SBH - Earnings call transcript Q2 2020 | Sally Beauty Holdings, Inc.

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Operator

Thank you for standing by, and welcome to the Sally Beauty Holdings Second Quarter Fiscal Year 2020 Conference Call [Operator instructions]. And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Jeff Harkins. Please go ahead.

Jeff Harkins

you. Thank and Sally everyone, earnings Holdings to call. conference welcome morning, Beauty the second-quarter Good

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

providing is financial financial given the metrics the be month COVID-XX, outside for second-quarter disclosure of we of addition, supplemental some which of for results. our In will April, timing limited operating and

of that you financial Section the remind the forward-looking statements I'd comments, business such of including XXA trend forecasted Section to like these XXXX meaning can, would, Act during use can and are forward-looking can target, amended. a expect, These plan, amended cause Beauty statements of may, subject should, as confident, project, actual XXE annual words the Securities XX-K. filings identified phrases. similar be differ such certain may of Many Act that information, factors results statements and of matters potential, of and within the believe, and contain Those most Securities number Holdings' anticipate, its or words Commission, as Exchange or by estimate, will, to could, intend, Securities contracts this of including information with of as made Exchange report described XXXX call in on from factors recent expectations. are to Form Sally optimistic, materially as

financial in Brickman, our earnings President Officer. offering transformation Alt, Chris and its our on website. our adjusting Senior and will and President Aaron against me detailed Financial dramatic Beauty call of network statements. Cormier, played progress and thoughts of The to well the on how restart. and growth update second its Officer; Chief Chris provided out, focus on The President non-GAAP as company Vice Chief are publicly in forward-looking our progress revise company or not Executive our and has measures by on he on explanation press Sally start does Officer; its a today of With obligation of as, Supply its and quarter Finance already undertake reconciliations the release particular, in will, items initiatives business, Marlo and Chief Accounting e-commerce store and any

financial Aaron will XXXX. on our segment then how and of year and are our then, rest liquidity, results, discuss thinking about consolidated second-quarter we the discuss touch fiscal

and be questions. for Marlo, Aaron, Chris, will available I your Finally,

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

Chris Brickman

morning, March, of good been. an made months was we transformation In couple our had the reflecting significant has and What Jeff, everyone. incredible progress you, on it early Thank our agenda. team on

good the We have for Sally success. national brand campaign launched with

to had businesses. had technology had sallybeauty.ca test and and that in the capabilities experienced hired the new We leaders launched quarter. in first just ship-from-store we're March for progress. positive metrics same-store we flashing prior Europe of X.X%; Sally X.X%; up in one same-day XX territory; Beauty same-store Group and sales our in also delivery were the Beauty e-commerce fixed and a We of We Systems global green, Systems Sally product our up and onboarding had positive showing digital and new Canada. We with sales X.X%; sales issues just Group launched quarter for the

are future. for excited than this to today future. about and has call in change will our we recognize was why we pivot executed the how you highlighting spend a so the company I And different That ago. we a of we days continue. situation, and rest responded are coming, we our what the changed going change have pivot, Because of that just XX were that we Then fast massive to am

turmoil. our and with set me of stage some categories observations about business let our in First, financial the times

seeing couple times last have shown financial been our the gone stable that over business down it, to and distress. out in has to before about other want they're customers out of has calls, way we themselves investment right it particularly that of to in our how in earnings things of willing they to years, it history We point today. and sacrifice good feel comes When we our During and it are sacrifice XXXX themselves, again saw their look. they

business mean may and this shift will from some course, BSG. Of consumers Sally may value-conscious some be Beauty to that

that Sally for business mind However, margin keep profit us. higher is in the

said, to we hedge XXXX time are further result should flat BSG natural from consumer of business. and evidence from That the period, segment the comfortable being resiliency the was that may basically of XXXX that So, serve DIY. service with a over our shift professional as the channel to

is typical and it disruption. Of respects, financial opportunity not course, retail businesses. In COVID-XX a your growth our for created has our some both wholesale

also inventory selling to stylists, been even the have for we we departments salons, doctors the must-have and in expect And accordingly. industries gloves a be equipment protective are salons, going as personal during we Just will shutdown, offices, other postal service individual investing consumers, police and forward.

to growth Beauty both We a for Group. be opportunity expect Systems this and Sally Beauty

you competitive context. give some me Let

what specialty differently early March, was us business remarkable was in was from During responding from retail, specialty our and apparel retail to differently how particular.

XX%, were up XX%, orders. weeks the specialty relatively flat traffic retailers XX% to declines leading while even shutdown COVID-XX in the Our was of traffic experiencing other

traffic, shortly to to had retailers operations. because this approached point. last to our our was XX we specialty want reports and repeat to started low good considering see I and close We one It close as of authorities closing we shopping, other conversion. thereafter not days stores no like because their did local of grim increasingly stores retailers March news for the only were steady reasons was asked that impact other retailers. and sales traffic when While grew safety we many greater

compliance with situation customer-facing all regional March stores States stores and for operations the stores in the in which we we're Ireland, Canada. As and and the stores already developed, to the mandates due Continental March which throughout and the stores On to in XX, the across U.K. safety overall United of continue and the our in employees local our our closed closed that closed customers the COVID of we COVID authorities. for Netherlands, XXth. Europe and All by the on XX date closed interruption, in operate except concern

to Beauty how So, direction let's demand behavior will levels. changed. talk magnitude the surprise and e-commerce The but about might. consumer of Canada, Within U.S. change spiked you, the unprecedented not Sally

by For approximately prior X Sally sales XX-day not Canada period. year, e-commerce Beauty had the XX XXX% the times X demand April online business not U.S. period April XX%, times XX, Sally In and Beauty prior approximately the $XX March million. and Canada until from spiked the approximately alone, for of U.S. and X%,

to and the we XXX% XX-day our one-third of Beauty XXX% at changed. customers the Systems prior Beauty of in also and the versus approximately salons previously In pre-existing period. that discovered Sally was not customers. huge same widespread We Group. with Sally approximately to was driven the was demand also closures the to approximately e-commerce demand base the business, notwithstanding store period, who also one-third our In conversion one-third customers retail e-commerce Because Beauty, year, by have us, customer prior the coming across us Beauty scale, known by Group country, of were of online new new shopped by increased customers versus saw Systems e-commerce

be X.X% story that of not building has know And well operation a would some a they capabilities. you though you we the of thinking, modest was our be Sally relatively and penetration on have capabilities. minute, e-commerce was Now might been end Beauty digital wrong. as QX, building were scale on our digital still hold modest Holdings even our focused At

we fast to I However, was talking future, digital. I the when executed to about fact referred the pivot a that

wasn't Group. And understood March, United focused was and we and prior technology Beauty we fleet. onset early impact, what way, As pivoted Xst, had the moved quickly test the growth. a Canadian rollout its company that XX stores digital in Systems a across on Sally new Canadian to store its we dramatic Beauty of stop test with we to acceleration launched for the mates planned, of COVID-XX ship-from-store March the and ship-from-store of coming as same-day under on everything of one-city our to In limited of delivery post way had the States we

