Sally Beauty(US:SBH)2021-05-08 05:36Financial Data and Key Metrics Changes - Net sales increased by 6.3% year-over-year, with same-store sales up 6.5% [30][29] - Adjusted operating margin expanded by 510 basis points to 12.1%, and adjusted EBITDA increased by 55% to $141 million [36][29] - Adjusted diluted EPS more than doubled to $0.57 [36] Business Line Data and Key Metrics Changes - Sally Beauty same-store sales increased by 4.9%, with e-commerce sales up 46% year-over-year [37] - BSG segment same-store sales increased by 9.9%, with e-commerce growth at 68% year-over-year [38] - Hair color category saw a 27% increase in Sally U.S. and Canada, with vivid colors growing by 53% [13][14] Market Data and Key Metrics Changes - Strong consumer demand driven by improving consumer confidence and government stimulus actions [29][8] - E-commerce sales for Sally U.S. and Canada increased by 56% year-over-year [30][14] - The company ended Q2 with $408 million in cash and zero balance on its $600 million ABL credit facility [11][39] Company Strategy and Development Direction - The company is focused on three major priorities for fiscal 2021: completing transformation elements, leveraging new capabilities to recruit and retain color customers, and reducing debt leverage ratio to 2.5 times [18] - Key initiatives include expanding delivery services, replatforming the BSG digital storefront, enhancing loyalty and CRM programs, and continuing the rollout of JDA [19][22][23][24] - The company aims to be a leader in color with a focus on customer centricity, executing a full reset of color offerings in all Sally U.S. stores [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of fiscal 2021, expecting net sales growth in the high double-digits for Q3 [26] - The company is cautious about ongoing store closures in international markets and salon capacity restrictions in the U.S. [26] - Management highlighted the importance of ESG initiatives and their role in long-term performance and value creation [27] Other Important Information - The company plans to test approximately 90 store closures to analyze sales transfer and purchasing patterns [17] - The balance sheet remains strong, with a net debt leverage ratio of 2.34x, and the company aims to bring it closer to 2.5 times [41] Q&A Session Summary Question: What are you seeing in terms of the cosmetic side? - Cosmetics is a small percentage of the business, continuing to decline, while larger categories like color and care are significantly up [48][49] Question: Do you think the headwinds were more than a tailwind? - Sally U.S. was up 13.9%, but international shutdowns lowered overall segment results by 900 basis points [52][53] Question: Do you believe you gained market share? - Sally is outgrowing the color category, and BSG's color growth of 17% indicates strong competitive positioning [54][56] Question: Can you talk about your CRM and new customer acquisition? - The CRM program is improving, with a significant portion of customers returning, and new technology allows for personalized customer journeys [60][61] Question: What cost pressures are you seeing? - The company is experiencing wage inflation and product cost inflation but remains confident in maintaining 50% margin targets [65][66] Question: How did the Texas storms impact your business? - The storms caused significant disruptions, with around 1,000 stores closed for multiple days in February [91] Question: Is Q3 expected to be the biggest of the year? - The company expects net sales growth of 35% to 40% in Q3, but the environment remains dynamic [92][93] Question: Are the operating margins sustainable? - The company believes it can maintain low-single-digit same-store sales growth and leverage SG&A in a stabilized environment [98][99]