SBH - Earnings call transcript Q1 2022 | Sally Beauty Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Sally Beauty Holdings Conference Call to discuss the company's Fiscal 2022 First Quarter Results.

As participants, all participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session.

Additional instructions will be given at that time.

As a reminder, today's conference call is being recorded.

to of call for Investor Holdings. like Harkins, to Sally would President Vice Relations I turn over the Jeff Beauty Now, and Treasurer

Jeff Harkins

you. Financial Paulonis, President for Chief Executive thank on Thank Marlo call and everyone, Cormier, and With Chief the Denise us. me you are today Officer, morning, Good Officer. joining and

call at viewed various a the by may sallybeautyholdings.com/investor-relations. our indicated this today's Reform important differ call for Private on Act Before I'll may everyone remind of Litigation of those available from to these on remarks like contain forward-looking we also provided forward-looking that can I'd within Securities results presentation from materially be meaning remind begin, statements, investor management's statements link of as site we have Actual XXXX. result the made a that the that you the those made views recent Form of report on discussed including our SEC. today. only of forward-looking factors, other update release, the most in represent factors our annual And website. this items The GAAP with call undertake Any and measures risk - XX-K as and to earnings section its filings detailed them. in reconciliations its obligations no a non company has adjusting its in financial and explanation in on we press provided of statements

Denise the formal begin to remarks. would I to the to like over Now, call turn

Denise Paulonis

stylists. the demand and with professional new Thank you, for year begin color DIY categories Jeff. reflects And core of both care, enthusiast fiscal to everyone. good financial pleased our results, morning, solid among We're and which strong

the inventory challenges, a has and customers and to current are effectively enabled Notably, also us to performance our countries. in for on in Omicron globally certain manage delivering prioritize focused to for and I'm healthy impacts closures superior to macro through experience of having is stocks. levels ability and we're our first-quarter the services. products maintain we which capitalize every proud Our our believe continuing from demand which remaining headwinds various and on managing at due to our chain well-positioned supply and team a navigate turn, ongoing reflects restrictions cycle,

actions achieve to just track remain just one here put our culture, execute that four guidance. spoke dive we last our to our on had When month. XXXX, quarter, on XX road deeper another you for of opportunity to I've we the the ground I've over weeks With company, for been into beginning map full-year the the infrastructure over the Sally we organization resources talent, the years, quarter, be [indiscernible] was the prioritize XX% around strong X.X%, to our net quarter staffing, our grew favorable As a of customers. up rose and customers hours, XXXX, dynamics I'm EPS to the of serve supporting health X.X%, the teams of mitigation the in traction how grew store comparable year of and year-over-year. first sales continued adjusted our XX% safety navigating With and final to we the weeks four leverage and We're remarkable. against the the variant and industry strategic were to to pillars. our and gained found while number increased of margin fulfillment. to proud sales capabilities challenge place and to customer-first past this extensive In and growth as fiscal gross start teams have at in

time on updating within X. our loyalty product driving you a delivering personalization, these spend supply pillar. some going chain. X. X. advancing and X. include: digital As progress I'm to platform, and reminder, each leveraging innovation, our

the and front, our On a enthusiast we're robust digital creating DIY platform for omni-channel stylists.

as and suite and of little in when two product, delivery utilizing it they services across them customers BSG allows are how to want and Our which full ordering hours. as Sally our get

connect community. to BOPIS to our work options During Sally our to to for the enhance store and network BSG CosmoProf delivery of app completed further first our fulfillment we the our our quarter,

engagement Additionally, customer increased functionality the section rates we BSG and website, are well satisfaction as seeing education around refreshed on ease-of-use. of as improved the

strengthens and of our leading in as side, of the an touch for in Initial advice, positive Overall, and being virtual customers color on-site, and digital launched new expertise Sally increase care, way has continuing we in consultants approximately we're call education. convenience higher another video color. expert for Sally velocity. Sally professional further Dallas-Fort in service the Worth piloted seeking the On live our currently customers our been a area. response to XX our By stores level this color provides conducted incrementally position

sales e-commerce 's QX. represented versus in X.X% year and of refreshed increased e-commerce mainly quarter, ago, BSG sales platform a driven XX% total This by

During ship-from-store recent rapid our and most fulfilled sales of stores XX% delivery quarter, for XX% and accounted XX% Canada Sally as represented comprise e-commerce the U.S. two-hour BOPIS X%.

both we a BSG our Sally the or reach omni and -channel of for continue can and e-commerce believe customers, years. As more sales of in scale to we coming services XX% full optimize suite

