Core Insights - Sally Beauty is expanding its "Rooted in Success" campaign, which focuses on uplifting and celebrating the next generation of beauty, by reaching 13 Historically Black Colleges and Universities (HBCUs) with student-focused activities through June 2026 [1] - The campaign includes a nationwide HBCU campus tour that began during Black History Month and will continue through Women's History Month, featuring professional-quality beauty solutions and education [1] - Sally Beauty is collaborating with Impressions of Beauty and ESSENCE magazine to enhance community engagement and amplify the campaign's message [1] Group 1: Campaign Details - The "Rooted in Success" campaign was launched in 2024 and aims to create authentic, community-driven moments on HBCU campuses [1] - The campus tour includes stops at universities such as Alabama State University, Virginia State University, and Howard University, among others [1] - Free pop-up events will showcase products from Sally Beauty's owned brands and popular national brands, supporting students' hair and nail journeys [1] Group 2: Strategic Partnerships - Sally Beauty is partnering with Impressions of Beauty to activate student leaders as brand ambassadors, fostering peer-to-peer engagement [1] - The collaboration with ESSENCE magazine aims to highlight Sally Beauty's support for students and emerging leaders through social media and digital channels [1] - The campaign is part of a broader mission to champion education, inclusivity, and entrepreneurship within the textured hair community [1] Group 3: Product Innovation - Sally Beauty has refreshed its Texture ID brand, introducing a modernized look and optimized product assortment tailored for various curl types [1] - The refresh emphasizes inclusivity, performance-driven benefits, and authentic storytelling, reinforcing the company's commitment to innovation and accessibility [1] - Sally Beauty continues to invest in the next generation of beauty consumers, creators, and leaders through brand partnerships and community-driven programs [1]

Financial Data and Key Metrics Changes - The company reported total sales of $943 million for Q1 fiscal 2026, reflecting a 0.6% increase year-over-year, with comparable sales flat compared to the previous year [4][19] - Adjusted diluted earnings per share increased by 12% to $0.48, exceeding guidance [4][21] - Gross margins improved to 51.3%, up 50 basis points year-over-year, primarily due to higher product margins [20][21] - Cash flow from operations was strong at $93 million, with free cash flow at $57 million [5][23] Business Line Data and Key Metrics Changes - In the Sally segment, net sales increased by 1.2% to $532 million, with comparable sales essentially flat [21][22] - The core color category in the Sally segment grew by 8%, while care declined by 6% [22] - The BSG segment saw net sales decrease by 0.2%, with comparable sales also flat [22][23] - E-commerce sales for Sally grew by 20% to $50 million, representing 9% of segment net sales [22] Market Data and Key Metrics Changes - The Sally U.S. and Canada business delivered positive comparable sales growth of 1.3% for the quarter [5] - Global e-commerce sales increased by 11% to $111 million, accounting for 12% of total net sales [20] - The company exited most lower-margin full-service operations in Europe, which is expected to result in a modest sales headwind of approximately $10 million for the full year [6] Company Strategy and Development Direction - The company is focused on four key growth drivers: understanding and activating the customer, unlocking digital value, differentiating with product assortment and innovation, and accelerating new growth pathways [9][14] - The "Save While You Skip the Salon" campaign is aimed at customer acquisition and retention, particularly among millennials and Gen Z [9][10] - The company is expanding its fragrance category, with plans to have fragrance in 2,000 stores by the end of the second quarter [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the customer base despite macroeconomic challenges, noting a rebound in performance following government shutdowns [5][30] - The company anticipates a strong Q2, with guidance for consolidated net sales between $895 million and $905 million, reflecting a favorable comparison to the previous year's weaker quarter [25][44] - Management remains cautious but optimistic about the second half of fiscal 2026, expecting continued momentum from new initiatives and customer engagement strategies [58] Other Important Information - The company is on track to capture approximately $45 million in benefits from its Fuel for Growth program in fiscal 2026, contributing to cumulative savings of $120 million by year-end [18][21] - The