As of September 2014, fiscal year-end
Company Highlights Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty products Annual consolidated sales of over $3.8 billion Strong cash flow generation Approximately 4,828 stores located in 12 countries (1) Industry leading position with ~33% channel share Proven resilience in recessionary cycles Well-positioned for long-term growth Two distinct business segments
Company Highlights Consolidated Fiscal 2014 Results Net Sales Gross Margin Segments • Retail consumers • Stores – Chair/suite rentals • 75% of sales • 65% of sales Customers • Professional stylists, small salons, • Full Service Sales - small to medium chair/suite rentals sized salons • 25% of sales • 35% of sales • Sales of $2.3b, up 3.5% • Sales of $1.4b, up 3.8% FY2014 • SSS up 1.3% vs. (0.6%) ‘13 • SSS growth of 3.5% vs. 4.2% • Operating income of $431m • Operating income of $217m Financials • Profit margin of 18.7% • Profit margin of 15.0%
Company Highlights Open-Line Retail Exclusive / Full-Service 3,563 stores 1,265 stores 981 consultants Distribution: Customers: Professional stylists Salons $ Value Retail Consumers $$$ High-end ` SBH plays an important role in the supply chain (1) Store count as of September 30, 2014, fiscal year-end
Industry Growth U.S. Salon Industry Product Sales Growth (at wholesale $’s) of 2.7 % Recession $5.0 $4.6 Resistant $4.5 $4.5 $4.2 Industry $4.0 $3.8 $3.8 $4.0 $3.7 $3.5 $3.4 $3.3 $3.5 $3.1 $3.0 ($ in billions) $2.9 $2.9 $3.0 $2.7 $2.6 $2.4 $2.3 $2.5 $2.2 $2.1 $2.0 $1.8 $2.0 $1.7 $1.6 $1.5 $1.0 $0.5 $- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Business Segment Overview
Sally Beauty Supply: Overview Sally Beauty Supply global footprint 3,563 (1) stores worldwide 2,793 stores in U.S. (including Puerto Rico) 770 stores in Canada, the UK, Ireland, Belgium, Netherlands, France, Germany, Spain, Chile, Peru & Mexico Average store size 1,700 sq. ft., 90% selling space Professional open-line business - merchandise assortment not available through mass retailers Destination for Professional hair care and solutions (1) Store count as of September 30, 2014, fiscal year-end.
Sally Beauty Supply: Historical Sales Sally Beauty Supply Net Sales Growth of 3.5% $2,800 $2,309 $2,230 $2,199 $2,400 $2,012 $1,835 $2,000 $1,696 $1,673 $1,567 $1,419 $1,359 $1,600 $1,296 $1,208 $1,200 $800 $400 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sally Beauty Supply Same Store Sales 8.0% 6.5% 6.3% 6.0% 4.1% 3.8% 4.0% 2.7% 2.7% 2.4% 2.4% 2.1% 1.3% 2.0% 1.2% -0.6% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -2.0%
Sally Beauty Supply: Merchandise Offering Other Beauty Items Ethnic Products 7% Hair Care 22% 8% 45% of Brushes, We offer a diversified Sales from Cutlery and Hair Care mix of beauty 14% Accessories & Color products 23% 10% Electrical Appliances Hair Color 17% Skin and Nail Care
Sally Beauty Supply Growth Initiatives Growth Initiatives Worldwide Sally Beauty Supply Stores Expand store base organically and 4,000 3,563 3,424 3,309 through acquisitions; domestic and 3,158 3,032 2,923 2,844 2,694 3,000 2,511 international 2,000 Plan to grow store base 3 to 4 percent in 1,000 FY2015 and beyond 0 Increase customer traffic through loyalty 2006 2007 2008 2009 2010 2011 2012 2013 2014 4.2% 4.8% 3.5% 3.4% Growth 7.3% 5.6% 2.8% 3.7% 4.0% programs and customer relationship management (CRM) Sally Beauty Supply Store Economics US Further expand Internet channel Capital Required $70k Drive gross margin expansion Average Inventory $85k Customer mix shift to retail Shift to exclusive brands Positive Contribution Margin 4 Months Low-cost sourcing Cash Payback on Investment 2 Years