Moving from to at XX% and loyalty In Sally, our our sales quarter, the approximately first programs. U.S. loyalty second growth and personalization. of pillar, Canada came

member climb active and end. stood at fact, quarter the continued an high at count to In all-time

our to resource our nascent we compared another Additionally, This go-to quarter. card, growing rapidly and in helping credit in and engaged X% are create efficient coupled the our their will stellar connections stronger way, who and us with fuel profitably previous came for of deliver we increasingly customers them us position run customers. capabilities growing business. BSG and more approximately QX becoming sales X% as look to the This our that personalization our increased our our yet community, rewards of are insights and represents with our as the There's marketing biggest from assets have to luxury no customer advantage who knowing data are. question with customers

increase All of value. lifetime support the revenue accelerating which customer and

in and XXXX. On marketing traffic marketing in digital be we'll to sales the fiscal front, campaigns media social drive further investing and

funnel, broaden our of to we into Sally expand footprint As to and Beauty key three plan touch points in critical discovery. consideration that represent acquisition aim the areas we Beauty new to customers

own voices as Instagram followers. that create in ambassadors authoritative be First, brand are will investing Beginning their organic invitations TikTok our who building of also and community - on smaller events. This influencers we're to grassroots to incorporate and for QX, awareness content that we'll DIY in initiative micro viewed samples, community products, and brand a influencers. Sally is building receive drive new

to a education launch Lastly, for DIY we X.X are the quarter. YouTube in is third that creating expected platform

rich throughout growth few the Turning stores to noteworthy Strawberry a Strawberry our callouts: continues dedicated online be Leopard, A product of of pipeline expect we our innovation. XXXX website. book color now the and Sally, driver year. to new At growth vivid to traction Leopard both innovation in third fiscal for The is on and this our pillar, gain slated line, significant

drier, manicure, brands Additionally, at-home the with at Turbocharged in the first well Iron point. Glaze, Diva we affordable Locks Joe as price high-end dryer quarter, as in head-to-head that and launched a goes hair more a Dashing tech best the

launches At was launch supplement have from higher-end introducing the appliances of seen the color innovation second Toning the more coming Olaplex Shampoo the among point to Strawberry QX be and care We half in products and brand. product year we've hair BSG, recent of we'll Leopard best launched. the new XP the the also

come to largest brands. be their the from key BSG an This glossing see year. color during This innovation exciting sub-brand, much more great deal and month to Another launch which we'll excitement to Overall, is biggest of in launch partner represents which adds expected us Shinefinity, for XXXX. the BSG's color. is Wella around to a

supply With the customer of fourth at pillar our is forefront strategy, our the chain. growth final and

mission week, will and of us phase promotions, be DC. be is in forecasting, and well and as pricing remaining a will to in Our integrated for across integrating us performance completed, up to in into growing ShipXme allow stock well system fully be great Once XX% our time, capabilities color customers. XX% we'll new as and Texas of assortment, chain scale The automated positioned localized network supply locations. We're made JDA to all towards the leverage steps Sally building and as future BSG our take on running of inventory with this meet North the our demand. shorten and and is care in the to every final we've that progress implementation and highly

ahead, confidence in even of uncertainties great that XXXX growth believe As at fiscal margins to at we the creates, look COVID are deal come. a have well-positioned we operating structurally we in to driving years and top-line continue the higher continue to

business for optionality XXXX fiscal outlook the and expect flow generate forward. and capital our allocation provide strong are meaningful cash to We moving reiterating financial

the and like to to create talented to In building who term. fuel out my and addition drive forward growth value to over our thanks over the With our on I'd long confidence I'll discussed, and customers, I questions. we're passionate X committed in team financials the your turn to to opportunities discuss future. will that call additional look then the the we'll are and pillars meaningful shareholder to taking business Marlo our our delighting express that, focusing

Marlo Cormier

morning, Thank you, everyone. Denise, and good

to year with the financial start performance pleased solid metrics. are We new across fiscal our key

sales demand. For reflecting the strong X.X% sales and net first X.X%, increased consumer rose comparable quarter,

metrics franchise sales. a related reminder, our our As include operations, we this with any sales quarter, sales, including comparable same-store sales and full-service effective replaced divisions which from e-commerce

more customers when continue recent to conversion transact they with remained and us. First spend shop trends, less quarter traffic with but fairly frequently as consistent

our sales. scale On prior new units down all continue and The million, drive but net with X.X% e-commerce capabilities e-commerce recently the site, our engagement. digital versus traffic per reflects strength, to transaction, and BSG our we utilize and resources increased total average $XX unit year. retail, customer to year-over-year tickets Global especially refreshed increased tools of whole, XX% was average ongoing increase as sales representing to

delivered came Looking at XX quarter margin in offset that last partially margin points strength gross which to by was reflecting both XX%, Sally profit, and segments BSG in in product first and at year, increases higher freight distribution costs. basis both gross up the

expenses. to Moving

X% ago. totaled related in reopening this spend. international versus increase and $XXX a increases primarily increased The higher to year-over-year attributable year markets in planned is First up to year, costs, quarter labor marketing expenses our SG&A million,

a points ago. anticipated, SG&A modestly perspective, basis increased rate As from up a versus XX year

of store offset beginning an to begin wage expect in will continue serving program as our optimization to part that We the latter XXXX. inflation