As Beauty nodes. week, stores Sally X,XXX e-commerce flexible of are this fulfillment operating daily as

and shipping of inventory to increases capacity the Sally fleet vast twice our The provides company's with our incremental X,XXX accessible store majority some stores. This company capacity e-commerce and public, makes high XX% not added entire are e-commerce that stores XX shipping stores, now the of as gotten open the approximately is customers, has of traditional even in of additional our Last the the operational the the and e-commerce capacity impact network e-commerce days. happened of our sales That daily. XX%. fulfilled distribution when were they week, to as weeks being

its delivery also accelerated The rollout same-day stores. Beauty Systems company Group to of additional

this month stores sense means. a magnitude another of of operations. $XX now approximate than public, April, of Beauty what Systems sales had the the launch. give million, of month service you the are Group of XXX company In more e-commerce closed of As the and it first offering XXX robust our are half newly this like our stores from full being I'd week, to of this the awaiting to

significant the and I penetration of without your the in attention would same future purposes, without were in prior XX% the marketing business a This pivot is focus X.X% e-commerce in For this on. the change our from e-commerce This was the to implied QX. comparison have we penetration equaled want promotion. at to year, period sales

a it of marketing makes she continued expansion her us expansion our continued customer both focus continued our at of digital wants capabilities, channel. she of Our for giving that regardless where what and wants, on fulfillment our capabilities, sense our and price of

shifting restart. and Now our store to network

reality have multibillion-dollar as While our we we possible. want quickly great back bring through the as stores online remains we progress have practical run that to business that digital, made on a

phased local be are of the inventory return-to-work county-by-county store stores the to of programs store conditions set implementation customer-facing fleet. and protocols, planning by monitoring by distancing We country-by-country timing of social in furlough has the specific been and restarts closely and authorities, actively on while return the replenishment. restart store continue new staff, of will basis a developments driven of from The operations the safety a

are foreseeable to additional with government now X,XXX States evolving week, Beauty future, more being roster open-door first open United on this supply two basis stores opened for the consistent of in Canada the a stores weekly globally, public added orders. the on XXth. stores and Sally than April to with its U.S. As the

the this Beauty are of Sally public. to stores supply week, As open X,XXX

as distancing and social stores rigorous have also operating procedures. pickup We X,XXX curbside safety adopted and we have locations,

allow us stores the however, curbside serve many these of in Some customers that to not in to yet. open public, of the are do as are jurisdictions stores also

additional and expect United stores Beauty come the coming the Sally We online months. that weeks in in States Canada and will

stores We also reopening in started Europe.

Dutch of follow First, Systems and public the procedures. stores France, small our never social U.S. personal government on Group regulations distancing in closed, Beauty sanitation products are as retail emphasis implementing supplemental with to while countries other operations. will safety lifted on April and first selling its on reopened stores Germany, tranche an care XXst, and

this to the Beauty Group be gloves wear public employees were more offering for curbside required week, As operating the stores and of were XXX future. stores and pickup. than open Systems All curbside masks XXX foreseeable to will

believe initial Additional thoughts and opportunity as COVID-XX the do emerges months. closing, let online weeks coming Beauty on well come Beauty shutdown. will stores a we few offer in me Group In Holdings world why has the from great to the a Sally Systems

regimen. demand Our will categories in she our other sacrifices before things are and hair customer her beauty and sacrifice high

traffic this in e-com March can in and our results. see We our April

been As earlier, business between we built-in Group. relatively our a Beauty I Systems Beauty Sally and and have mentioned has hedge recession-proof,

mall but not over mall Group, fear or As of and crowds to as see Systems face within consumers Beauty downsizing have we Group may opportunities the may overhang of forefront, and potential well distributors. with DIY going the We the benefit the moves that Sally of growth Beauty forward. do failure stores PPE smaller Systems

store our relatively social is are addition, easy enforce. to small, In distancing footprints relatively and

normal We are in at an as us building strong accelerated the growth pace digital a new that retail. consumer position for further platforms should establishes

our is with safety emphasis work Finally, the COVID-XX. teams to but pursuing remains, of immensely an our proud for I our our and Significant passion for am team the have spanning creativity and the store of with restart our aggressively on team. networks customers continent reacted which

and Now, over I Aaron turn to will more our in detail. it to discuss our financials liquidity

Aaron Alt

and because to both work Thank were leap incredible morning. you, because allowed things was Chris. us challenging Good that through of the an of quarter that forward. It the to things

was to start to a earlier, impact terrific quarter prior COVID-XX. noted off the of Chris As second our

customer been January, earnings February, season and Prior but positive traffic choppy observed In part March throughout after in delivered accounting sales for Both to of traffic Christmas. that we in call, QX. had show XX, holiday our and we last progress same-store first growth the both the to March had segments. normalized sales continue

not did reported in quarter. that we the first technology also issues We face same the

let's the approximately translation stores the sales. the same-store the revenue almost a all middle impact prior XX rolling were the quarter, an $XXX year, same-store Given increase results. basis stores versus customer-facing our points prior sales shutdown in of reported for our Consolidated by sales discuss financial on with currency that to base impact initial of year starting driven X.X%. enterprise March, by background, followed operations results fewer and down was down the level, of At unfavorable of an X.X% final smaller at foreign XX million in from the store

