Sally Beauty Holdings (SBH) Misses Q1 EPS by 9c, Revenues Miss; Maintains FY20 Revenue and Same Store Sales Guidance

Sally Beauty Holdings (NYSE: SBH) reported Q1 EPS of $0.47, $0.09 worse than the analyst estimate of $0.56. Revenue for the quarter came in at $980.2 million versus the consensus estimate of $995.22 million.

• Consolidated Same Store Sales Decreased 0.3%
  • Beauty Systems Group Same Store Sales Positive for Third Consecutive Quarter at 1.2%; Segment Revenue Reaches All-Time Quarterly High
  • Sally Beauty Supply Same Store Sales Decreased 1.1%; Europe Turns Positive
• Global E-Commerce Sales Increased by 27.6%
• GAAP Diluted EPS of $0.45; Decline of 16.7%
• Adjusted Diluted EPS of $0.47; Decline of 17.5%
• Continued Progress on the Transformation Plan; Overall Remains on Track
• FY20 Revenue and Same Store Sales Guidance Maintained; Adjusted Operating Earnings Modified to Flat to Prior Year

“Although we made significant progress on our transformation program during the first quarter, we fell short of both our top-line and bottom-line goals. I would highlight two key factors that contributed to the shortfall. First, traffic declined at both Sally Beauty Supply and specialty retail in general, resulting from the shortened holiday season. Second, implementation-related technology disruptions led to product pricing issues, the misapplication and unintended increase of promotional discounts, and a resulting disruption of our planned marketing activities during the quarter,” said Chris Brickman, president and chief executive officer.

“As we enter the second quarter, we believe we have addressed the most critical of the technology challenges we faced during the first quarter and we have already taken aggressive management steps to improve financial performance,” Brickman continued. “We want to be clear that our first priority is to complete the transformation and put in place the right retail and digital capabilities to set the company up for long-term success. We are focused on unlocking the full potential of our highly differentiated business and we will invest additional resources as appropriate over the year if that is required to deliver our objectives. To be prudent, while we are maintaining our top-line expectations, we are modifying guidance for Adjusted Operating Earnings and now expect that metric to be approximately flat to the prior year.”

“In summary, we remain confident that we have the right plan, that the business is highly differentiated and defensible, and that we will return to growth and provide value creation potential for our shareholders over the long-term. A challenging quarter will not distract us from completing our transformation goals and delivering future growth,” Brickman concluded.

Fiscal Year 2020 Guidance

The Company is maintaining its revenue and same store sales guidance, while adjusting its Adjusted Operating Earnings guidance to flat to the prior year. This reflects the implementation challenges of the first quarter, aggressive steps already taken to recover and a commitment to invest as necessary to complete the ongoing Transformation Plan. However, when combined with the benefit of the debt reduction and share repurchases to date, the Company is maintaining its EPS guidance for the year, but at the lower end of the range.

For earnings history and earnings-related data on Sally Beauty Holdings (SBH) click here.

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