Adjusted EPS QX. to delivered points earnings. $X.XX. operating in rose Adjusted XX basis profitability margin now and adjusted Turning We XX% basis increased to XX.X% XX.X%. to XX EBITDA points increased margin to strong diluted

was results. Sally consumer demand $XX quarter. across segment Comparable totaled markets. sales X.X% sales million at and the e-commerce Looking and the At for U.S., Europe, Beauty, strong American increased Latin

while For by XX%. category the segment, hair care grew X% color the Sally increased global

the basis to significantly driven of XXX represented sales grew expanded we primarily hair compared BSG product care and to compared was pricing U.S. XX.X% for representing year. of to XX sales. of year. a E-commerce compared Segment improved comparable pricing by Sally quarter prior the Gross generate XXX margins points essentially prior at profitability prior points also our Canada. the at product basis points operating continue at operating gross as was prior-year. to was as compared margin grew In The points operating U.S. by the were result X.X% margins million color year-over-year driven on up leverage, the For year, XX% total growth margins year, Sally in a as leverage. the segment, XX XX% and the solid to vivid while color sales full basis XX% totaled basis. expanded the to basis while XX%. Canada, colors and to salons to Gross increased prior up Segment to improved category margin margin by margin $XX by XX.X% and capacity to BSG up strong, compared XX.X% XX% XX%

a with balance up cash and of revolving of first billion, the quarter cash a zero-balance and were line and XX% $X At December We conditions, strong $XXX financial outstanding ago. under year equivalents versus our ended flow. to credit. cash Moving the inventories base approximately in asset million sheet XX,

decision levels and Now, supply plan discussed as inventory mitigate the call, strategic continue last to order from our in made to on pull to disruption. forward purchases we earnings we chain building ongoing

of expect remain to We elevated half and year. come the second our levels the in short-term down inventory the in

the cash XXXX. requirements working well For operations $XX.X in totaled the from as $X.X of of fiscal inventory from plant million expenditures quarter as fiscal of buildup quarter, the the by first quarter of million. the during carryover was the used capital XXXX, expected fourth driven quarter Capital

in We strong cash half the to expect in business year. the primarily generate operating of the fiscal flow second XXXX,

Last shareholders. growth investments on we cash we to quarter, restart program. returning Importantly, as share prioritizing as strategic focused well our stated remain to intention our repurchase

excess was more $XXX at our million million. end to repurchase the aggregate the authorization. X.X million leaves current our used of shares cash growth quarter, entered of business pillars momentum This pleased net We're During $XX under our cost core forward. we first as an the we the At debt first year have to quarter, remaining with X.XX than to on leverage remain the drive ratio strong times. focused

our including surge macro a and environment reiterating XXXX backdrop recent of dynamic are full-year We challenges. Omicron against outlook supply the chains the

waves. While we in surge pass quickly, this experienced January, to expect impact some in recent sales traffic we to similar

nearly pandemic navigate under and dynamic during these to execute experience our our In years teams of with know addition, two periods. belts, how

basis points, growth margin by to GAAP and decrease primarily your by growth XX Sally points, of to approximately expansion of guidance XX stores in X% the margin to flat optimize Net as XXXX. our net range to X% continue to store we operating margin year U.S. basis to Gross X%, Our XXX basis this portfolio. adjusted morning. for following: of We points driven XX count appreciate approximately to time includes basis X% fiscal points XXXX sales operating the

the Q&A. for open ask call the operator I'll Now to

Operator

you. Instructions]. [Operator Thank

Parikh first with from question will Rupesh the Your come open. is And line of your line Oppenheimer.