business Our the by e-commerce global grew XX% second quarter. for

the grew to by shopping to a of in COVID-XX impact halt. settle started as For e-commerce and online the operations of business March, customers in-store XX% as month came global our to shifted

by For XX which point offset larger XX.X%, compared approximately our the in the supply of a grew segment were business. Group was Beauty sglobal the was month the April, Beauty in mere the for the Consolidated partially margin by basis business prior gross Sally e-commerce quarter Decreases year. stability Systems to XXX%. decrease

increased and by COVID-XX-related expenses $XX.X year, staff. of increase of increased two our although was of up the fees, administrative marketing of of the part in that remaining two prior of $XX.X includes personnel increase related quarter weeks many or take. the The general launch second field earlier pay revenue of of paid we furloughs furloughed as, vacation to professional Beauty expenses part XX% as well Sally associates elected the to expenses the and to point company's out dramatically our million all million more weeks in quarter, potential key the staff as became from should versus well cut selling, for the X% normal investments our as, spending, we disruption employees, XX% marketing I SG&A as HQ driven course For that with back as by COVID and apparent. and the to This as disaster aggressively

and $XX.X mainly XX% expenses quarter personnel and earnings the due selling, GAAP compared As impact in margin the general to share prior to of were $X.XX earnings and the the respectively, in second compared a company's diluted in and $X.XX and compared related million prior COVID-XX per were and million lost the percentage prior of earnings in company's sales, million to excluding furloughs. to After due administration year. prior $XXX.X margin to the deleveraging second XX.X%, respectively, the the related to year. to respectively, $XXX.X XX.X% expenses in as to $XX.X expenses year furlough XX.X%, in the prior the were operating and X%, adjusted X%, GAAP COVID-XX transformation compared respectively, years, sales the operating year. charges of were million impact in adjusted efforts operating operating and quarter and

compared per decrease expenses cost-cutting related $X.XX the in COVID-XX. from A diluted partially purchases March year, the the in allowances by anticipation in the of to dilution a second share across and margin were shutdown prior decrease furloughs. vendor to sales XX.X%. company's operations Adjusted on globe, a $X.XX loss of These in stores were to the from incremental modest COVID-XX the lower due offset gross largely of to XX.X%, also of inventory quarter to in due headwinds of lost earnings public-facing due aggressive

second from for the the cash the XX.X% Payments in company During quarter, decrease quarter expenditures flow a of versus $XX.X totaled of generated the operations million. $XX.X year. million, capital prior

Since debt compared of of or to retired levels fiscal over its and flow of $XX.X shares Prior million beginning Free negative repurchased COVID-XX, XXX.X% COVID-XX, an prior $XX impact cash million. year. quarter, reduced in the the and the to as company at by debt company the year million. also $XX.X was the repurchased $XX million down had the was in a million cost which the aggregate X.X to XXXX and prior $XXX million

company's liquidity at on cash million we approximately quarter, of capacity I will later. broadly hold was to second the The March, during the However, on then million leverage outstanding and drew end X.XX $XXX.X reflecting $XXX balance revolver of our the was sheet balance out times, million of of discuss our the on caution. the that ABL $XXX abundance more revolver incremental of drawdown.

segment to Turning performance.

For the X.X%, same-store prior sales sales which Europe, segment, March project XX, surge. against result segment a as of grew same-store to progress including positive Beauty continued Sally by delivered

second for the the quarter, same-store sales represented U.S. Global sales in the of by Sally segment decreased all Sally quarter. segment Beauty However, Beauty in XX% The X%. for the and Canada business

revenue decrease in The impact generated driven compared of fewer a an consolidated quarter, Sally stores foreign $XXX.X impact the and X.X% year, of basis XX XX points. million prior approximately of the by unfavorable the COVID-XX, of segment primarily exchange to

growth growth drive e-commerce Sally's approximately the make revenue XX% month e-commerce the in E-commerce and quarter second rate in ended, for March, quarter. growth the with which of We was helped the growth continue to XXX% And accelerated meaningful after entire Canadian rate progress of U.S. of second April. with business, XXX.X%. a

the with in XX and in Europe offset of sales in and the a quarter, earlier support while relaunch. declined in SG&A margin operating the related was Beauty XX.X% Sally were higher was by Segment at COVID-XX driven contraction for points, of U.S. XX% Canada brand in flat flat. points by by the operating segment of the year. lost of America in expansion year, Gross $XX.X XX.X%, impact Latin basis versus from the margin quarter million territories to quarter decrease basis prior prior compared the expenses primarily to to XXX the marketing Segment earnings the

Now March X.X%. segment. same-store XXth, Beauty turning by to the Prior Systems segment Group grew sales to

to decreased of by X.X% $XXX.X XX X.X% the in decrease stores. year, were fewer second driven sales the same-store Net the quarter, entire by prior However, segment impact quarter. million compared and in of a the COVID-XX for primarily sales the

Foreign currency the translation had no on impact quarter.

quarter. grew the Additionally, platform BSG's by e-commerce second for X.X%

And March, operating XXX%. quarter, April XX%. the by gross of decrease basis second XX% month earnings following grew expenses $XX for a was month year, from end sales BSG's Segment costs. related in versus margin year. by million, from the increase prior by in of were and driven COVID-XX, grew lower the the SG&A lost the quarter, BSG distribution higher For e-commerce the of XX of impact of of decrease an a the the margin, points primarily to gross prior XX.X%

points basis Segment liquidity. XX.X%. our certainly margin our Chris news by interested described and XXX earlier applied that It operating of to quick how managing pursuit also we're that, the that in pivot With sure declined to cash stakeholders liquidity. I'm good are is

has are a lot left company unturned. and cash. no we we which generated quickly, We a of We were historically acted to aggressive. In response COVID, stone

to the on the in rent with immediately of near-term launched drop cash. negotiations through We outflow with abatements our start Let's landlords sales. get us shared-paying

merchandise XX We closed to doors lower our to and with are our aggressively the terms. and date those extend with vendor pleased payment parts March continue receiving inventory discussions. and results worked We

the and of date to results the some partnership with our pleased from are vendors. with We

only furloughed the We business, was continued the of back investments to ship cut digital remainder the capital but health investments We continue delivery. compensation corporate of growth same-day whether team. our moved We our our or spend pay to of across executive office XX% and reduced for capital furloughed quickly review the related e-commerce, to it XX% store approximately approximately staff benefits. of support and year to staff their the from field

on and expenses. marketing Finally, field spend services office cut back we back aggressively shared non-personnel spend,

following: by COVID-XX our cash and We in focused the sources on weather this on the final $XXX the revolving the amend $XXX funding of with additional we our of of us storm. balance Since the Of approximately out, capacity caution, in will credit to an on credit course, million, abundance cash our did borrowed how which the to line the out know We March exactly also none we our of hold line sheet. loan, half increasing work advance on increased of million to play $XX million started included million revolving March rate to $XXX collateral. first-in second of from last-out, of

our upsize early in completed this under enhancing further was The facility. credit April, liquidity

