Sally Beauty Holdings Company Overview
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 Over 5,070 stores located in 13 countries (1) Industry leading position with ~33% channel share Proven resilience in recessionary cycles Well-positioned for long-term growth Two distinct business segments (1) As of June 30, 2016, fiscal 2016 third quarter.
Company Highlights Consolidated Fiscal 2015 Results Gross Margin Net Sales Segments • Retail consumers • Stores – Chair/suite rentals • 76% of sales • 65% of sales Customers • Professional stylists, small salons, • Full Service Sales - small to medium chair/suite rentals sized salons • 24% of sales • 35% of sales (1) The impact from unfavorable foreign currency exchange in the 2015 fiscal year was $87.3 million, or 2.3% (2) See Addendum for a reconciliation of this non ‐ GAAP financial measure.
Company Highlights Segment Distribution 3,750 stores worldwide (1) Channel Retail consumers (76% of sales) Customers Professional stylists (24% of sales) $2.3b Sales FY2015 1.7% SSS growth Financials $412m EBIT 17.7% EBIT margin (1) As of June 30, 2016, fiscal 2016 third quarter.
Company Highlights Segment 1,322 stores (1) Distribution Channel 947 direct sales consultants (1) Professional stylists (chair/suite renters) Customers Salons (via BSG’s direct sales consultants) Sales $1.5b FY2015 SSS growth 5.7% Financials EBIT $231m EBIT margin 15.4% (1) As of June 30, 2016, fiscal 2016 third quarter.
Company Highlights Open ‐ Line Retail Exclusive / Full ‐ Service 3,750 stores 1,322 stores 947 consultants Distribution: Customers: Professional stylists Salons $ Value Retail Consumers $$$ High-end ` SBH plays an important role in the supply chain (1) As of June 30, 2016, fiscal 2016 third quarter.
Industry Growth U.S. Salon Industry Product Sales (at wholesale $’s) Growth of 3.2 % Recession $6.0 Resistant Industry $4.5 $4.6 $4.8 $4.9 $5.0 $4.2 $1.6 $1.7 $1.8 $2.0 $2.1 $2.2 $2.3 $2.4 $2.6 $2.7 $2.9 $2.9 $3.0 $3.1 $3.3 $3.4 $3.5 $3.7 $3.8 $3.8 $4.0 $4.0 ($ in billions) $3.0 $2.0 $1.0 $ ‐ 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Professional Consultants & Resources, 2015 Study. (1) Professional beauty supply channel size based upon a 2015 study of manufacturer ‐ level sales conducted by Professional Consultants & Resources.
Business Segment Review
Sally Company Highlights Sally Beauty global footprint 3,750 (1) stores worldwide 2,902 stores in U.S. (including Puerto Rico) 848 stores in Canada, UK, Ireland, Belgium, Netherlands, France, Germany, Spain, Chile, Colombia, 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 quality haircare and solutions with a love it or return it Sally Beauty U.S. Store guarantee (1) As of June 30, 2016, fiscal 2016 third quarter.
Sally Beauty: Marketing Initiatives
Sally Beauty: Marketing Initiatives Blog Blogger In In Store Solution Guide Store Solution Guide Networ Network Direct Mail Direct Mail Ext Exterior Sign or Sign Pro Flyer Pro Flyer Email Email Access Hollywood Access Hollywood TV Morning TV Morning Shows Shows Auto-R Auto-Repl eplenish CRM sh CRM Sallyb Sall ybeaut eauty.com y.com Targeted Targete Digital Digital Beauty Box Beauty Box Text Text Vide Video Digital Ads Digital Ads Social Media Social Media
Sally Beauty Financials Sally Beauty Net Sales Growth $2,800 of 1.9% (1) $2,309 $2,330 $2,230 $2,199 $2,400 $2,012 $1,835 $1,781 $2,000 $1,696 $1,673 $1,567 $1,419 $1,600 $1,359 $1,296 $1,208 $1,200 $800 $400 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16 (1) The unfavorable impact of foreign currency exchange on sales for the first nine months of fiscal 2016 was $33.9 million. Sally Beauty 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% 2.0% 1.7% 1.3% 2.0% 1.2% -0.6% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16 -2.0%
Sally Beauty Product Mix Other Beauty Items Ethnic Products 7% Hair Care 22% 8% 47% of Brushes, We offer a diversified Sales from Cutlery and Hair Care mix of beauty 14% Accessories & Color products 25% 9% Electrical Appliances Hair Color 16% Skin and Nail Care *Fiscal year 2015
