Cost of debts means lower profits for Sally Beauty

By Simon Pitman

- Last updated on GMT

Related tags: Beauty systems group, Sally beauty, Revenue, Sally beauty supply

Professional and salon hair care provider Sally Beauty has posted
lower profits in its first year of independent trading, attributed
mainly to debt repayments.

The lower profits came despite the company reporting that sales increased by 5.5 percent for the fourth quarter ending in September, to reach $639.7m, which put full year sales at $2.5bn, a rise of 5.9 per cent. However, on the back of rising costs, mainly related to interest payments on debts incurred before the company was spun off by Alberto-Culver one year ago, profits have fallen. The company said that net income for the fourth quarter was $16.9m, compared to $30.7m a year earlier, while net earnings for the full year fell from $110.2m a year earlier to reach $44.5m. Since being spun-off by Alberto-Culver, the company has been trying to consolidate its financial situation, while simultaneously trying to expand its market reach and sales. However, on top of that, other challenges have resulted in a challenging year for the company, not the least being the fact that it lost a big contract to supply L'Oreal branded hair care products in the US from February of this year. This loss particularly affected the company's Beauty Systems Group (BSG), seeing sales for the full year decline by 0.7 percent to reach $946.4m, mainly attributable to a 7.6 per cent fall in sales during the fourth quarter to reach $229m. However, the company pointed out that comparable store sales growth for BSG remained strong, coming in at 10.1 percent for the fourth quarter, while further acquisitions of distribution rights for Goldwell and KMS products in the quarter also boosted figures. The performance at BSG contrasted the results for the company's other division, Sally Beauty Supply, where sales for the full year increased by 10.4 percent to reach $1.57bn, while sales for the fourth quarter rose 14.3 percent to reach $410.7m. The company said that the particularly strong growth for the division in the fourth quarter was mainly down to the fact that the company increased its store count by 18 in the US, combined with the fact that new products had continued to be rolled out during the course of the year. "I believe we are well-positioned for strong results in fiscal 2008,"​ said CEO Gary Winterhalter. "During the next 12 months, we will be focused on unit expansion at Sally Beauty Supply, improving operating margins in our Sally International Business, and returning Beauty Systems Group to historical levels of profitability."

Related topics: Business & Financial

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