Rupesh Parikh

my Good morning taking question. for and thanks

sounds way that? going QX on the much back but of didn't have impact about commentary variant, on Is the to an expect have it the an QX. like on think Just you it right to that to impact your it

Denise Paulonis

the part for we had first particularly We where things saw question. last certainly much that asking impact It of looks two it quarter, needing for that of end at employees this. through in like we're of think We've December. like sick bit and looks us and seen it's the morning, Good is wave out impact little down end a quickly. thanks coming how increased but -- I so of bit the figured just quickly. change big to Those weeks navigate Rupesh, went were little and way be to more this through. And really our the we've rippling a quite January, the very out our

of we're in of result January seen haven't well might pleased very year. the where I great up we rest we While with we the as a and think hoped, we're as are set have for

Rupesh Parikh

you you question I related guys in you Okay. you your higher I be mentioned first Great. year of Maybe expect stronger gross that. half the in back call, the to than majority sales on know the the of margin a half think the -- with just to of that last the mentioned line. expansion expect that back year And half. also

how for cadence can sales in you margins of terms and think us forward. update If to just the quarterly going about

Denise Paulonis

starting was the various [indiscernible], Yeah. My lines P&L with to as mentioned, take year. the of QX the we've through the great start it sales a

really about feeling again, So year. full good the

lower a been hasn't Given lowest as quarter QX. QX the well. volume are being than at we bit our little surge in January looking sales Omicron historically, QX,

that bit. down growth, strong Still be basis just year-over-year a have as growth on to but do isn't planned the a going QX. as we So,

the As geographies. actually in cases see starting surge Denise mentioned, taper. We the of also come it lot expect quarter, but are a starting and we see see to think we in peak that to we're in

will loosen perspective When significant perspective half, as bit the year and had get looking So, overall than we're year basis. be but a growth tougher an the go back from lot the starts the we we comparisons I year-over-year expect beginning in look last QX in move those some then to it, lower mentioned, past from when the at at a restrictions it that reopen closures and rate was. little a from back when is to and half markets year. into at of a Keep we mind, of QX

we leverage line, able the increase Having basis of to we we we're strong guidance we're basis points execute have as see have. in highlighted then from when to on past, So, as in this. a and seeing a look When at at the costs be XX margin from All here We takes as comparisons out look quarters. more that good a all looking our just outlook, points. at that full-year we've be we're about mainly high dollars our and from pricing And expansion gross account to we into that the year-over-year, on increase our you're QX. inflationary performance And we then been And XX with we rate benefits back in of this there'll labor, as said, well. up the did basis, we've out full-year that comps, contemplates will normalized full-year do really have basis we at in relatively half. expect pressures here consistent so full-year confidence the talking have SG&A, on the looking line the finishing freight slightly. full-year expectations

also And our markets markets investing as as our we well also then, increased We as international in in expense XXXX. we those initiatives reopen plans have in are marketing. growth

to still marketing to rates, progress a the more looking little rates more more have back we normalized towards made did have normalized room in increased we marketing bit there. get go to QX, So, but dollars of

throughout that So, as increasing go we work still investment the towards we'll year.

consistent step-up puts from from so us And with line deliver last in planned, where from So of great year. to are QX QX that we've SG&A as much a full-year position bit dollars in to a pretty full-year the then operating QX. expected to little on been a relatively be out, basis, margins a

Rupesh Parikh

you Great. the all Thank color. for Okay.

Operator

you. Thank

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

Stephanie Wissink

that on the first quarter. if of you're to willing take in had Any took on quarter? and to morning, the saw trying Good price everyone. pricing I inflationary your the within to pressures pricing. the you. wondering incremental comments gross some level of you the plan quantify follow-up you a line. Just in reconcile second I'm Thank margin

Denise Paulonis

with I'll This start details. broader is some additional commentary fill Denise. and any Marlo just in can then

really of we to can. set ultimately pricing for stronger through, that tools see that that do price the And we're where set what importantly, costs really about us, we're in with is looking the then and way strategically and with line available of we price think thinking to us coming a in cover I seeing. market, stay we're elasticity around new analytics the able to

lever been to us, trending towards be take we're outsized, tools prudently we CPI is that use quite while what a important choices perspective do expects. continuing very those for So, has line look staying consumer it particularly making we to with go. as our pricing the price We're from In general, so not to sure in forward what there has more surprises to the no customer been. inflation and the and

mentioned in from quarter, to Marlo, I'd be came is what first able that? to the you what volume sales anything think really both add price deliver. I we're growth to looking importantly, is was want to That and balanced. which our improvements