Sally Beauty Store Economics Worldwide Sally Beauty Stores Growth Initiatives Expand store base organically and 3,673 4,000 3,424 3,563 3,309 through acquisitions; domestic and 2,511 2,694 2,844 2,923 3,032 3,158 3,000 international 2,000 Plan is to grow net store base approximately 1,000 3 percent in FY2016 0 Increase customer traffic through loyalty 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 programs and customer relationship Growth 7% 6% 3% 4% 4% 5% 4% 3% 4% 3% management (CRM) Sally Beauty Store Economics US Further enhance e-commerce platform Capital Required $70k Average Inventory $85k Positive Contribution Margin 4 Months Cash Payback on Investment 2 Years
Sally Beauty Growth Initiatives Existing International Platform Long ‐ Term Store Growth Potential 848 Sally Beauty stores located in 13 countries Current Potentia l ~250 Stores located in Canada, the UK, 118 (Canada) Republic of Ireland, Belgium, France, the ~250 Netherlands, Germany, Spain, Chile, 211 (Mexico) Colombia, Peru & Mexico ~300 261 (UK / Ireland) 24% of Sally Beauty sales from international Sales mix differs from U.S./Canada 600 ‐ 800 194 UK/Europe (Belgium, France, Germany, Spain, Netherlands) ~80-85% professional 41 ~45 ~15-20% retail (Chile) Mexico and South America almost 100% retail 17 ~40 (Peru) 6 ~50 (Colombia) (1) As of June 30, 2016, fiscal 2016 third quarter. 848 ~1,500+ Total
Sally Beauty: Growth Initiatives Store designs vary by country and customer demographic Chile, S.A. U.S. Peru, S.A. United Kingdom
BSG Company Highlights Beauty Systems Group – 1,322 (1) (professional stores & 944 professional distributor sales consultants 1,157 company-operated / 165 franchised stores (Armstrong McCall) 947 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 retail or Sally Beauty stores LoxaBeauty.com, the online retail solution for salon/stylists (1) As of June 30, 2016, fiscal 2016 third quarter.
BSG Financials BSG Net Sales Growth of 6.5% $1,505 $1,600 $1,445 $1,392 $1,325 $1,400 $1,257 $1,196 $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 2015 YTD16 (1) The unfavorable impact of foreign currency exchange on sales for nine months of fiscal 2016 was $9.8 million, or 0.8%. BSG Same Store Sales Growth 12.0% 10.1% 8.5% 6.9% 6.8% 8.0% 6.2% 6.1% 5.7% 5.5% 4.6% 4.2% 4.1% 3.5% 4.0% 1.0% 0.0% (0.6%) (4.0%) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD16
BSG Product Mix Other Beauty Items Electrical Hair Care Appliances 8% 5% Skin and Nail Care 35% 10% We offer a diversified mix of beauty products not carried in 11% Sally stores or mass retail Promotional Items 33% Hair Color *Fiscal year 2015
BSG Store Economics Growth Initiatives Store Growth Store Growth 1,265 1,294 1,151 1,190 1,245 1,200 1,027 991 929 Expand store base organically 874 828 800 Further penetrate existing geographies 400 Enter new territories 0 Exclusive distribution 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Organic 6 46 44 16 36 39 39 43 20 22 Expand gross margins as sales Acquisition 0 0 11 46 0 85 0 12 0 7 Growth 6% 6% 7% 4% 12% 3% 5% 2% 2% shift to the stores BSG Store Economics Fold-in acquisition opportunities Capital Required $80k Average Inventory $150k Positive Contribution Margin 4 Months Cash Payback on Investment 2 Years
Consolidated Results
Consolidated Debt No near-term maturities Long ‐ term debt (as of 6/2016) In November 2015, refinanced entire AMOUNT % OF ($MM) TOTAL DEBT $750 million of 6.875% Senior Notes due 2019 with $750 million of 5.625% REVOLVING ABL FACILITY $0.0 0.0% Senior Notes due 2025 5.750% SENIOR NOTES (FY2022) $850.0 47.4% 5.625% SENIOR NOTES (FY2026) $750.0 41.5% Targeted consolidated pro forma 5.500% SENIOR NOTES (FY2024) $200.0 11.1% leverage ratio (Net Debt/EBITDA) of TOTAL DEBT $1,800.00 100.0% approximately 2.75x Ample liquidity Long ‐ term debt maturities ($ millions) Strong cash flow $1,000 $850 $500 million asset-based revolving $900 $750 $800 credit facility $700 $600 Committed through July 2018 $500 $400 $300 $200 $200 $100 $ ‐ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
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