Beauty Product Boom Lifts Sally to Highest Since 2023

Sally Beauty Holdings, Inc. (NYSE:SBH) is a global distributor and retailer of professional beauty products with revenues of $3.7 billion annually. Through the Sally Beauty Supply and Beauty Systems Group businesses, the company sells and distributes through over 4,000 stores, including approximately 132 franchised units, throughout the United States and Puerto Rico, the United Kingdom, Belgium, Chile, France, Canada, Mexico, Ireland, the Netherlands and Germany.

Denise Paulonis has served on the firm's board of directors since May 2018 and was appointed President and Chief Executive Officer in October 2021. She joins to break down her company’s latest quarterly earnings report and examine the health of the American consumer with Carol Massar and Tim Stenovec on Bloomberg Businessweek Daily.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.

Speaker 2 (00:08):
You're listening to Bloomberg Business Week with Carol Masser and
tim Stenoveek on Bloomberg Radio.

Speaker 1 (00:15):
All right, we're going to go back to some original
reporting that we mentioned, certainly by our Amanda Mall. We
just talked about Alta Beauty. That is the cover story
of Bloomberg Business Week. The beauty industry, though overall, has
several players. We talk about the growth, we talk about
the profitability. We just talk about, you know, consumers, they're
out there spending.

Speaker 2 (00:34):
Yeah, let's talk a little bit about one of those companies.
Sally Beauty Holding shares finished day lower by about one
point six percent. Initially, they rose to each of February
twenty twenty three intra day record nineteen percent to the
upside following the company's most recent earnings report, fourth quarter
comp sales up one point three percent that beat Wall
Street estimates. The company also beat estimates when it came
to fourth quarter adjusted EPs and Q four net sales.

(00:57):
Dalis Polonis is a president and CEO of the one
point four billion dollar market cap Sally Beauty Holding. She
joins US from Texas. Shares up more than thirty eight
percent so far this year. Denise, we want to talk
about the company, but I want to start with just
your view on the consumer right now. How is the consumer?

Speaker 3 (01:16):
Thanks for having me, great to be on. You know.
Overall the consumer that we're seeing is resilient, but is choiceful.
So resilient in total dollars spending, but very picky about
what they're going to put their money into right now,
just knowing that they might have a limited budget to spend.

Speaker 1 (01:31):
What are they spending it on? Then? If they have
a limited budget, is it smaller things that cost less?
I'm curious.

Speaker 3 (01:40):
I think what we see is we see people both
splurging and then being frugal. So they'll splurge on experiences,
They'll splurge on special products that are important to them.
I expect that they'll splurge a bit on things like
Thanksgiving dinner, but they'll pull back and say, you know,
if I have enough of something in my pantry, maybe
I won't buy three more bottles of shampoo or three

(02:02):
more lipsticks. I'm going to lean in for what really
matters to me.

Speaker 1 (02:05):
Well, that's what I mean, though, So then I don't
mean you no, I get it that they might not
spend you know, they look at their whole wallet and
what they could spend out. But so what are they
really spending money on At Sally Beauty, I will.

Speaker 3 (02:16):
Tell you it's Sally Beauty. The big thing is hair color.
So our hair color business was up high single digits
at Sally this quarter. What we're really seeing is customers
who have always done DIY for their hair continuing to
do so. But more and more we're seeing customers who
are splitting their time that they might regularly get done
in a salon, but they'll come in and do a

(02:37):
fill in or an update you to kind of stretch
their wallet a little bit between those salon visits by
coloring their hair, touching up their roots. And we've also
see a reinvigoration of vivid colors as people I think
want some fun in their lives and want that experience
of pink or purple hair.

Speaker 2 (02:53):
Just remind us that where you play and where you
meet the consumer, you call yourself the world's largest distributor
and retailer of professional beauty products. Brands that might be
and are probably known to most of the audience include
claireal Con Air Hotshot Tools, Wela, and more, where do
you meet the consumer because it happens at retail stories,
but it also happens via salons.

Speaker 3 (03:15):
Does we meet them in two spots? So overall we're
about a four billion dollar sales player that split half
and half between serving a traditional consumer with Sally, which
is a public consumer retail stores that are out there,
and then we service all of the beauty salon professionals.
So you know, all those folks who work as independent
contractors are work in a salon taking care of folks.

(03:38):
We're actually that largest distributor to that salon professional. And
primarily what we do on both sides of our business
is everything hair, hair color, hair care, accessories, tools, you
name it, that's what we do.

Speaker 1 (03:51):
Hey, I am curious with tariffs and so on and
so forth. The global supply team when it comes to
beauty products, I think it's around the world. France, South Korea,
the US, China, Japan. How has that impacted the cost
of things or your business?

Speaker 3 (04:05):
Yeah, I think we're quite fortunate that eighty percent of
our product comes from North America and the twenty percent
that doesn't is kind of split equally between China and
Western Europe. So we're a little bit more insulated than
some other beauty players out there, which is great news
for us. When we think about what's most affected for us,
it's things like blow dryers or flat irons that might

(04:27):
be coming in from China and have a little bit
more of that tariff on it. But we've got some
great relationships and we're navigating it quite nicely. I don't
expect the consumer we'll see any notable increase to them
as we're going through the holiday selling season on those products.
With the cooperation we have with our vendors and how
we're trying to navigate.

Speaker 2 (04:46):
Sourcing, the disconnect between Wall Street's expectations and what you delivered.
I know, a big part of any executive's job is
managing expectations. It was a beat pretty much across the
board for you today. Where did that come from?

Speaker 3 (05:00):
Well, I will tell you the team just did a
fantastic job executing. We've got a few key initiatives that
are working really well for us today, you know, namely
starting with innovation, particularly on the pro side of our business.
Thirty five percent of our sales in hair care this
last year came from product that's new to us in
the last eighteen months or so, and that's three times

(05:21):
higher than it was a couple of years ago where
that was only ten percent from newness. So that newness
is resonating with our salon customers quite a bit. On
the on the retail side marketplaces, you know, we now
participate with Uber eats, door Dash and instacart in terms
of kind of the non traditional marketplaces, you know, delivered

(05:42):
to your door in two hours. It's been a great
business growth opportunity for us. We laugh internally that the
fact is there's a lot of people who have an
eyelash emergency at six o'clock on a Saturday night before
you know, a big party.

Speaker 2 (05:55):
Well, Meybia one thirty pm Monday through Friday. I'm looking
at me.

Speaker 1 (05:59):
I know, yeah, he's got his issues and he's going
to say to Denise. This was interesting and fun. Really
enjoyed it. Denise Helon as chiefs president and chief executive
officer of Sally Beauty Holdings, joining us from Texas. This
is Bloomberg