffic well we're we been our against. the comparing we've specialty As what

that given the so those -- next that making that that pleased with continue the into we should And changes positive expect are year. and we're trends

Rupesh Parikh

in store experiment your concept about to then perspective, see to comment decision your at more growth continue color at as restoring return maybe with juncture provide of the restart just current so stores, juncture? a Okay, the this just both going I segments, if can to you was growth for great. And surprised to it curious terms from store so back you timing in to growth,

Aaron E. Alt

do take we on and us the the have realize which locations BSG have stores United which close the across addressing are action. in is the we being to going course of the year, do Sally, and result, this but fine, understand business we as with the we opportunity where background, from did well over aggressively the we and portfolio of we course progress couple the where the of locations where offers and market representation white net to where a are the What geographic have we've market to in we the need store have over as XX a to as States do great some have in and we're that models with year. by And come places are have where We That making made do the space. a Canada. landlords areas model brands

stores, we're in continued our so currently where pillar those growth our stores quite that do added that strategy we be of going the recycle to add connection have. we strategic but And in have with aggressive we to

Rupesh Parikh

sneak guidance, buybacks? share include could last I that if question, And your does in one on

Aaron E. Alt

share incorporate guidance our Does No. buyback?

Rupesh Parikh

the thank No? Okay, Yeah, you. EPS.

Aaron E. Alt

million thing reinvest out. we've in not to Rupesh has our going No, of called allocation changed, that first you question, capital to And with capital of we're the advantage which take do that's strategy see $XXX just maybe that is the is and that business.

invest we As the capital we here amount that's year. dollars to sit the of today, believe over right

As well. additional like debt our available opportunistically in something opportunity did have a business that investing we the materialized And is we where we course of from down. the resources and an bring us. that But priority we to look on at make we'll if us a success, positions with will key equity, can as themselves for consider do QX, in

Rupesh Parikh

thank you. Great,

Operator

And go the Jefferies. line we Stephanie with you. next to of will Thank Wissink

Your is open. line

Aaron E. Alt

Stephanie. morning, Good

Stephanie Wissink

morning. Good

Christian A. Brickman

Good morning.

Stephanie Wissink

questions. our for morning. taking Good Thanks

for The that's on that rate you is was of slightly mix, or the if brought like across brands just you've like pricing that of and meaning, more that earlier pricing in, the if a pricing, a increase in improvement the carries premium took you or this wondering the was pricing comp first function in a year much increase higher factor how board? that one the took

Aaron E. Alt

tell other increases not that It will. one as brand in specific I us. as growth its specific. well. responding were will you areas thing a is part would about did from I And take note, in be you specific We be. for though, I to are accretive those as we course where saw can wouldn't vendors, pricing. of category We The price that did we price unit is What do increase, if -- storewide our is which that's

Stephanie Wissink

like -- to And be performance is your you the to help helpful. XXXX couple XXXX very growth, questions that's relatively to earlier follow-up could consistent XXXX just the if to the store the bridge XXXX year-over-year. your net CAPEX to Okay, of looks guidance, understand then with a CAPEX just us going

effect phases you that, respect And FX the of are where your or investments to headwinds embedding other also one then investments? currency in back in more are pulling you are what on guidance? you where So in just terms with in of the

Aaron E. Alt

first question that again. me Give

Christian A. Brickman

to -- with our Sorry, has FX you it -- do Steph, can

Stephanie Wissink

sorry. Yeah,

Christian A. Brickman

are adding. we are cutting Where where and back we

Aaron E. Alt

Steph, not capital per rate is the what capital you project much in rather I'll run of XXXX tell based. it So, se, was fiscal was

into as what's And digital for leading the heavily investments degree think and to move project replace use tail the example one should investing substitution with is about additional Sally it an the the would around so the But that And I we we a fiscal you XXXX. XXXX. QX off projects. investments. in we QX will do as That is where way of another were into us digital

mix a and the the that investments there's the between investments pretty store course store as number. investments feeling well. ramp-up shift to don't on And as We're over capital we of good it. expect year exceed We so technology

of guidance. opportunities I us. contemplating, we capital with to in that the are, well assumed we FX in efficiency help to respect ensure course, after swings have your connection with going We FX then have available And that to as was question providing not

Stephanie Wissink

adjustments can just from one me, housekeeping, scale us and or guidance adjustment. Final coming help up? might where you size GAAP that if that a non-GAAP extrapolate does help your assume be of those I'm great. just some from to Okay, wondering

Aaron E. Alt

talk we after? about on don't call Why it the

Stephanie Wissink

Okay, sounds great. Thank you.

