Sally Beauty boosts profit, names Don Grimes SVP, CFO & COO
Sally Beauty on Tuesday reported solid fourth quarter and full year results ended on September 30, 2016. “We achieved solid results with full-year adjusted EPS growth of 12%,” said Chris Brickman, President and CEO, who detailed the company’s focus for 2017.
“Looking ahead to 2017, we are excited about our sales driving initiatives in both businesses,” Brickman added. “In Sally, our in-store investments are mostly behind us and the Sally team is focused on the next phase of customer conversion and engagement.”
The focus is to build on initiatives set and carried out in the fourth quarter and 2016. In the third quarter, the company completed several initiatives including the brush category reset, the color education center rollout and the completion of owned-brand repackaging, and in the fourth quarter the company remained focused on customer conversion and engagement, which it plans to continue into 2017.
Fourth quarter consolidated net sales increased 1.3% to $976.4 million attributed to same store sales growth and 152 new stores. Sally Beauty Supply sales increased 0.3% to $583.9 million and Beauty Systems Group sales increased 2.8% to $392.5 million. Fourth quarter sales were impacted $12.7 million from unfavorable changes in foreign currency exchange rates.
Consolidated net sales for 2016 increased 3.1% to $3.95 billion with Sally Beauty Supply contributing $2.36 billion and Beauty Systems Group contributing $1.59 billion. Both businesses increased sales over 2015.
“Cash from operations of $351 million enabled us to invest in the business and return a substantial portion to our shareholders,” said Brickman. “During the year, we opened 152 net new stores and continued to buy our stock, acquiring 7.8 million shares totaling $207 million. We believe our BSG business will continue to gain channel share and work towards becoming the indisputable partner of choice for stylists and manufacturers.”
Gross profit in the fourth quarter and full year increased 1.7% to $483.4 million and 3.5% to $1.96 billion, respectively, and both improved 20 basis points over their respective periods. GAAP SG&A expenses were $345.5 million in the fourth quarter, a 110 basis points increase, and $1.37 billion in 2016, including $153.4 million of unallocated corporate expenses and share-based compensation expenses of $12.6 million.
GAAP net earnings fell 6.3% in the fourth quarter to $52.6 million from $56.2 million in the prior year comparable period, and fell 5.2% in the full year to $222.9 million from $235.1 million. Full year GAAP diluted EPS increased 0.7% to $1.50 and adjusted diluted EPS increased 12.4% to $1.72, while the fourth quarter GAAP EPS remained flat and adjusted diluted EPS increased to $0.41.
In addition to releasing its fourth quarter and full year financial results, Sally Beauty announced the appointment of Donald T. Grimes as SVP, CFO and COO, effective December 12, 2016. Grimes stepped down from the same role at Neiman Marcus on November 14, 2016, which was not related to disagreements according to the retailer. Prior to joining Neiman Marcus, Grimes served as SVP, CFO of Wolverine from 2008 to 2015.
"After a thorough and deliberate search, we are thrilled to have Don join our team as CFO and COO," said Brickman. "Don is an accomplished executive with significant financial and operational expertise in the retail industry. His broad experience will be an asset to us as we build upon our strategy and prioritize our opportunities for long-term growth."
Sally Beauty expects its 2017 consolidated same store sales to be 3%, consolidated gross margin expansion to range from 30 bps to 40 bps, and consolidated SG&A to be slightly down from fiscal 2016 GAAP metric of 34.6%.
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