How Sally Beauty is fighting back
Sally Beauty is aggressively implementing new e-commerce and loyalty initiatives to generate traffic and sales.
The beauty retailer reported a 2.2% decline in comps for the first quarter ended Dec. 31.
CEO Chris Brickman said in an earnings call that the company has been building its e-mail database to drive incremental traffic and sales by targeting promotions to specific customers in order to drive traffic to our website and stores.
The company is also testing a new loyalty program in approximately 300 stores in Florida and Georgia with the goal of increasing traffic over time by acquiring more loyalty members and engaging with them on a regular basis. Enhancements were added to the test program during the first quarter including improved communication to customers and training for our associates in order to drive more traffic.
"Traffic is the core issue for Sally," said Brickman. "The first quarter was impacted by a continuation of disappointing traffic trends in our U.S. Sally Beauty stores, an additional day of store closures versus the prior year for our Beauty Systems Group stores due to the holiday calendar and the residual impact of Hurricane Maria in Puerto Rico. We continue to focus on innovation as a means to drive top line growth and traffic in our domestic Sally Beauty stores."
During the first quarter the company also accelerated investments in its Sally Beauty e-commerce fulfillment capabilities to allow it to offer free two-day delivery on minimum orders of $25 to more than 90% of U.S. households. Brickman says the retailer is beginning to see positive results as Sally Beauty e-commerce sales increased 23% over the prior year, driven by increased customer traffic and conversion.
Brickman says the company plans to market the free two-day delivery promise to customers across the country and he expects this will further accelerate growth.
The company posted a 49% rise in first-quarter net income and 67% higher earnings per share, which the retailer said benefited from the recent U.S. tax reform. The Denton, Texas-based beauty chain earned a quarterly profit of $83.3 million, or 65 cents a diluted share, compared with $55.8 million, or 39 cents, for the same period last year.
Consolidated net sales were $995.0 million in the first quarter, a decrease of 0.5% compared to the prior year.
The company expects full-year same-store sales to be approximately flat, with more challenging comparisons in the first half of the fiscal year than the second half of the year, it said.
It added that it now expects full-year gross margin to be approximately flat, compared with fiscal 2017.
During the quarter, the company announced it successfully completed several of the initiatives of its 2018 Restructuring Plan focused on significantly improving the profitability of its international businesses, with particular focus on its European operations.
“Our focus remains on initiatives and opportunities to drive profitable revenue growth. We believe that these strategic investments, combined with the strength and stability of our large and growing BSG distribution business and the on-going benefits from U.S. Tax Reform, will keep us on the path to long-term earnings growth,” Brickman concluded.
Sally Beauty Holdings has a footprint of more than 5,000 stores in the U.S.