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Sally Beauty profits dip from last year’s records

Profile image for By Maria Halkias / The Dallas Morning News
By Maria Halkias / The Dallas Morning News

Denton-based Sally Beauty Holdings Inc., which sells hair, skin and nail products to consumers and salons, reported a 4.3 percent decline in second-quarter profit and weaker than expected sales. Comparisons with last year’s record growth in some categories, specifically nail polish, hair extensions and appliances, were tough to match, the company said Thursday.

Innovations practically re-created the nail category in 2011 and 2012. New cracked looks, gel enamel and accessories such as special quick-drying lamps helped the beauty supply chain’s sales soar. China Glaze even created nail polish colors tied in with the Hunger Games movie.

“I had no idea gel nail polish would have the impact it had in the last 12 months and the impact cracked polish had the year before that,” Sally Beauty CEO Gary Winterhalter said on a call with analysts. “You don't always know in this business. It has a fashion aspect to it.”

While U.S. consumer spending slowed in March, Winterhalter said he didn’t believe shoppers were cutting back on beauty spending. Sales of hair care and color products, which represent 40 percent of Sally Beauty’s business, continued to grow in the quarter.

Winterhalter promised analysts that he would let them know when “women don’t care about their hair being gray anymore.”

For the first time, the 3,357-store Sally Beauty chain posted a decline in same-store sales. Its 1.6 percent sales decline compared with a record 9.3 percent increase a year ago. “We believe comparisons will get easier in the second half of this year,” he said.

The company’s wholesale business, Beauty Systems Group, which sells Paul Mitchell, Wella, Sebastian, Goldwell and TIGI products to salons and professionals, posted a 1.3 percent same-store sales increase. That was also softer than last year.

Sally Beauty, which competes with Ulta, drugstores and discount chains, reported a profit of $64.9 million, or 36 cents a share, compared with a profit of $67.8 million, or 35 cents a share, in the year-ago period.

Analysts surveyed by Thomson Reuters had forecast a profit of 39 cents a share and total sales of $920.6 million.

Total sales were $898.2 million, up 1 percent from a year ago when sales had increased more than 10 percent from the prior quarter. The second quarter also had two fewer days than last year, accounting for $15 million of the sales decline, Winterhalter said. He forecast a stronger sales increase in the range of 3 percent to 4 percent in the second half of this year.

Sally Beauty’s stock price gained 41 cents to close at $30 on Thursday. The stock price is up almost 20 percent this year.