The here high-yield to in it to on sit notes some X.XX% not we we million ABL up were today, and contingency. surrounding senior market facility $XXX show the view As the remaining at April, policy additional annum. at their interest enhanced par of as the activity, the issued per draw we Also secured began notes sold and against availability in as intend insurance an as COVID-XX. do uncertainty

of COVID-XX, plan learnings the stores open, nothing for The high-yield business last insurance of we The will our five-year cash future have ongoing our notes unknown, and policy notes for the foreseeable the but impact these an mature in a given XX April from sheet as of more. against days. The provision. was bond the no-call balance sit over two-year the the unexpected as upswing assess XXXX on execute

the Now period, or will I not I disclose get a of time observations. rate going couple burn on dollar question will know a to I'm offer and I figure while

new we model, operating and called a reopening stores safety-first Chris options large a aggressively offered are As number e-commerce our are of curbside adopting. in aggressively out, which states and have

we for So total we do in medium-term network the ABL drawing bond long cash. the the on liquidity without or a shutdown prolonged as using sufficient not have the future, face

sufficient next address remain would, were year. actions management stores burn, take we future, to we not we cash Alternatively, fiscal course did closed and a be of shut into have pattern, for to the different foreseeable well our if fact even which the or then in if to liquidity additional survive

our weather invest against So business. COVID we have overall, sufficient believe and continue liquidity to to we

several rest are on looking that to of you for the likely Now questions on guidance also get 'XX, and it. I'm fiscal sure of I'm many

full-year guidance at me time. to many by this, unknowns do COVID-XX Let not XXXX around providing for this will start be that. too are saying be we fiscal able There to us

I rapidly way store operation. We'll down. to However, some you on We'll offer quickly fleet quickly return move am to intend the up. perspective. way on to happy our move We the

our Of will state consistent regulation, first. lead course, be efforts we'll with local safety and the

With the and of Coast while be guarantees, our the have end stores by we the largely second the exception the West of operational we Northeast, to no expect week of June.

For with the have in Northeast, for will soon West those recently, the supplemental the been demand allowed robust. public. the we have in are ship-from-store regulation opened Coast public and has local we we they stores open lead as the if will as curbside I associates observe even and that that by cannot to to stores,

too such how stores key demand While newly what the in we with next to certainty Texas. play it are any reopened out early the will couple in seeing is over states with say as we're pleased quite months, of

are that capabilities. our further estate geographic and functions but within redirect using we investment our canceled. We priorities. services also of will our further continue to shared efficiencies remodels been business, optimization our entirely real presence, Store ship-from-store cuts but enabled and inventory newly in somewhat delayed invest largely updated openings have our clearing end, will or that we assessing To our not with consistent portfolio, to

have these earnings will to during We more say QX topics call. our on

and of to sufficient capacity again, much we doubled we having believe double and progress. our it maintain robust runway be to then continues that demand have Digital

invest continue to in area. will aggressively this We

Finally, address let allocation. me capital

alluded will to just to, against have priorities our business, our I continue As invest changed. have we but

our optimizing business are cash. for We

our Nevertheless, smart in with the of first As a be capital result, our we canceled investment. long-term of and debt, of was remains the respect will the half to year. our in remaining reduction make goal any we indebtedness. With spend elements have the our half. Most reprioritized capital investments we of back

However, hold of on sheet the for practice. future, excess in we cash historical foreseeable balance the our intend to

at We ABL this from bond the will the not to using time. cash repay the be

the out plays at COVID-XX consider of how year, see this our calendar we end options. will As we

expense direct So see my the for to us COVID-XX. a close transformational that this way, was as in result interest see with do the comes see long the cash in with to holding and moment, it I in several remarks as it. -- us way hold Beauty of interest fast are to to back. Holdings of to before to and expect under company it that changes the increased pivot streams the did, put able Sally is and was place were that It which forward expense observation. us still following and already a work versus but want increased carries

and to time a where express the to have you to teams our months the I back over morning. old new of for want my work and appreciation your putting servicing Thank the be leaders we put teams this in in that couple ways. last tirelessly worked to us can place and our customers

turn to take operator for to and like Now I I call your to over Chris the the would back questions.

Operator

Thank you instructions]. [Operator

Jeff Harkins

see is XX in the but... concern know queue, so people the what I we Cynthia, don't

Operator

And moment. of is please And And the go with going it question. right. our a All will your be Altschwager. Mark to line come from ahead first just question

Mark Altschwager

happened and in this, be terms side a the you're normalized Difficulty] of of And store-base that's do last result where [Technical on over other going everything the change thinking you how to digital few size think of on the of has weeks? the penetration? as your

Chris Brickman

I know you what first Mark, you the where but just or end, XX to I heard don't started side we I missed you on XX other of seconds think with. that. want of the

Mark Altschwager

commenting. I the I on was was infrastructure. congrats progress just saying, with all digital the

Chris Brickman

jump in. let Well, us

And are new are predict. we're that's the customers hard on customers a us number true significant are store very the of to as are for is think new side, significant And number of to these customers that What well. seeing to e-com. BSG course, I So BSG new of it's some BSG to who a Sally.

do I to expect And models future focus extending a much the business. well. going know, of in You our we're near be obviously, it as to be service to larger piece

able future. behavior how change be to serve do, going the able to And served want you want be know that's is what be to customer is in to to Clearly, we they the to here.

not a into to or up prefer they people do they and Some buy either of will pick do delivery to some online, model. type want prefer ship-from-store other probably store go to store in or

So be will sizably you it know, we larger. think

can been to out over I where help months at. customer and us, really able the last we've serve commercialize infrastructure in do be want will to new they're we've and service the But in going paying XX and the we try for be fact don't and toward the think want that is these out to this built normal. the now I settle quickly it predict to way served what so models working

Aaron Alt

our that. in think any I any behavior saw combine I e-commerce change in we business increase When in without add to marketing the promotion and really would driven spike an was to the fact consumer really the free the that and you without great the with turning believe of a new that focused have back the shipping further part opportunity the the business around that driving strategy we're to portfolio. we now marketing that threshold. capabilities, leverage We and on the on this

Mark Altschwager

to the fleet. second I your of size just then And thinking store the that Any the on part there? guess question, changes of Thanks.