Sally Beauty Supply: International Opportunity Existing International Platform Long-Term Store Growth Potential (1) 770 Sally Beauty stores located in 11 countries Current Potentia l ~250 Stores located in Canada, the UK, Ireland, 100 (Canada) Belgium, France, the Netherlands, ~250 Germany, Spain, Chile, Peru & Mexico 180 (Mexico) 25% of Sally Beauty Supply sales from ~300 261 (UK / Ireland) international Sales mix differs from U.S./Canada 600-800 187 UK/Europe (Belgium, France, Germany, Spain, Netherlands) ~80-85% professional 39 ~45 ~15-20% retail (Chile) 3 Mexico and South America almost 100% retail ~40 (Peru) green field Other South 0 American Countries 770 ~1,500+ Total (1) Store count as of September 30, 2014, fiscal year-end
Beauty Systems Group: Overview Beauty Systems Group – 1,265 (1) (professional stores & 981 professional distributor sales consultants 1,104 company-operated / 161 franchised stores (Armstrong McCall) 981 professional distributor sales consultants Average store size 2,700 sq. ft. Sells to salons and salon professionals Professional exclusive / full-service business – includes merchandise assortment of premium brands sold through salons and not available in mass or at Sally stores LoxaBeauty.com, the online retail solution for salon/stylists, launched in March 2014 (1) Store count as of September 30, 2014, fiscal year-end
BSG: Strong, Consistent Financial Track Record BSG Net Sales Growth of 3.8% $1,600 $1,445 $1,392 $1,325 $1,400 $1,257 $1,081 $1,200 $975 $954 $945 $941 $895 $1,000 $802 $800 $616 $600 $400 $200 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BSG Same Store Sales Growth 12.0% 10.1% 8.5% 6.9% 8.0% 6.2% 6.1% 5.5% 4.6% 4.1% 4.2% 3.5% 4.0% 1.0% 0.0% (0.6%) (4.0%) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (1) Store count as of September 30, 2014, fiscal 2014 third quarter.
BSG: Merchandise Offering Other Beauty Items Electrical Hair Care Appliances 7% 6% Skin and Nail Care 35% 10% We offer a diversified mix of beauty products not carried in Sally stores or mass retail Promotional 12% Items 31% Hair Color
BSG: Industry Growth Growth Initiatives Store Growth Store Growth 1,245 1,265 1,151 1,190 1,200 1,027 991 929 Expand store base organically 874 828 800 Further penetrate existing geographies 400 Enter new territories 0 Expand gross margins as sales shift 2006 2007 2008 2009 2010 2011 2012 2013 2014 Organic 46 44 16 39 39 43 20 36 6 to the stores Acquisition 0 12 0 0 11 46 85 0 0 12.0% 3.4% Growth 5.6% 6.2% 6.7% 3.6% 4.6% 1.6% Improve profitability BSG Store Economics Optimize distribution network Capital Required $80k Continue integration efforts Average Inventory $150k Broaden offerings with new suppliers Seek potential fold-in acquisition Positive Contribution Margin 4 Months opportunities Cash Payback on Investment 2 Years
Consolidated Results
Solid Balance Sheet No near-term maturities Long-term debt (as of 9/30/14) In November 2011, refinanced Sr. and Sr. Sub Amount % of Notes for $750mm of 6.875% Senior Notes due ($mm) Total Debt Revolving ABL facility $0.0 2019 0.0% 5.750% Senior Notes (FY2022) $857.4 47.4% In May 2012, refinanced the Term Loan B with 6.875% Senior Notes (FY2019) $750.0 41.5% 5.500% Senior Notes (FY2023) $700mm of 5.75% Senior Notes due 2021 $200.0 11.0% $0.1 Other (1) 0.1% Targeted consolidated pro forma leverage ratio of Total Debt $1,807.5 100.0% 2.0x – 2.5x Ample liquidity Strong cash flow Long-term debt Maturity ABL Revolver of $500 million $1,000 Refinanced July 26, 2013; lowered rate and increased $857 $900 availability to $500 million $750 $800 October 2013, issued $200 million aggregate $700 principal amount of 5.50% Senior Notes due 2023. $600 $500 $400 $300 $200 $200 $100 $- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Sales and EPS Growth for total Company Sales EPS (adjusted) $3,524 $3,622 $3,754 $3,500 $3,269 $1.60 $1.53 $1.48 $1.42 $2,916 $3,000 $1.40 $2,648 $2,637 $2,514 2.0% $1.20 $2,500 $1.07 3.6% YoY $1.00 YoY $2,000 $0.77 $0.80 $1,500 $0.60 $0.52 $0.44 $0.40 $0.32 $1,000 $0.20 $500 $0.00 2007 2008 2009 2010 2011 2012 2013 2014 $0 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Addendum: Reconciliations
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