Sally Beauty(SBH) - 2023 Q4 - Annual Report

Financial Performance - Consolidated net sales for fiscal year 2023 decreased by $87.4 million, or 2.3$3,728.1 million, impacted by foreign currency exchange rates by $9.2 million [177]. - Consolidated comparable sales for fiscal year 2023 increased by 1.4$21.0 million, or 1.1%, to $1,898.2 million, while gross margin increased by 60 basis points to 50.9$12.6 million, or 3.7%, to $325.0 million, with an operating margin decrease of 10 basis points to 8.7$1.0 million, or 0.6%, to $184.6 million, with diluted earnings per share at$1.69 compared to $1.66 for the prior fiscal year [177]. Store Operations - The company completed the majority of its Distribution Center Consolidation and Store Optimization Plan, closing 330 SBS stores and 35 BSG stores [173]. - SBS's net sales decreased by$53.8 million, or 2.5%, primarily due to store closures, while BSG's net sales decreased by $33.6 million, or 2.1$15.8 million, or 1.7%, while BSG's SG&A expenses decreased by $0.7 million, or 0.1$17.2 million, primarily from lease termination costs, compared to $27.6 million in fiscal year 2022 [193]. Liquidity and Capital Structure - As of September 30, 2023, the company had$605.6 million in liquidity, consisting of $482.6 million available for borrowings and$123.0 million in cash and cash equivalents [197]. - Working capital increased by $184.2 million to$648.7 million at September 30, 2023, compared to $464.5 million at the same date in 2022, driven by higher inventory balances and increased cash [198]. - The company repurchased approximately 1.5 million shares at a cost of$15.0 million in fiscal year 2023, with $580.8 million remaining under the share repurchase authorization [199]. - Outstanding debt as of September 30, 2023, was$1,078.0 million, including $680.0 million in 2025 Senior Notes and$398.0 million remaining on the term loan [205]. - The company had a current assets to current liabilities ratio of 2.12 to 1.00 at September 30, 2023, compared to 1.70 to 1.00 at September 30, 2022 [198]. Cash Flow and Investments - Net cash provided by operating activities for fiscal year 2023 was $249.3 million, an increase of$92.8 million compared to $156.5 million in fiscal year 2022 [200]. - Total capital expenditures for fiscal year 2023 were approximately$97.8 million, primarily for technology investments and store improvements [202]. - The net increase in cash and cash equivalents for fiscal year 2023 was $52.4 million, a significant improvement from a decrease of$330.4 million in fiscal year 2022 [200]. - The company entered into a seven-year term loan facility agreement for $400.0 million during fiscal year 2023, which was used to repay an existing term loan [204]. Goodwill and Impairment - As of September 30, 2023, goodwill allocated to the BSG reporting unit was$457.8 million, with an estimated fair value approximately 18% more than its carrying value [231]. - Goodwill allocated to the SBS reporting unit was $75.3 million as of September 30, 2023, with no impairment recorded for fiscal years 2023, 2022, or 2021 [232]. - For fiscal year 2022, an impairment loss of$24.8 million was recognized in connection with restructuring [227]. Foreign Exchange and Interest Rate Exposure - A 10% increase or decrease in exchange rates for the U.S. dollar versus foreign currencies would have impacted consolidated net sales by approximately 1.8% in fiscal year 2023 [237]. - A 1.0 percentage point interest rate increase would negatively impact annual interest expense and cash flows by $2.2 million [239]. - The company uses foreign exchange forward contracts to mitigate exposure to changes in foreign currency exchange rates [238]. Accounting and Risk Management - The company believes its allowance for doubtful accounts is sufficient to cover customer credit risks as of September 30, 2023 [241]. - No recent accounting pronouncements have been issued that will have a material impact on the business [234].