Sally Beauty’s fourth quarter results were met with a positive market response, as the company delivered flat year-on-year sales but exceeded Wall Street’s profit expectations. Management attributed the performance to disciplined cost control, strong gross margins, and continued gains from its Fuel for Growth program. CEO Denise Paulonis emphasized the resilience of the core Sally customer, especially in the color category, which saw notable year-over-year growth. The company also benefited from robust e-commerce momentum, with digital sales up 20% in the Sally segment, and highlighted the positive impact of targeted marketing campaigns and new product launches such as fragrance. Management acknowledged some challenges from macro volatility, including the government shutdown, but maintained that their strategic initiatives kept performance on track.
Is now the time to buy SBH? Find out in our full research report (it’s free for active Edge members).
Sally Beauty (SBH) Q4 CY2025 Highlights:
- Revenue: $943.2 million vs analyst estimates of $940.5 million (flat year on year, in line)
- Adjusted EPS: $0.48 vs analyst estimates of $0.46 (3.4% beat)
- Adjusted EBITDA: $111 million vs analyst estimates of $108.7 million (11.8% margin, 2.2% beat)
- The company reconfirmed its revenue guidance for the full year of $3.74 billion at the midpoint
- Management slightly raised its full-year Adjusted EPS guidance to $2.06 at the midpoint
- Operating Margin: 8.1%, down from 10.7% in the same quarter last year
- Locations: 4,415 at quarter end, down from 4,453 in the same quarter last year
- Same-Store Sales were flat year on year (1.6% in the same quarter last year)
- Market Capitalization: $1.58 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 Q4 Earnings Call
- Oliver Chen (TD Cowen) asked about differences between BSG and Sally customers and the potential of new categories like fragrance and Sally Ignited. CEO Denise Paulonis explained that while BSG customers remain value-focused, early fragrance results are promising and Sally Ignited is on track but will expand cautiously.
- Alec Legg (Canaccord Genuity) inquired about the promotional environment and customer response to fragrance. Paulonis said promotions were slightly higher but margins remained strong, and early fragrance sales were mostly from existing customers, with broader marketing to follow.
- Olivia Tong (Raymond James) questioned the impact of last year’s weak Q2 and current Q2 outlook, as well as trends in Sally Ignited stores. Paulonis noted easier comps this year and positive early results from store refreshes, with higher transaction values and more cross-shopping.
- Sydney Wagner (Jefferies) sought clarity on category growth expectations and salon visitation trends. Paulonis reported ongoing strength in color, softness in care, and highlighted opportunities from new categories like fragrance and skin/spa, while noting some macro-driven pullback in add-on services.
- Laureen Ng (Morgan Stanley) asked about comp guidance for the second half and scaling of Sally Ignited. Paulonis indicated guidance remains cautious due to macro uncertainty but is optimistic about new categories and the multi-year rollout of store remodels.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will monitor (1) the pace and customer adoption of new category launches such as fragrance and skin/spa, (2) the effectiveness and ROI of the Sally Ignited store refreshes in driving higher ticket and new customer acquisition, and (3) sustained e-commerce growth following mobile app enhancements and marketplace expansion. Execution on these initiatives, alongside disciplined cost control, will be critical markers of progress.
Sally Beauty currently trades at $16.26, in line with $16.16 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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