Marlo Cormier

on XX on to we both of just also points. margin to QX the That that guess we the that we and I reiterate, have about pressures, basis having Yeah. line. pricing largely actions inflationary expansion overcoming freight took. the line, but was margin line, We're costs we're rising SG&A driven in also talked DC overcome the by that

objectives, just ability strong market team to what are both take to can the the at think of to and advantage advantages confidence with So way then going those us about delivery forward, when is I able of think just be Sally that 's pricing our to really And margins. I our think gives moves, it BSG. but we move. in They the our terms Denise pleased the by the we and were expand points,

core of highly our And if things some you those categories, inelastic. are, think about they're

stylists home those are on then to XX% Sally, really highly and pro we're assortments. is exclusive. over ones assortment the use. have the sales exclusive we from differentiated We in that largest from our wholesale At colors care only And of side, core and brands. do distributor the the and coming owned of for product BSG XX% we're

a differentiated have highly We assortment.

really a build that We our then we're continue It's and have strategic we to behavior. and position have executing as these notable loyal and sticky the mentioned, haven't And finally capabilities in the a customer's of customers. unique say, a market seen on Denise promotion leverage, I able price and change tools. proven record pricing just in to track and to increases we

Stephanie Wissink

loyalty I Very helpful. could If on just and follow-up with a marketing.

pillars. down, the advancement you're the program made were think but of one that was know was us other investment little on up. investment I return Thank thinking and on quarter. a the s also that you the strategic big that traffic in KPI I marketing about how bit about on investment you've your seen. loyalty Maybe you. help marketing reconcile Talk

Denise Paulonis

Absolutely.

the things that came company to of XX% actually associate two our we our customers XXX% impressed a BSG. of I customers sales by One of was the into the and is that about in can in so Sally number and and know

investment marketing our to people us who with big we while the for the our reach understand opportunity we existing in customers, the continue and funnel can that of more else top opportunity attract. is to put Our

really could marketing and QX when around we that we performance in about pushes digital was investments So, think do. and that the the and you made it

Importantly, harder that the just knew. we little funnel, bit I think upper push we did a for versus try customers to

top card. the end customers And from million over QX, QX side our BSG of the so, we sales we level return a as funnel, to up number after it's a that our really point of about of got loyalty increasing. we coming on can the that XX base think the return we quarter know talk want but we've there, investment I we to customers the about the on on of and that And when when lower finish go record side went bit we to. we a Sally X% do credit with think customer in And have pool, to through little strong see again our a that

we people on. measure, and get trying that be metrics to can trajectory pretty good we're about where that them the we're feel to stickier, the we reach So,

Stephanie Wissink

much. you very Thank

Operator

Thank you.

question next and of Our with Chen Cowen comes line from And is line your Company. Oliver open. the

Oliver Chen

you. Thank Beauty those little [indiscernible] about bit going And about Division for Denise. was The sales. [indiscernible] some forward. [indiscernible] and what AURs be comp catalysts softer as will still up [indiscernible] relative think [indiscernible] Sally would are to Hi, Sally a we also versus

Denise Paulonis

Oliver, Could unfortunately, up. to you're your I think you breaking repeat try question?

Oliver Chen

Sally ahead drivers division comps The key Sally and divisions. the of

Denise Paulonis

go-forward. very If and a operating a think Certainly. in our hours as pretty have about year actually bit then should the challenge we're with the salons we delivering in reopened Latin lapping where we we've for that number about we When uptick end slowdown Sally, business particularly continued and comp think of think little out a and is good that. business was sales a our how felt where the few Care our that amount December healthy fully more Strawberry Sally strong number businesses. were were we about business with year. a in in performed good consistent where shorter needed of lapping got geographies. of COVID of good with across particularly bit easier we against with we products, and sales strong the store growth the in stylists of the up overall, quarter, our But feel saw fair Europe states chain about side at where and that you things like a the quarter, of was performance we businesses. we little on indications saw Sally in last are really to what performance. America Leopard BSG last all very business. a They still growth our to And quite came was about which what we saw were was in Performance the us compares their at business and there color, the

year. go that them we that beginning So the of through the tapers the as in helps year number

about Sally good So all-in-all felt performance. our

Oliver Chen

Thank you.

Operator

Thank you.

go we of to Next, Morgan Simeon open. your is Gutman will line the And Stanley. with line

Simeon Gutman

maybe the first wanted of give seeing I gotten of least maybe like going? month that January. seems in better, up that's in if you now have and by the half that's Can And And as as you us variance everyone. the morning, consumer? on are Good nuance to follow January? the there a recovery back was can sense Omicron at if the you handled SBS about how versus any -- cadence Omicron there rapid talk of a case, the was is the things VSG

Denise Paulonis

wants Sure. I'll then to and if add anything. start Marlo

In seeing, traffic improvement can definitely last I you in or week the so, we're terms of an what think in see trend.