Aaron Alt

we We're assessing area it the more short-term with by is, changed the at We'll rent and now observe doing a conversations portfolio quickly very What metro went current demand of shared-paying I consumer quarter. overall review. abatement how end around would the out about an has talk landlords experience. for

opportunities as, us. were of diagnostics of consumer combination at list a us, will well view each as the the that to with look as the of create shift, around landlords behavior we the willing how work that for we're as, store, where medium-term well So

Mark Altschwager

understanding regarding then the impossible I'll in in provide ask how fiscal you've the offset you've revenue have about any achieve help to guide seen pressure? what any you anyway. results reopened? to on terms SG&A guideposts stores order it's based able the then And been with in ranges But this third at magnitude stage, can question that quarter of April? And thinking the you're the cuts revenue almost similarly, to of the in And

Aaron Alt

And was details, would really revenue April the really with the a were of lot any you give month number operating, scale. guides. but you the satisfaction where not total purposeful providing a on context we'll the can't is e-commerce no April. for I couple We and offer spiking there give Unfortunately, is of I stores were

would I a from the perspective. April right, meter, view sales so And as

the it up You and noticed that the day, ramping are as have piece network to we plus the will possible. every as running digital fast back rapidly stores adding we intend up get to and

most and event. is not of we're so, QX event that And impact the a a hopeful QX here

Chris Brickman

general, as And good Mark, some response quickly resilient in been think as is who do say some customers us mentioned, we're in here finding as rebounding. what strong openings. I serve store weeks. Aaron done mentioned pretty I care do there's normally And that, well demand we seeing to And to are able haven't categories, that of last comments six I'd the my pent-up would as have is people for demand in they the and

Aaron Alt

us to interesting the professional quite also demand on It's been BSG.

number still states are pleased that Mark's with coming that's seeing stores of with the stylists we allowed point. advance still we're in orders in. specialty operate, most across where even And segment, seeing team what closed not are at are to country this with even our the of So

while so the will the ramp-up was painful, ramp And be down fast.

With the personnel is I question on furlough. in furlough. is the I us on your that respect And perspective, hopeful still to mind, expense there. still keep SG&A, fleet the of corporate we of vast on We're vast majority took guess is, say tax the majority staff get would what from combination a of the our will

will savings the in into we particularly to business, We personnel putting our that toes as with be now, respect are to upside our did e-commerce right? all forward. marketing, an We So cancel have us with SG&A capability continue carry that back QX. for have, absolutely we we will

all canceled have you the comments my we grass changed down of facilities, right? liquidity, the And or schedule from from As our at full that everything on folks canceling compensation the there. cut would range executive heard we the it's so to

much details we back until have But that's burn of as can just offset And up the the you. looking for can that get fleet and to we I so, are as we expense running. completely

Operator

next the Parikh to Thank we of with Rupesh line you. go will And Oppenheimer.

line open. Your is

Rupesh Parikh

any demand some the point. frame that the versus reopening help where you're side? reopened to there and in both seeing way these for So historically I very Is your BSG guess comment demand to at on going seeing back productivity just like stores us stores, this you're robust of you were Sally the Beauty

Chris Brickman

too Rupesh, early. it's really

a days. of last mentioned, these XX cases, of As stores in in And of a we lot the days have revenue. many opened couple Aaron have

that's demand, those of And been win. we're don't knowledge. mind, so there trends we're store. that these has sales demand in how we're categories strong in position that couple for but days, is my before suggests out to to relative a that is it we'll need we whether like know But about we pent-up in settle you But details what historical and well-positioned excited demand let give have to of to ample exactly in not each first and

Aaron Alt

a out important call many that as so think nodes is e-commerce from of with are But our well, thing productivity isn't labor. model because now is I incremental that perspective, one stores to

us. And X,XXX options of leverage that give We'll well inventory, we'll productivity more will now interact e-commerce business hours. go how investment the in far so, better as stores we'll the leverage up servicing the to form the the in actually dramatically. store And better SG&A of as the consumer with the are as

Rupesh Parikh

the Where growth demand the some questions to within the And should we think margin then given there. e-commerce there? the are backlog gears in And all to related impact in e-commerce. about Two filling of how of out then guess your penetration? business, I you e-commerce your switching changes your

Aaron Alt

goes up marketing have It how the well of couple as days. how on we close We are depending or much weekend backlog we down a doing. to as a of are

lot We have backlog. we particular. off of last various been on in or in have capabilities by exploring of retailers, the Like the a of suffered our marketing couple a days limits turning

shipments taken out like. we the get would than longer It's to

with Ulta others like progress are making we and pleased So the there. Amazon, in we're that respect. But we're

the that to make respect. so with the experience Of including course, most conversations the forward call to have better by corporate some have staff, we complicated right? carry been furloughed, as been some customers has centers, fact in our of we that And it's

Chris Brickman

shipping of limit. economics, In the terms we raise Rupesh, our did

may you have $XX. at seen As the rates

ship-from-store based distribution over significantly. work improve allow inventory That's on us optimize economics distribute to where but much over locations in it based network and and to will are in addition, across a dial is closer continue time, we'll on that our well, our from better, which -- can ship In progress, the place, how time. open still will to stores customer are get we we'll orders in where and as the distribution will that

Aaron Alt

Yes.

