Sales up but profits down as Sally Beauty posts mixed Q4 results


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Sales up but profits down as Sally Beauty posts mixed Q4 results
Global cosmetics company Sally Beauty Holdings reported a poor performance in Q4 of their financial year as profits were affected by increasing income tax despite an increase in sales.

The company pointed the finger at tepid foot traffic to US retail outlets and comps to its high growth in 2012 and early 2013 as an explanation for its relative decline in this quarter. Overall, profits fell by more than 1%.

Gary Winterhalter, chairman, president and CEO of the company, commented on the company’s disappointing performance: “Fiscal 2013 was challenging due to comparisons against our record-breaking growth in fiscal 2012 and soft traffic in our Sally US retail business.”

“Nevertheless, our performance was solid, and we executed on our strategic initiatives, including our information technology projects in the US and Europe as well as the new UK distribution center.”

Analysis of the company’s financial performance

Whilst gross profit increased, this was more than offset by a large growth in tax rates, with Sally’s effective rate climbing by five percent from 2012-2013.

The company’s performance in both sales and gross profits was also lower than analysis estimates, according to the news website RTT news. Gross same-store sales growth for the period 0.4%, compared to over 4% in 2012.

The firm’s share prices suffered a hit once results were announced, dropping by as much as 4% in the immediate aftermath of the release.

Year’s performance

On the other hand, the overall situation is looking better for Sally Beauty with the company’s reported net earnings having increased by 12.1% relative to the 2012 financial year. Sales growth for fiscal 2013 was approximately 2.8%. The firm also continued to increase its footprint, opening 170 new stores.

Winterhalter commented: “As we move into fiscal 2014, I believe that we’ve embarked on the right initiatives to gradually improve retail traffic in the Sally U.S. stores and continue the strong performance at BSG and our International businesses.”

Overall, Sally Beauty generated $310 million in operating cash flow this year, which was re-invested in order to generate company growth. The firm also bought over $500m of its own stock as part of its re-purchasing program.

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