Sally Beauty Holdings ( NYSE: SBH ) reported a 2.8% drop in sales for FQ4 amidst what it described as a highly dynamic and challenging macro environment.
Comparable sales were flat during the quarter compared to a year ago and were unfavorably impacted by inflationary pressures that continued to impact consumer behavior and supply chain challenges at Beauty Systems Group. In addition, foreign currency translation had an unfavorable impact of 170 basis points on the consolidated sales tally for the quarter.
The retailer's adjusted gross margin rate fell 60 bps to 50.1% of sales, as higher product margin from pricing leverage at Sally Beauty was more than offset by a sales mix shift between Sally Beauty and Beauty Systems Group and higher distribution and freight costs in both segments.
The SBH balance sheet showed cash of $71M at the end of the quarter and an outstanding balance of $69M under the asset-based revolving line of credit. Inventory was up 7.5% to $936.4M. FQ4 cash flow from operations was $107.3M. Capital expenditures in the quarter totaled $32.0M. Sally Beauty ( SBH ) ended the quarter with a net debt leverage ratio of 2.2X.
CEO outlook: "We remain encouraged by the rebuilt foundation of the business and are excited about the potential of our new strategic initiatives. As we leverage these strengths, we also expect that the external environment will remain challenging in the nearer term, most notably the inflationary pressure that is negatively impacting consumer purchasing behavior and also driving increased labor costs."
Looking ahead, SBH sees net sales declining by low-single digits compared to last year. Comparable sales, notwithstanding a notable change in consumer behavior, are expected to increase by low single digits.
Shares of SBH traded flat in the premarket session.
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Sally Beauty warns inflation pressures on consumers are impacting sales