We that's same worst, are in the the at We're off. and world not a ship-from-store a stores chain. working supply the where, yet, not toward from far are the economics there but

Rupesh Parikh

question, last Beauty in of on up of the supply, signing customers new the Sally your program? my rewards And just say they terms you're acquiring, Sally that let's are some to Beauty

Aaron Alt

they are. Yes,

Chris Brickman

capacity DIY sanitation other many they testing extent may they us because struggle. they find increase leaving or retailers the color may result, nails some a as our will industry. out is share or to And we find for us time because this they're find probably a And cleaning or again, are. or because other may Yes, as of PPE long DIY or

our and over building of with us a customers relationship reasons obviously, And be, those to upping our time. good card all so for are loyalty penetration of these

Aaron Alt

had the We now the been of collecting of rest actually on QX. One have gone of the capability the up customers in well. thing that can that new now contact of we is QX. first all you the behind expect the loyalty the heavy Given part light addresses us, And see over the will on this we technology over details, QX. course program we've had issues the email communication as to as we well

Operator

you. Thank

question line Chen come from the of will with Cowen. next Our Oliver

Your line is open.

Oliver Chen

We were what what your and with promotional relationship of curious your forward being of sales, the will happen know going the we inventories What growth are state with should positioned? about The your gross nature encouraging. environment? X%. down relative you to and vendors down thinking the How thoughts the terms were working X% the for margins take… in are inventories and about management of capital And also

Chris Brickman

I'll take environment question. question progress Aaron -- both. think are just inventory promotional take we making I on I'll the the let

new businesses. So approach expertise expertise attracting it's it's enthusiasts a whether our whether to promotional-driven focus move to a listen, as of want from to she world. great helping operates the the both not stylist both Sally, for to this we helping businesses, us, or business on just in as expertise, We actually, opportunity away see the of a DIY more but the

stylists we be other us media, on fewer, lower I lot bigger, expertise the new deeper, a social see really this empowering much And intensity to Empowering of will will you're can then our And in think marketing, focus drive which more successful traffic. so, DIY the categories our much enthusiasts focused things promotional be environment. to or and empowerment. on going to push key where

that the over expect I so intensity And promotional will go down time.

supplying the if on promotional we're challenges as people Aaron, just at want I to the in question. shot focusing the of intensity. consistent take as seeing you focus a that's on And to with honestly, know inventory marketplace, customers also what opposed don't

Aaron Alt

and tongue cheek. somewhat So

didn't with aggressive blessed it. late -- I tell were The Flynn inventory into first going May. canceled the team all we early into April course led position gaps However, Chief crisis. though, of and of the would April The took our going you, by Pamela then have we inbounds March, Merchant, over part strong and virtually what the action that

on, speak, receiving our having And so pile to March. us with not did shut doors of XXth so we

we by how last biggest around do over bringing the the for in good about orders also, are team the process the are with buck getting in. of that felt category, very has new that And The place we a order-to-buy targets that. by course so for ensure -- couple bang business, we months, put around we of the specific

And so, inventory. not in a will spike see you

the where core be make course, to course called Chris color beyond will see You will in of this categories progress as be continue here. the of over out, will and way. there that us we investing. PP&E, year Obviously, some and But of areas

Oliver Chen

difficulty]. And last [Technical

Chris Brickman

impossible question right the we unfortunately, we'll if try Maybe Oliver, to more it's one understand time can. now.

Oliver Chen

safety in [Technical and store Social distancing difficulty].

Chris Brickman

it's So and I'm the store what operations. you're and need I'll affects getting that, hearing social that distancing at. answer is our what hopefully, how

are time. distancing at store one the people in impose social number We to going specifically requirements the around of

where of customers majority the not will we ask that have affect we stores to as that but So wait don't our typically shop. finish because recommended, customers there vast will some the outside will than other XX their the stores have is to be customers more

obviously the And our that better practice. masks, we other well feel exit feel that this new At have entry large we open get the it's the store. and stores point practices. need we control mass traffic, to much about from now, difficult we in are this customer being pretty to going as, fully understand fleet gloves in and and to and before store suited our that is footprint we time, implications. increased implementing as We're very operate cleaning that. That do implementing said, But implement good than to right environment

Aaron Alt

enthusiastic seen And have in been, And we're as had And our the appreciation I comply we've safety side a we place. that struck for have issues that teams asking for them. social to the the put haven't from customers any been we open protocols have stores people as with the result, would around distancing. notable well operations how with say

extensive to front members Just the are to masks, time. many our required how are at are the emphasize, and to store of wear given gloves. store they monitoring doing required our any are door We're the cleaning team in we at people

Operator

Thank you.

come from will with is America. line of of Olivia And your Bank Our question line next open. Tong the

Olivia Tong

e-commerce, morning. you talked sales of numbers you impressive. first buying Clearly, of usual pivot? helped what styling? masks steady Obviously, compare in You you much how think How quarter. at to any as much in the to terms it mid-March in peers? the a able stores? hair traffic you sort hair of seen guess the And the the you on in does Was categories, later same-store breakout there still so COVID color, big buying just look longer became people keep pretty it gave sort do were particularly your about clearly prior was were that through gloves, Good to for that some question, consumers of pretty still what pre-COVID numbers were Thanks. topic the you why versus good. -- Was I of had the were out?

Chris Brickman

couple of Well, In of change patterns journey. brand again. bit it's weeks, a the every a

coloring So listen, for. their to come saw right? I People were hair. think in in making cutting early And us their or March, of what categories, we then hair, would things resiliency our still the all stylists they interested was nails, doing were the doing obviously still

we stores correct, though, picked sanitation. products PPE as to the front us. a got begin gloves, April. down crisis and -- cleaning in And color opportunity in as for nails kind And the is for long-term demand nails more Interestingly up and into center, I categories. selling did are became really shut you're more of the was other We and for lot think spike there a and still nails

in spike for for customers Sally place think we saw expect We over nail nails BSG think and salons opportunity I to be back for go some do time. business Later to. our see a ongoing continuing, DIY will be will nice be a are our that April, time. I problematic And a business we to demand and going in PPE clippers.

see into level we will own that began as we to certain We April, saw spike grow to think that men's haircuts. continued forced a as to clippers big perhaps to demand. Mid- they normalize as a and May. We've hair were to get out late do in their

so going we be to listen, it's strong. continue evolve. believe going to But core to And is the

but be a consumers We sold that nails our up PPE color well. now supplies as, selling be well is we will as as for disinfecting think are excellent -- where pick new going to of be think have cleaning I salon have always continue obviously, retail some to we products And strong. strong. really to us, the think extent will to category