Operator

you. Thank

from comes with Mark line question next of Baird. Altschwager Our the

is open. Your line

Mark Altschwager

and on good this congratulations Great, morning, past the all year. progress

Aaron E. Alt

Thanks, Mark.

Mark Altschwager

plan for for the very I single think Canada math did EBITDA I low-to-mid and you're running Europe digit First mid-teens question, just the international, sounds correctly, on maybe if my U.S. perhaps margins today comprehensive versus business.

picture, the So better how they margins as years? you to should get that we be Just two in about expect to international trajectory near term? intermediate that be make the how one thinking next over we you get these thinking growth? should before about margin bigger to Would investments the worse and

Christian A. Brickman

progress margin performance, of it and of get gross we well make worse we're before innovation brands marketing, So in execution, it terms and technology is, question. stabilization. I parts execution, gets don't gets working reality Mark, assortment as want good I all better. across do But think the takes to it new their finally Because think to here. P&L, The time as store

this view it time and think don't "Hey, it take will But before I better. gets our it gets build." So is, will worse

Mark Altschwager

year loyalty And you. then on a thank Okay, little a the the roll-out. been front, over it's since

assessment have various you expectations? sign positive, seeing back if pieces? these incremental overall Curious disruption, very give of how were very the there's push if to the been us given and ups a trips year, summarize program of way that Just for just has anticipated pricing. P&L from the the moving past the it you're impact the of an been Sounds little like have your the hoping trended versus could little aspects broader all on

Aaron E. Alt

of I transactions That's are sales And the previously. than program. XX% more loyalty within I can percentages get More than out the XX% of now couple a Well, thoughts. and exact called we of as a positive. guess

with that who free excitement are customers that seeing are We in it's particularly in participating when discover respect. program, the they the

of we the the so the view real we carrying really, take last with more better we And us means built program how connection loyalty marketing, being are would a our be, do planned -- of within the advantage of those it, OK, direct the And engagement. implementation That we for the program have to as all successful consumers part XX would forward? because XXXX. magic baseline, we've our of months means of that that now Sally better getting

the assortment, the to the whether consumer of of we've been this the on offers, per about store, we talking app the of granular to us Some she's the data have greater the Because regardless the channel, view allow us allow investment visibility tied in optimize optimize well, or is those whether into on or call it's far on se. website, building in-stores. to digital digital to the the or -- one in so

for So the we XXXX. view as build part of that

Christian A. Brickman

that new you customers. allows customer CRM of of combined that and talked about we system all our we've and transactions exact participation and that one pieces recognize reached to the the that Mark, store, us tools it's, the combined in reached, program as together, of having is with this more better targeting POS with exciting about things about when coming think relaunched scale

you that that's make and being offers quarters, the terms relevant real where next As customer in -- in together offer to all payoff this all purchase. the really of comes few recognize app able of months the get and from

exciting. be which what's So that's more now but come starting of is still to work There's all done, together, to close. we're

Mark Altschwager

from you're talk cannibalization That's a last pro about this Sally customer could curious great, maybe about and hair if strategy bringing Sally? a customer Is customer And you. one of to a you thank BSG bit of retail targeting more me potential stores more or brands pro the I could, a how to little attracting do in pro one if successful primarily think you Beauty. if