an We lives. sick also see amount other might experiencing their challenges be out who improvement or in the of associates, our in

at saw So, normalization fairly this And we is we happen. us behind starting counts, high won't do see that to a case so I say point. completely it's

In there's really a a than team and just more progress that of environment, saw side this general, it's times course this The that's a time regular small for bit this time. to because Sally again. that and just a stores the in to a of our Europe, as down little saw think retail compared probably BSG in one business I little day-to-day wasn't BSG not example, in terms a actually think we've business it we're more members Omicron, less the go. Sally, down. only a saw operating unique has the than say that pattern shutdowns that or through we markets stayed for a is, think more dip, European business But and business. the lot different what bit to business than more lockdowns locked The prior our pressure noticeable I thing little time pretty Netherlands, part up sales lot of is other was of very seeing a there sticky but variants in true of The and same gone our general I geography. a with lot that did. trend on we The stylist

go us in didn't the pleasant far businesses of they in they how additional being That as surprise a was While Europe. restrictions, to certainly as parts terms most of managed. just had shutting down some variant's

Simeon Gutman

in then Thanks the And the for elasticity about follow-up you of that. both talk is, my can businesses.

classifying looks On AUR an units. the to and the follow-up, those don't there's I know given like across brand. surface, full-year and and how it within anything be Is this SBS, with like QX SBS more the is of a on seems between can top how follow-ups. units anything looks played Whereas the changing up. inelastic, you so follow-up pullback that Is how some in were sorry observation, about in there maybe out? said you looks just were performing BSG some BSG as share gross it margin based your lines know the any I all flow-through. guidance? you then it like And

Denise Paulonis

I advantages the have some we inelastic Let's with start ways. question. in the terms businesses, say would different in of inelasticity, from but both

about market of home it's Sally the you share at the for really the use. share about side, would think say color the I you when only is market when the least If at provider statistics. Sally you XX% think Sally pro customer, look

to a quality to is the down And service. going does as at not everything buy long and go the their So, if up an store it be might treatment we're get up you're And going either so, you're else, customer you call you talking about, need of trade and from box where to color. or $XX choice color, if think $X about or Sally? $X to and the not all-in tube silo you now going $XXX trading results bowl buy to a they to

such so place in positioned it's So, market. just the -- uniquely a

color, box down as trade to of to you're $X, a result. you If really going may but the get good save not you

difference a for we in that's a so, stickiness where $XX see consumers. or loyalty Sally on $X And the $XX the purchase, of the

So once give how product, we and use loyal. teach very the the them them confidence to they're

have guidance point, to customer six anything upon no. based is that really ways on last that saw bit And seen you sure, in on quite months what behavior. haven't I a at say change And and various over prices for in would full-year we and really, changing we then QX? the I think So, a really year up moved question yes, general, almost follow-up had our a there in there

the cadence year likely the out we expected. way to the think that is play of I

the I expected. the quarter quarter a always cadence in quarter that lighter the terms or think seeing what second than we of would every we out. of year And to be importantly, is first sales, little plan in Marlo the mentioned, that play rest sales expect we

of I really bit performance different coming other gross in would the a offset little we the quarter have strength that's through say, working with piece the to and costs. think of margin as first some the pricing one stronger we

to styling were is assuming and I So, been fairly to that say talk have quarter, inventory. they the four and did year, dealing gross supply going to year about in the differently, we throughout with quarter. some these challenges bit was think gains a more the we pressure the weighted. We consistent electricals with we make be we're our time bit on one going challenges margin the talked some one to about the moves for I the so be call piece our started we've frontload this a disruptions and Sally. back-half normalized last the really if more as tools now, quarter-over-quarter some will did was and this and There little versus chain

going for inventory at level the our we're So, place been healthiest ever is the pandemic. we've up,

we've good full-year So, able about that to with sales talked deliver cadence that, we feel these the being about. with

Simeon Gutman

both. you, thank Okay,

Operator

Thank you.

comes from the is Raymond Tong line line with Olivia And Our question James. open. next of your

Olivia Tong

morning. bit bit, for put of Good a wanted expectations a on your quarter. this a to little little finer follow Great. point Thanks. up I

sense stimulus. can you you've your modeling, what to when were, got a back fall off have expectations -Omicron got the you think you So your based of of on you've on etc., them pre macro, whether whether, Omicron, inflation do and top with

rate of do the back do there stabilization you base we're Just identified you the call terms is there? let's planning the respect what a it then you you so could And expectation to run you you're of on the close? doors that in count? to following this, wondering much. sort touch XX once continued feel of this the or right just XXX optimization. is ending Have bit. like And calling or store store Is if store Thank a to up little footprint to think you with