Aaron Alt

that. adds And to just two maybe

the incredible growth we've expect. of so it's right? you is And color, First are. who seen seen would we've incredible growth And as color, we in core in

places was everything We're is media. Target, I the with national like hand Chris things our on add a sanitizer places could called a you sourcing completely goes of That may were treasure bit hand noticed for And over the second of you there. the and crisis, the on of buy a that agree Walmart, said. -- way, couple sanitizer. going The three there have three to were Sally the Beauty. By we hunt out times course the

Olivia Tong

how number Or back, just you consideration thinking expense Or you'll region, you a of can that, talk through there associated limited by of region all around sort then, sort of stores? are well. allowed going is stores? back how in of with stores be time, And cover bring efficiencies, opportunities to given will Because going in your generating will how the in a that challenges. a all opening There And -- have there at cost? a terms some of as if that be Are are strategy be at comes bring is will And employees. people are there that it of be you of that rent about opening terms you're proximity, as the you obviously you some to there have to your costs with overall? consideration sales you enough the close storage time? in to when same like all you've

be could great. if talk So just you that would that through,

Chris Brickman

in. to So high then it I'm level, Aaron take let ask me to and going jump

hypothesis as And they on a looking the cost to weak whether amortize who, of the focus can you've got have think very There demand. cost I really across worry a that demand. stores, here. about are result, at as are and open some retailers lot model they they

are or stores. that demand either We experiencing we Sally not CosmoProf open up as

than demand put that, We the levels are more honestly, high into we justify are would labor experiencing stores. -- of those

I slow not consumer going experience don't demand, it, experiencing to some may from least that ramp-up discretionary retailers obviously, of call we're at this are, have that we're standpoint. more think So in that a categories

thoughts on the opening the that. us lens think I you to in so, a of network? than any different at specifics Aaron, And look have

Aaron Alt

and many with where have states, we open only is are curbside and inventory is the we that store to before ship-from-store first the municipalities, the do The often And local some leading demand and we counties public. the in we appropriate.

will. the full us to and if back where step we activity, regulations brought we that store start effectively local into first I then, new cleaning public trained voluntary to have We to as a in recalls opened alluded we allow so, where have gloves, place earlier, masks, with And the with the safety and well. So of you social the distancing. managers store protocols the stores do of

there's us want make But out we you're our the limited which to you hours here efficiency shipping significant went than with another they in have really, first stores nodes been front have of, many They we incremental sure opening point, of keep And the in operating which the business which now e-commerce have mind, for well. this stores just before, to is the someone aware business with. of being had to are was element more door. the as walking goes I not

And getting received. members play we're so, that optimization team not is an have us of otherwise the where that for we might out productivity

Olivia Tong

Just last question.

might color count on If you can your store you by think where provide any be year-end?

Aaron Alt

By fiscal year-end?

Olivia Tong

Yes.

Aaron Alt

open. XXX%

Chris Brickman

she… think I

Olivia Tong

count… No, I mean your store

Aaron Alt

my like I answer better.

Chris Brickman

the that, purposes, we're decisions and for make Again, are as at understand, store obviously, count online materializes, the to shift occurs we to of to relook the prepared review the efficiency demand not doing and we'll But should comment that how side. we on network network a and make.

Aaron Alt

we guided previously will We away our be down, aren't how as down of be up. to it, to giving but is want guidance to will right? down, it be far from will growth. it clear, of not we stepped door had We We be numbers Part our guidance. part

Operator

you. Thank

line Our next Steph question line the from Wissink comes your And is of open. with Jefferies.

Steph Wissink

of couple a have housekeeping Just questions.

you your about fulfilled? How us, accounting? report sales The should just or or the Can originate, where first e-com do remind on based on think we digital where is e-commerce they via comments. they're you

Aaron Alt

Where originate. they

Steph Wissink

capacity the just And the state. one then is on second

just Chris, across health key of that I a those see chance think booths Thank the this industry period some Is be of the business extrapolate. of what and you've maybe your that view have want that salon there to couple the bit times. seen markets? able little a to also about to their are you in industry, outcome? able or to their you either to give among mentioned and And of terms crisis? could periods you shakeout a a talk renting consolidation distributors Is past then may And and in business renting survive salons stylists change chairs you. those there continue a may I or

Chris Brickman

Let take order. them in me

So listen, going before, to there's be up who first whether foremost, the and loaded be -- be to side, with I who think, side are the were it exiting do or on retail going wholesale were competitors smaller competitors they our than debt. competitors

exited, in landscape. to going if downsized a there's change It or who wholesale. some especially be so surprise not there And were competitors the me would either competitive in

material Sally They'll to us be And be the opportunities the there sell for or business. some may either way territorial our I stores will have retail in smaller ones, side, Beauty a stores some increase less that brand, of aren't but because that right? who big lot on there a would expect there be exit

our customers to we're And to can. and job, capturing we see in the so opportunity make our sure is categories share where where the greatest serve we though,

forget the I'm was sorry, In terms what point, -- I of the question? next next

Aaron Alt

salon. of Survival

Chris Brickman

salons. for of to happens who with happen, see and don't -- we'll create And opportunities competitors I let's they're come way, and what what us. Survival back that. of will know is great A retail whether and like that. to the by Sephora's Penney's I'll see going example,

terms in salons salon from the booth business In and to a shifting long-term renters. salons, renters of been trend independent there's suite away

some If like New tend while. are layout, typically them a to in going you from the be Obviously, very, think the manufacturers. York very effective or who are be markets large call salons, network for to buy the brand direct biggest City. the there salons, cities They those about A

struggle renting that because they direct. these our this as of that What have Then of with come to either engaged an small good not or is think go in friends. opening new a impact potential salons. on find back. to stylists doesn't coming when get there's home. That middle-sized out the got or may some or suite salons much may buy happen certainly They happens a renting their business they I you've some tends salon

So we'll the lot of a don't you'll see stylists see. leave think I industry.