Aaron E. Alt

different here's BSG what is. that XXXX We've us. to shopping and tell right? amount in question, I'd already, different are trip great confirm done They're a of research Mark, for reasons, It's to you a and coming both Pros fair Sally types. over

we for what a we color relates of it forward. as also the this economical, who packet anything carry serviced in to wouldn't go that CHI else coming to serving as that to different and They're offering being for the market have the creative, pro. doing, Ion they're do view pro BSG they're always customers to want want is, case the they're is BSG. And Sally is we we're they than is a so has it or And It have don't salon. higher-level consumer, access or an retail at a whether They to themselves. part looking

that like we pro so BSG. both CHI, some like of some about, retail talked the higher be we've offerings our and business of the that products like supportive more and the pro of supportive And not of believe care cannibalistic to end will

Mark Altschwager

details That's helpful. all the Thanks today. for

Aaron E. Alt

as number bet. moment earlier. Great, tongue-tied take talking I was on one I and I you a reflect that should

were Of course $XX.X sales segment BSG for the million. $XXX.X not million

Operator

you. Thank

Morgan go the Simeon Stanley. line will to Gutman with We of

Your line is open.

Simeon Gutman

morning, everyone. Good Thanks.

Aaron E. Alt

Good morning.

Simeon Gutman

wanted and Sally I Beauty, is on follow-up, a I quarter pretty which the notable. maybe in think to I guess, improvement this ask

it Maybe stacks, quarter traffic and three the going sharply. was in But better. on the whole the have been culminating on? like been like else that's back this else anything look year realized brands it's quarter, But particular the provide quarter, could but And improved. occurred getting about back, color pretty a -- just really this two sounds reflecting could in it what thinking the you you improved I looked abruptly for If year. it innovation they've it

Aaron E. Alt

Sure, A thoughts. couple of

successes this quarter pleased want to I a be Sally for the by for on good are out very we Beauty a It couple that driven quarter. build was quarter we've to a of was breakout we need and there not Supply, we're First, with while call declaring to Right? It things. us the achieved.

teams we've have the is across in retail training, do organization focused The focused fundamentals, on where on focused our how Sally first been on been retail Beauty thing have stores of the have discipline, been been making QX seeing course across real benefit the over that while was we're better. the steps we point where of serve the the first the year, customer And good the enterprise.

Second the thing offering around what assortment of the going better are guest. on we course, to is,

between to marketing stores, talking improvements we're organization up significant connection consumer point made our and the we've and then in online how or is third how our showing The otherwise. we're in

that up And think, factors so those three things, translatable drive as the are primary Sally be they the should forward. and numbers course helping we are to I of Beauty carry

Simeon Gutman

that's on a market us And it, helpful. that operates -- you Can for market is next share you sense one other? -- assumption BSG the growing you the versus then in? Got the professional gained of give year the what share, your hold

Christian A. Brickman

said, BSG. That for good Yeah, the I mean, see on and Simeon, through opportunities stylus. really we get it's growth hard category to numbers pro track that being just

slowly our execution, our we're the and and add continued our margin on to well talent reasons improve side to our new continue. we're going one platforms new both that BSG add execution in-store that sales into is as we're on going to team And, of as service and other to continue to through digital and models will new add innovation. improving both is execution we've and Some better part obviously, both side the the

add So it's channel. pieces that to we It's like the have up to the in all see growth but the get total anything in retail. to performance,

Simeon Gutman

Nice Great, okay, thank quarter. you.

Aaron E. Alt

Simeon. Thanks,

Operator

of with Linda the We Bolton-Weiser Davidson. line will go D. to A.

is open. line Your

Aaron E. Alt

morning, Linda. Good

Christian A. Brickman

Linda. morning, Good

Linda Bolton-Weiser

and your was FY in your wondering Sally revisit I Could Beauty percentage certain of on strategy just was Hi, us exclusives what we FY that products percentage how brands? a 'XX for -- have just brands. if update XXXX you? versus should you are to So exclusive

Christian A. Brickman

so Sally believe, XX% XX% the toward and with bias is with Yeah, low exclusive is owned the I about BSG, owned toward exclusive. and bias XXs,

Linda Bolton-Weiser

or -- And for down up go versus flattish did Sally stay or how it did that year? percentage prior that did