company ended the quarter with $157 million in cash and cash equivalents, with no outstanding borrowings [23] Q&A Session Summary Question: Comparison of BSG and Sally customers and trends - Management noted that BSG customers are more value-focused, with a cautious approach to spending on add-on services, while Sally customers showed resilience and positive growth in color sales [29][30] Question: Promotional environment and expectations - Management indicated that promotional levels were slightly up year-over-year, but gross margins remained strong, and they do not expect a highly promotional period in Q2 [38][39] Question: Customer demographics for fragrance - Initially, fragrance customers are primarily existing customers, with plans to expand marketing efforts as the product line grows [40] Question: Q2 outlook context - Management highlighted that Q2 is expected to benefit from easier comparisons to last year's weak quarter, with positive momentum in both segments [42][44] Question: Category growth expectations - Management remains optimistic about color category growth, while care has been softer; new categories like skin and spa are seen as significant opportunities [52]

Financial Data and Key Metrics Changes - The company reported total sales of $943 million for Q1 fiscal 2026, reflecting a 0.6% increase year-over-year, with comparable sales flat compared to last year [4][19] - Adjusted diluted earnings per share increased by 12% to $0.48, exceeding guidance [4][21] - Gross margins improved to 51%, with adjusted gross margin expanding by 50 basis points [4][20] Business Line Data and Key Metrics Changes - In the Sally segment, net sales increased by 1.2% to $532 million, with comparable sales essentially flat [21][22] - The core color category in the Sally segment grew by 8%, while care declined by 6% [6][22] - The BSG segment's net sales totaled $412 million, with comparable sales also flat, down 20 basis points [22][23] Market Data and Key Metrics Changes - Global e-commerce sales increased by 11% to $111 million, representing 12% of total net sales [20] - Sally's e-commerce sales grew by 20% to $50 million, while BSG's e-commerce sales increased by 4% to $60 million [22][23] Company Strategy and Development Direction - The company is focusing on four key growth drivers: understanding and activating the customer, unlocking digital value, differentiating with product assortment and innovation, and accelerating new growth pathways [9][12][14][15] - The "Save While You Skip the Salon" campaign is aimed at customer acquisition and retention, particularly among millennials and Gen Z [9][10] - The company is expanding into the fragrance category, with plans to increase presence in 2,000 stores [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the customer base despite macroeconomic challenges, noting a rebound in spending in December [5][31] - The company anticipates a strong Q2, with guidance for consolidated net sales between $895 million and $905 million, and comparable sales expected to increase by 0.5% to 1.5% [24][26] - Management remains cautious about macroeconomic factors but is optimistic about the potential for growth in new categories [58][59] Other Important Information - The company exited most lower-margin full-service operations in Europe, which is expected to simplify operations and focus resources on core businesses [5][6] - The Fuel for Growth program is projected to deliver approximately $45 million in benefits for fiscal 2026, contributing to cumulative savings of $120 million by year-end [18][21] Q&A Session Summary Question: Comparison of BSG and Sally customers and future initiatives - Management noted that the Sally customer is resilient, with positive responses to initiatives like LCOD and a 1.3% growth in Q1, while BSG customers are more value-focused [30][31] Question: Promotional environment and expectations for Q2 - Management indicated that promotional levels were slightly up year-over-year but maintained strong gross margins, with no significant changes expected for Q2 promotions [40][41] Question: Trends in category growth and salon consumer behavior - Management stated that expectations for category growth remain stable, with strength in color and some softness in care, while salon customers are expected to return to regular spending patterns [53][55] Question: Comp guidance and potential for improvement in the second half - Management expressed optimism for the second half of the year, citing new categories and initiatives as potential growth drivers [58][59] Question: Insights on Ignited stores and customer trends - Management reported positive trends in Ignited stores, with increased customer engagement and spending compared to the rest of the fleet [49][60]