industry. leave salon some see may the You

find density -- we're they're the to work, we're way many what seeing or scrappy. they during whether is, -- hair a can't if They're cutting in crisis, longer their salon. stylists, was exactly whether that this think that home. much stylists, seeing we Or who that's probably also were that their working houses in make going own have And there independent hours people's as to means

stylist the sustain that's so going bread a income. see this to because to how they and we're to a And their is community and of lot living, resourcefulness make want from their butter, they're going

some to And serve as, then out. is it But right as there'll going open, markets levels be sanitation see PPE of demand and We pent-up in to them after work to demand. lot hard think that with expect gain served there's again, where they're a got be side the business. more, opportunities we the good sell well and we've products opportunities share to to we'll

Steph Wissink

to little you is book together the one a for need supply? about your kits just talk backlog of put access Can salon… key terms that final of or key supply ingredients sort really to access And your your bit on to in order in those PPE. you Any

Aaron Alt

and supply gloves we other Yes, our sanitizer, into network. elements have masks, robust of a coming

demand carry we Of as know don't absolute course, the forward. we

those the and the significant. we're teams of But to finding teams it on have new be sources us. about the good expect done work globally sourcing for supplies feeling We merchant

Chris Brickman

now, we be better not this categories practice this long-term think build year in put to visual actually, is online where three a the just next industry these a it. actually merchandising the want a And in-store our think we and be in customers buying we're from are months. change around going and to to And where category both out want going will to

Operator

you. Thank

your come line And Gutman. of Our next the line from Simeon question is will open.

Simeon Gutman

Was we're store was it know was opened, on broad-based? Chris, it across detail I the the not too much days of opening. volume did confined of it breakout to getting the couple store, well? whole days was just sales, you've the a

Chris Brickman

going accessory stores anyways. And our close. broad-based see that stores where Targets it's as any or something a don't weeks. malls. been strip stores don't are grocery that. a just I for purchase just apparel a treat them think like even I are category malls. not the few are think They're have in Many in people like open customers Again, It's high-end course, and Walmarts we the or this of, discretionary of of and kind

we'll demand for demand what but pretty normal we're of just much pent-up on demand trying and maybe let bit it's is out, top -- like it. think it to looks us, I a settle So little communicate

Simeon Gutman

economy And you more How on you're consumers feels I the do do giving gross margin, It think margin? I are opens pretty about -- it how point. know moot, know but don't at looked this but not if this you up. when like gross think in is about guidance, changes price-taking pre-COVID, the solid SBS. that it be may

pretty a you. of to lot unique defensive You're A merchandise is category. in

what's more gross margin So go forward? as the little a on have visibility it? we of And you can driving SBS

Aaron Alt

play would SBS. I already say we value a Broadly, within are

as carry the as we of of We about off of -- have The impact Chris element of right? believe on that buying to before, we have have as negative assets we cadence working, allowances, customer aggressively, to promotional but can bring have did that's have will short-term promotions. our be we're us. to every otherwise because that take talked Our one will think take available would inventory the it value will opportunity we we a only turn course, offset is, that as forward. margin has the we I expect, and you about conversations we vendors stock as change, the I And by with will gross

Chris Brickman

want And I Simeon, first empowering And focusing DIY hard the the enthusiasts that the expertise predict I mentioned, term. long to and Obviously, on and empowering Yes. to be us stylists. it's cadence think a that mean us. retailers and there stores, their business greater from for I will exiting reopening some lower not promotional over who will time. demand also the benefits be creating are as

level. to up get not see normalized what as see to ramp some I But four months the we'll our you'll back think purchases, pretty there's environment happens a opportunity So there we're well-positioned. as we to three, now. And promotional. Overall, in and wait from be have allowances

Simeon Gutman

One were with more, forget you pre-COVID different. the completely off. I'll jump timing I'll a is SBS, marketing and Aaron again, then, world Will I I -- marketing come make that it Do know back because wonder may it we've your if the that shut mentioned boost. The two moot parts, think I be eight campaign, off. four, was if was meaningful paying any in a position on there you magnitude we about we're if like going less driver? don't know a we Is rent, think leases. completely that And we on the the than be Hey, call. you're paying unrelated, as forward? comfortable XX% part, could it second share to what look I before. talking

Aaron Alt

rent Let abatements, of go was With been pleased months that we've couple the approach seeking and landlords, out rent shared-paying the in with have order. reverse me happened. to abatement, quite experience a with to respect results our initial go the

portfolio of so are leases overall. a under with With abatements of on we options you pleased generally to can't As expense and in dollar way, but we're length don't, we lease work a expect, cash that with we the is received you have I portfolio have and we years, options would our the perspective. do relative respect five all far from the still those The work to number. marketing. or given quite exploring are give us some a partnership the with landlords where conversations our that

the Absolutely, for us. doing well was campaign brand

well the the we the for as in the brand like the in can't look a out points believe and carry tied focused bring many traditional, of it brand, what how while even as We're still the as stores we believe us. effort, campaign, that in just we you more than stores continuing more forward. up, to campaign, we sale same-store we role, digital to will have does as, basis So were figuring tell positivity we role marketing on believe

work more do so there. to And

SG&A be QX can I to COVID. very to are And that's say. We all going as up we careful ramping watch about continue in over any and area

Operator

Thank constraints, to you. over time Chris, comments. turn due to it I'd closing you to back for like And

Chris Brickman

incredibly your in To excellent Thank for digital you, transformation quarter, summarize, having milestones and important the and track prior for on same-store retail was and questions our adept reducing cash, the by When a of thank aggressively the struck, and COVID models managing excellent an online company today. structure the service you to results team managing delivering sales achieved accelerating our all in pivot and massive through rollout liquidity, cost an dramatically COVID-XX impact. demand. demand increase reinforcing accomplished delivery in

and e-commerce teams, Our of teams story. are real stores, our by the this led stars distribution,

And color and position even because a as hair professional footprint competitive enterprise emerge hair them, an and stronger with in of we digital care. larger expect a to transformed much

our Additionally, with us again well-positioned capital a our today. for company. believe recent we transactions, emerge and have to joining survive a you financial enhanced Thank stronger prolonged and we markets flexibility downturn are

Operator

for your for you ladies today. service. AT&T conference and Teleconference using Executive Thank does gentleman, conclude you and call your that for participation and Thank

now may You disconnect.

Sally Beauty (SBH) 9 May 202020 Q2 Earnings call transcript