Aaron E. Alt

call while couple example in is we're has help late an basket good historically drive national brand business the to largely where private been of have cosmetics. our roughly of a owned Maybelline, we -- would a in fill it And been quarters to some the quarter, in bring is last our we've spreading Maybelline label And key brands flattish. areas. initiatives some In I in or example out. where of one

Christian A. Brickman

But Color that's that and Another which back younger exciting in overall driving Good there. consumer. up is brands as Color bringing and influencer Arctic are example is where an Dye like we've which is growth been well, Young, Fox story well, terrific business the -- bringing our

Aaron E. Alt

is And our our brand Ion largest business. color vivid still line own

Christian A. Brickman

absolutely. Yeah,

Linda Bolton-Weiser

much. very thanks Okay,

Christian A. Brickman

Linda. you, Thank

Aaron E. Alt

Linda. Thanks,

Operator

Thank you.

of Fargo. from Frasch comes the question next Wells Our Lauren with line

line Your is open.

Lauren Frasch

this about been driving talk and bit. little Good follow shifting in as at initiatives? a Sally you. segment morning, little these great drive you've I approach it margin margin quick improvement gross in I the quarter. that expansion know around Can your have through on Does everyone. margin strategy? to gross U.S. Thank on lapped difficult you've Canada more get promotional Beauty. you bit a to stuff up Congratulations a a

Aaron E. Alt

But is, What you that we to category, driven us still the of been by driving the of where promotion we the some with would little I that think where as it's a promotions margin gross speak. opportunity it was focused change than result more the fewer there. the other puts bit a driving smaller of have magnitude in did opportunities asking there. effort into to we've We so and of course than improvement just you're over promotional find question promotional breadth on in deep a it impact now year. cadence, our by fair this year are on a over XXXX, see is more I tell opportunities cadence really

Lauren Frasch

Thanks.

Operator

Thank you.

the from of with question next comes Our Kozek Raymond Adam line James.

Your line is open.

Adam Kozek

quickly noticed will I last an that a if which I there was guys to -- great? so kind still Last target of Looks just on X.X, consistent, wondering was that, the like I Joe's. on believe, from I quick that timeframe put at I improvement in was leverage. just guys instead my name you update maybe give be X.XX pointed on at But were of you wanted a quarter, time

Aaron E. Alt

quarter X.XX. at X.XX. We this quarter landed landed at last We

bring continue the We down. to leverage

over have have We our certainly can the quarter ratio We the to flow. well. this as cash that and time support leverage goal leverage. -- that cash you our the But is saw strong down bring flow our

Adam Kozek

talked just this? getting signs and here? just that consumers headwinds, Great, guys have prolong keep to potentially. you Europe on fact lot have seeing the and you course, on and Are the that of color But know a does lot I that good give a then of uncertainty a pushed improvement that the Brexit adjusted quick follow-up. deadline for back, the

Christian A. Brickman

to I kind uncertainty. think, would the general, in consumers say adjusting I are of

are in improvement We seeing business. some U.K. our

argue And little bit in so it But to time. and wait that. original My I this a happen we're going before for be at fears. of have guess we it happen would would it's point news than impactful to is less let the know to it

Operator

Carla with of to J.P. line go will We the Morgan. Casella

is line Your open.

Carla Casella

Cody. -- of on BSG? I'm Is top Hi, a question do wondering I and someone asked follow-up Cody for five as with well? you also And currently had vendors your you one Henkel about Henkel work -- your is

Christian A. Brickman

both across one of of five. work And do Cody well. with we largest our businesses top and Henkel our they one as vendors are is

Carla Casella

to highlights in look trying am the stocking any were items kind the for or we season? and -- holiday terms stores Okay, key or then promotional and of the you look just in I key areas as just go to focus there into holiday

Aaron E. Alt

several quite So focus one where doesn't cosmetic Sally to to items, some key to a for holidays. offerings. point NCAP tied on some we some with care This have offering of different items, to appliance our the tied on holiday is year tied items. year We business steady. gifting a strategy Sally for mid-October that our last a and at to the It adjust you vary not started is, has years dramatically seasonal context the been pretty been our of last has that in for business,

performs relatively see the time. how to eager flat given seasonality business we're over the So that of

Carla Casella

new the inventory one kind have make adjustments inventory will some Okay, during DC additional stocking doing the as what's the both? be then on you in just disruption conversion? don't timing great. or well DC consolidation to as sure that roll-out or you're any DC of of Europe, follow-up facility And Texas, the of there And in

Aaron E. Alt

it's Yeah, a great question.

