COVID-19 shutdown hits Sally Beauty in Q3

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COVID-19 shutdown hits Sally Beauty in Q3

By Dan Berthiaume - 07/30/2020

Forced store closures due to the pandemic dampened Sally Beauty’s Q3 performance, but the retailer is optimistic as stores reopen.

Sally Beauty Holdings, Inc. reported consolidated net sales of $705.3 million for the third quarter of fiscal 2020, down 27.7% from the same quarter in fiscal 2019. The specialty beauty retailer said its sales decline was driven primarily by the impact of the rolling shutdown of customer-facing operations at almost all global stores for a significant portion of the quarter, along with having 27 fewer stores compared to the prior year and an unfavorable impact from foreign currency translation.

As a result of COVID-19, consolidated same-store sales decreased by 26.6% for the entire third quarter. However, this figure includes a 72.1% decline in April, 19.2% decline in May and 10.8% increase in June. Diluted earnings per share were a loss of $0.21, compared to a profit of $0.59 in the prior year. Sally Beauty said loss per share was driven by factors including lost sales from COVID-19, a lower gross margin rate related to inventory clearance efforts, and incremental COVID-19 expenses

The company began reopening its stores on a rolling basis in mid-April. Store reopenings are triggered by local regulation, the adoption of Sally Beauty’s new COVID-19 related safety protocols involving store cleaning, masks, gloves, limiting customer numbers at one time, and in-store social distancing guidelines, as well as the recall from furlough of sufficient store staff.

As of June 30, all stores in the U.S., Canada, the European Union and the U.K. were operational. A small number of stores in Mexico and South America have not yet been cleared to reopen by local authorities. At the end of the quarter, net store count was 3,691, a decrease of 14 from the prior year.

“We executed exceptionally well during a disrupted third quarter,” said Chris Brickman, president and CEO, Sally Beauty. “The team aggressively managed costs and cash, drove an accelerated pivot to support digital growth and scale our key digital transformation initiatives, and reopened the store network faster than competitors. Because of the speed and agility of our team, we are well-positioned to take advantage of emerging customer trends and gain share in a disrupted environment. As we enter the fourth quarter, we will continue to invest in our digital transformation, take advantage of the strong demand for our key categories, adapt quickly to any new local restrictions or changes to consumer shopping behavior tied to the pandemic, and stay disciplined in terms of cost and cash management.”

Due to the uncertainty from COVID-19, Sally Beauty withdrew its full-year financial guidance for fiscal year 2020, as previously stated in March. Sally Beauty is also not issuing financial guidance for the fourth quarter.

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