Denise Paulonis

and Omicron going choppiness is world years this the I'll been start the to that what where We for We've now. know we dynamic. which we did two didn't and us with living first and came be planning process. year one, down to are this do into the expecting up into this

expected And disruption be so, around whether we pressures, the whether be labor pricing just that uncertainties pandemic. or the that disruption, some had

we're difference navigate what to how disruptions out. the these numbers in we chain deal we're going of these think again, think there's we the well-positioned all to we January whole the our think, all combat really do expect just we're that dynamics teams these think and don't are lifted just pressure but a the that get and done with with way and we're supply with and again, a And thinking like planning have we've the our way challenges. these I play deal really on. We and waves I in to with seeing more that and I try earlier the way lot with and takes to mentioned, So, know of positioning and puts pull-ins, past that also lot

just If you crazy. -- year, look last at it's it's

and know mentioned COVID you with experienced it it. You mentioned deal all We've we mentioned stimulus, waves. to you how weather,

downs. the of other on that out. And a we've feeling we're question we're pretty learning -- the than in bit ways not a and change ups planned and about deal what you So, then I'll jump store good threw optimization new this with with lot to

we when optimization that get the is can a for opportunity on think us, store to we think where I focus big opportunity really about sales transfer.

reduce So, before, positive help base be been opportunity shift is to as that pressures a I profitable. for offset The sales, a think our stores generally We've other cost be and test. have us able talked to the bit we've all to to running the about are overall. the business

about results longer. for stores identified. read specifically closure this continue be We -- bit we'll have of identified But year, continue a little a make are that the we'll we which with stores pleased for the test, XX-store to all closure the that those to is

is XXXX stores. for of plus So, the to good stores path known makes by to and the markets that we're a very have that go down, well close some XXX feel it's about that those offset we new us that will in. sense path already partially a But selection for is openings be planning and some that

that I where I the think go, the want bridge longer-term we and margin understand the transfer today company. are the we operating the sales where efficiencies we when understand and and into company from of to this and also could compared to think test to continue the the of

was stores of in delivery profitability our has healthier our of able now e-commerce while customers so is stores more service before. it on base managing than cost Our BOPIS and we've a that our overall with through gone still up carry pricing to even what been into as our number profitability

get we've and I we'll a of good both year expect with overall, in our to take have as far. where stronger But we might those later feel what done read we'll so path post-XXXX here. So, us of view the

Olivia Tong

are not helpful. why that of but in they're about Have bit XX% That's SBS, buying love little of a And done more new it. the the bit then joining to why be color give any you you customers, on think members? there. not may you just more members, SBS We'd little a diagnostics who aren't the people store? can or they loyalty Got they're if on color just they

Denise Paulonis

one, new customers really and reasons. a to one few. store continue could in to And store, There program. sign loyalty come when I'll all throw the a I we a regular for shop think into up day customer expect you of on wouldn't first them do out be Of a types see come if customers we on to the basis. new have they're Sally,

aren't all So when honestly terms program up other come their see and offering have Overall, that of of for to with baskets There in in customer an actually they're smaller what a not or those they'll that's they of be folks our loyalty completely required a loyalty might customers than sign to not who as programs always population to less spend to in, still with that's love they it. terms no customer little speaking, a outside choose dollar get more Generally in is We people signing honesty, of are sharing amount And drivers if customer. in we fine loyalty would and think us. who just some us. about has is information. that a fraction a comfortable specific but We to certainly of participate, best coming we or other be not the of average design shopping customers who's basket outside bit customer loyalty up. our something Clearly them frequency. need what participate.

more to have much signed they why in might this not for it's an time. account macro as think I up point at issues

Olivia Tong

so Understood. Appreciate much. it. you Thank

Operator

you. Thank

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

William Reuter

Hi.

I two questions. So, have

all year-over-year basis seen you way. are increases mentioned price increases maybe what in on sending that you been vendors price seeing the a you types is, your have or been pushing guess, that I through first point? The this you've have at of

Marlo Cormier

one normal at say to. vendor often that. thing Yeah. From that sometimes to this point Vendors I'd thing. annually, is very do increases, just least than out price a more

thing So, side, it about BSG you out. -- a think the when another on to that's point that's

stylist, up of keeping CPI recurring mostly again, of From it's amount, and -- with inflationary the For price used This to the increases. is part their actual they're a lives. pressures. in terms normal

Denise Paulonis

comfort for of the bit main than and especially cadence on years, lower changed, often, probably once more the to past would in history. how know and I kind hasn't clients several little been confidence And that a a maybe more the concern a side that they behavior year, that. been say bit recent has loyal very again, through shopping a Their they to happy have more is little higher the it's year again, in with. than stylist. their do times products the to But in keep

patterns. their shopping changed And really haven't so, pricing

William Reuter

that mean that were does relatively comps, units flattish? X% the guess I Is fair?

