Sally Beauty to Close 350 Stores and Ramp Up Omnichannel Services

Sally Beauty Holdings, a retailer and distributor of hair color and care products for both consumers and salon professionals, is working to optimize its footprint by consolidating its stores and distribution centers while continuing to serve its customers via its omnichannel capabilities, the company said Thursday (Nov. 10) in a press release.

Having closed some stores and noted that it retained the customers’ business, the company is accelerating the move and will close another 350 locations. The company has retained customers’ business by offering delivery from other stores.

“During our transformational period from 2017 to 2021, we built the infrastructure and key foundational elements to take our business well into the future, including our CRM [customer relationship management] platforms, our advanced digital commerce capabilities and our enhanced supply chain,” Sally Beauty President and CEO Denise Paulonis said Thursday during the company’s quarterly earnings call.

Most of the stores that are to be closed will be Sally Beauty locations, which serve consumers, and most will close in December. The company will also close two distribution centers in December. The closures are expected to reduce costs by $50 million in the fiscal year 2023.

Sally Beauty has been piloting store closures over the last several quarters and has seen positive sales recapture rates and improved profitability within those markets.

At the end of the quarter, it had 110 fewer Sally Beauty stores and seven fewer Beauty Systems Group (BSG) stores, which serve salon professionals, compared to the prior year. At that time, it had 3,439 Sally Beauty stores and 1,355 BSG stores.

These announcements were made as Sally Beauty reported that its consolidated net sales were down 2.8% for the quarter that ended Sept. 30 and down 1.5% for the fiscal year 2022.

Thursday morning, about an hour after the earnings call ended, Sally Beauty Holdings’ stock was up about 10% from the prior day.

Paulonis said in the release that the macro environment is “highly dynamic and challenging” with inflationary pressures that are impacting the behavior of both consumers and salon professionals as well as supply chain headwinds that have increased distribution and freight costs.

“In Sally U.S. and Canada, the inflationary environment continues to cause some of our customers to color less frequently and reduce the size of their basket,” Paulonis said during the call.

At BSG, she added, the company is seeing that professional stylists are focused on saving time and maximizing profitability and are purchasing products closer to when they need them and are responding to cost-saving promotional bundles.

Moving ahead, the company will also expand the services it offers to professional stylists, increase the education it offers to consumers, grow its portfolio of owned brands and increase the efficiency of its operations.

“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,” the company said in the release.