Sally Beauty’s third quarter saw positive market reception, with management attributing the company’s performance to strength in the color category, digital marketplace expansion, and ongoing customer engagement initiatives. CEO Denise Paulonis highlighted the importance of color products, noting 7% growth in color during the quarter, as well as significant momentum in the company’s “Licensed Colors on Demand” consultation service. Management also pointed to the effectiveness of digital channels and marketplace partnerships, such as with Uber Eats and DoorDash, in driving e-commerce sales and customer acquisition.
Is now the time to buy SBH? Find out in our full research report (it’s free for active Edge members).
Sally Beauty (SBH) Q3 CY2025 Highlights:
- Revenue: $947.1 million vs analyst estimates of $931.8 million (1.3% year-on-year growth, 1.6% beat)
- Adjusted EPS: $0.55 vs analyst estimates of $0.47 (16% beat)
- Adjusted EBITDA: $117.4 million vs analyst estimates of $110.1 million (12.4% margin, 6.6% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.05 at the midpoint, beating analyst estimates by 1.8%
- Operating Margin: 8.4%, in line with the same quarter last year
- Locations: 4,422 at quarter end, down from 4,460 in the same quarter last year
- Same-Store Sales rose 1.3% year on year, in line with the same quarter last year
- Market Capitalization: $1.37 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Sally Beauty’s Q3 Earnings Call
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Oliver Chen (TD Securities) asked about the drivers behind upside performance in each division. CEO Denise Paulonis pointed to color category strength, digital marketplace sales, and customer activation as key contributors, while CFO Marlo Cormier noted that store traffic and ticket trends were in line with expectations.
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Susan Anderson (Canaccord Genuity) questioned progress on the Sally Ignited store refresh and its impact compared to legacy stores. Paulonis detailed that refreshed locations showed higher cross-category shopping, greater average transaction values, and longer customer dwell times, with plans to expand the program in 2026.
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Laureen Ng (Morgan Stanley) inquired about the sustainability of EBIT growth after Fuel for Growth winds down. Paulonis responded that ongoing supply chain optimization and increased own-brand sales should continue to support the company’s growth targets.
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Sydney Wagner (Jefferies) asked about category trends and the promotional environment. Paulonis emphasized continued investment in color, care, and nails, as well as new categories like fragrance, while noting promotional levels were consistent with prior years but increasingly targeted and time-limited.
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Olivia Tong (Raymond James) sought clarification on Q1 guidance and market share assumptions. Paulonis cited caution due to potential pressure on lower-income consumers from the government shutdown, but expressed confidence in long-term growth drivers like customer activation and new product categories.
Catalysts in Upcoming Quarters
In the coming quarters, our analyst team will monitor (1) the effectiveness of the Sally Ignited store refresh in driving higher transaction values and customer engagement, (2) expansion of digital and omnichannel initiatives, including the BSG app relaunch and marketplace partnerships, and (3) the pace of category expansion into skin, spa, fragrance, and men’s grooming. Execution on cost optimization and the ability to sustain color category momentum will also be key signposts for progress.
Sally Beauty currently trades at $14.09, down from $14.68 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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