Marlo Cormier

pointing was Denise out it's pricing volume. and coming from so that No, both

William Reuter

you a The down your and below X.X have two times leverage target. net second is, is times

your shares how times. million guess, on to X.X You say target share this repurchases? of about what guess, are And pace of quarter. that focused the $XX I the in does repurchased of I you getting

Marlo Cormier

rephrase. I'm a put So maybe not sure to there. target out we've

is what a think to be. leverage at we place great -- would X.XX a say I at is ratio XXX

I just go We the are would with really are. where overall. back we pleased to

really all teams Our cash in balance the a business sheet. post strong through came this and just a our flow model strong environment dynamics generating just has and such really really to with pandemic dealing the

$XXX run we've balance sheet. definitely outstanding have cash usually So, ABL. would so some the anything we Historically, on around million $XXX the million, we We on got balance the on of sheet. have don't excess

So, we're terms in positioned excess well cash. deploying of

I $XXX think initiatives. to will we to was program. We've we We X% growth capital the restart up And We've the our got got opportunities further on like say, left purchased our that We repurchase prioritize deployed optimize did, structure. you $XX company, continue then that. of million have million there.

additional past P&L. us where interest can the do that savings some we the on maybe in see You get

up but you put that we together, what to free of cash on in optimizing certainly buybacks through shareholders generation, we're be as is for of this balance terms as cash return share cash to will and about loaded, of million $XXX year. $XXX flow all capital well predicting to million half where us are So, million generation, value $XXX sets the you think sheet. back well That continue structure.

William Reuter

taking questions. Great, thanks for the

Operator

you. Thank

Goldman Sachs. question next line with your will of Jenna Giannelli open. Our line from is come the And

Jenna Giannelli

question. Hi my for taking there. Thanks

-- you're very inventory now. bringing with year-over-year balance, amount On and are it you're comfortable said comfortable healthy the up

across you're supply looking industry and little comment if some to categories bit of curious there still or looks the replenish chain on you headwind? a Just are anywhere, if that out fill more how can [indiscernible]

Denise Paulonis

let in. and jump start Marlo I'll So,

cross on we're sure Also, supports stock be front, we've but we're that is that where manage color. pull color to When around focused be able our think people our business our that went, of for color it's pleased and It think the about I it's moving with being we forward entire really demand. and our that BSG core products, Sally really our business customers. looking category the heavily that to that some able what fastest what to in we and sure for service inventory into line can products. continue core of much in on been

So step-up been. very focused in terms the has of where

a to are have the to few being believe able where be through some be. and we and system, utilized than appropriately tools that's other a offset by that categories we styling opportunity, need inventory quarters. Our into we be But get and we things as where the little lower through going those might the business to in color

Jenna Giannelli

one Okay. Excellent. just question. Thank additional you. And then

or updates more just mass emphasized either You competitive the I the good share, in Amazon those of a competitive it's the little there quiet. landscape? on any broader whether even But strong it market a particularly place that's broader the to around, be. professional landscape, XX%. comment call That's been on Thanks. guess, Sally side on

Marlo Cormier

hasn't There news. much been really new

keep we eye all I same been happening we're that what we certainly like think who players there. the an are have out competitors. watching and there before there is the feel on out all They're

step any what meaningfully them our is. closer seen haven't We of to core offering

prior call, we're we and that position this future? are skills. really mentioned our think said our view I to and to for, we doing is what I start leveraging can expand we to stand do the of it if say, other really how at capabilities we looking work our our looked way how for year the on ourselves the

growth at might any set that watching bit agenda. So, the although for on seen we really complete, open that to who Were looking be traction places that more --any is also a haven't places now there. competitors play, we're transformation little closely looking we're while a new

is of We ourselves. -- opportunity have also we look that the can new to for growth That be data the need and we areas for drive business analytics our forward. that

Jenna Giannelli

you Makes Thank much. so sense.

Operator

speakers, you we any comments, that, questions with no if further have so And closing you. Thank have

Denise Paulonis

never call all and around so customers to that us our business served all our associates thank the for of in do effort just today lot to It they all our you without well are growth I the and to joining that the I'd thank is profitable of well of serve like world. importantly, drive like appreciate future. I'd and a and

call joining the thank all So, today. you for

Operator

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

You may now disconnect.

Sally Beauty (SBH) 2 Feb 222022 Q1 Earnings call transcript