In the in So let a for only is the to anticipating that of change facility, we it answer me the Texas Canada are which fiscal in and building know the North couple We U.S. of XXXX servicing addition ways. should Right? with that business March. support will the inventory by is the currently the need to BSG under construction of end naturally enterprise. of be live and load

the That that we're starting testing network. While elsewhere as also we implementation within well. probably through is going JDA a have on,

facility Sally implementation. Texas time were the a the That in some and and levels for so coming say North opposite in in same of the will would within inventory XXXX. business on the our coin very down. may and we inventory the you they in. we're investing side materially What focus ensuring that And us on things be to two the elsewhere that both those the At would our and inventory there business, levels area rise I is be tell work-in-progress working a focused BSG bring not JDA are aggressively, do fiscal key

Carla Casella

-- that is anything that? from consolidation Europe The

Aaron E. Alt

as is spread a to we of over worked We're on expecting nodes levels so year. a the not material anticipating and inventory out of impact The the course we've European that I'm the have not consolidation out consolidation inventory the down, problem. come as

Carla Casella

Thank you. Okay, great.

Aaron E. Alt

Thank you.

Operator

the our with from line of will Thank America. come question final Bank of Reuter you. William And

open. is line Your

William Reuter

Good morning.

the be acquisitions comments could in BSG some prepared on mentioned You of that the there year. exclusive side brands this

be I if these might context guess the us can that you But time-to-time. any size we've heard of about at? acquisitions of give think that you I from looking

Aaron E. Alt

to going specific not say what acquisition. we're take I is, things. this you should the comment What on from is two Well, would

growth, the looking brands quick being to the model, put -- is XX store on business. and The BSG's first, impact moving last new we're existing where new overall course, part help want as has on of two to a same what like That, distributions or I elsewhere over new, store require look of is them months that of back driven take rights to their time, brands. to you a into away brands years opportunities We've sales. been Either of you focused know, to for model and for at you existing network. that they've

the use Right, these have I is be in we away we'll put They none -- se. to may that result into business to cash. investing -- Second thing while Right? you the would would offset want material acquisitions bucket in the per things. that, of take to other of the that enterprise will that

William Reuter

half I'd still you goal Couple and down. last and times, time that leverage it at one callers that target two is to what follow-up. ago bring target Okay, of your mentioned -- or point? seen your is was ago, your just as a leverage leverage callers this The is

Aaron E. Alt

first Our times. two a is success and point half

leverage in our as and from at to going demands the and there. we'll business, and said I've what cash two in think go around get I the half we need our look ratios other to we investments is, past the on times, a we're

William Reuter

you thank very Great, much.

Operator

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

Christian A. Brickman

long drive first summarize, all will thank To initiatives We invested in key for you we questions on we your are future the term transition we that XXXX capabilities there you from we today. as efforts track tremendous we and of results still the We're us growth. company today. back XXXX. and remain acknowledge remaining progress Well, seeing joining in made work Thank growth. to is confident our in that positive as for

Operator

ladies will for after A.M. and X:XX XX. until And gentlemen, be today's today replay midnight November call conference available

system dialing participation XXX-XXX-XXXX your today. by conference International Teleconference teleconference code X-XXX-XXX-XXXX AT&T once XXXXXX. XXX-XXX-XXXX. and enter for participants Those numbers does AT&T access That may X-XXX-XXX-XXXX code conclude access of dial entering your Thank for of XXXXXX. the again, You replay may or Service. using for Executive and call the and the access you

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Sally Beauty (SBH) 7 Nov 192019 Q4 Earnings call transcript