Q2 2024 Sally Beauty Holdings Inc Earnings Call
Operator: Good morning everyone and welcome to the Sally Beauty Holdings conference call to discuss the company's second quarter fiscal 2024 results. All participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Additional instructions will be given at that time. Now I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer, Sally Beauty Holdings. Please go ahead
Good morning, everyone and welcome to the Sally Beauty Holdings conference call to discuss the company's second quarter fiscal 2024 resolved.
Speaker Change: All participants have been placed in a listen only mode.
Speaker Change: After management prepared remarks, there will be a question and answer session additional instructions will be given at that time.
Speaker Change: Now I would like to turn the call over to Jeff Harkins.
Jeff Harkins: As president of Investor Relations and Treasurer.
Speaker Change: Sally Beauty holdings. Please go ahead.
Jeff Harkins: Thank you. Good morning, everyone, and thank you for joining us.
Jeff Harkins: Thank you.
Jeff Harkins: Good morning, everyone and thank you for joining US with me on the call today are Denise Pelotas, President and Chief Executive Officer, and Marlin for me, a chief financial Officer.
Jeff Harkins: With me on the call today are Denise Paulonis, President and Chief Executive Officer, and Marlo Cormier, Chief Financial Officer. Before we begin, I'd like to remind everyone that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K and other filings with the SEC.
Jeff Harkins: Any forward-looking statements made on this call represent our views only as of today, and we undertake no obligations to update them. The company has provided a detailed explanation and reconciliation of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. Now, I'd like to turn the call over to Denise to begin the first remark.
Jeff Harkins: Before we begin I would like to remind everyone that management's remarks on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95.
Jeff Harkins: Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K, and other filings with the SEC.
Jeff Harkins: Any forward looking statements made on this call represent our views only as of today and we undertake no obligations to update them.
Jeff Harkins: The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website.
Jeff Harkins: Now I'd like to turn the call over to Denise to begin to forward remarks.
Denise A. Paulonis: Thank you, Jeff, and good morning, everyone. Our teams negotiated dynamic sales trends during the second quarter while continuing to execute against our strategic priorities and deliver engaging experiences for our customers. Net sales came in at the lower end of our expectations at $908 million, down 1%, and comparable sales declined 1.5%. However, our sales results reflect notable strength and momentum in our BSG segment. However, this was offset by softer sales performance at Sally amidst weather challenges in January and ongoing customer frugality. Adjusted gross margin was 51%, which came in lower than we anticipated due to higher promotional penetration as well as an unfavorable sales mix shift out of our highest margin business, Sally US Business.
Denise A. Paulonis: Thank you, Jeff and good morning, everyone.
Denise A. Paulonis: Our teams navigated dynamic sales trends during the second quarter, while continuing to execute against our strategic priorities and deliver engaging experiences for our customers.
Denise A. Paulonis: Net sales came in at the lower end of our expectations at $908 million.
Denise A. Paulonis: Down, 1% and comparable sales declined one 5%.
Denise A. Paulonis: Our sales results reflect notable strength and momentum in our BSG segment.
Denise A. Paulonis: By softer sales performance at Sally admits weather challenges in January and ongoing customer frugality.
Denise A. Paulonis: Adjusted gross margin was 51%, which came in lower than we anticipated due to higher promotional penetration as well as an unfavorable sales mix shift out of our highest margin Sally U S business.
Denise A. Paulonis: We continue to execute solid cost controls with an adjusted SG&A of 1% versus last year in line with our expectations. The business generated solid cash flow from operations of $37 million, allowing us to return value to shareholders via continued share repurchase activity. We also strengthened the balance sheet with the refinancing of our 2025 senior unsecured notes. More on that later from Marlo.
Denise A. Paulonis: We continue to execute solid cost controls was it adjusted SG&A of 1% versus last year in line with our expectation.
Denise A. Paulonis: The business generated solid cash flow from operations of $37 million, allowing us to return value to shareholders via continued share repurchase activity.
Denise A. Paulonis: We also strengthened the balance sheet with the refinancing of our 2025 senior unsecured notes.
Denise A. Paulonis: More on that later from wireless.
Denise A. Paulonis: Let's take a look at performance by segment. At BSG, Q2 comparable sales were up 2%, a bit ahead of our expectations. This represents the second consecutive quarter of positive comps and reflects continuing improvement in salon demand trends, paired with a robust flow of product innovation. Comparable transactions increased 2%, and average ticket value was flat to the prior year.
Denise A. Paulonis: Let's take a look at performance by segment.
Denise A. Paulonis: At BSG Q2, comparable sales were up 2% a bit ahead of our expectations.
Denise A. Paulonis: This represents the second consecutive quarter of positive comp and.
Denise A. Paulonis: And reflects continuing improvement in salon demand trends paired with a robust flow of product innovation.
Denise A. Paulonis: Comparable comparable transactions increased 2% and average ticket value was flat to the prior year.
Denise A. Paulonis: We are pleased to see momentum returning to BSG with color and care both in positive territory. It is clear that our stylists are seeking value, which was reflected in the strength of our quarterly customer appreciation sale. In our Sally segment, sales were at the low end of our expectations for the quarter as our customers continued to exhibit cautious shopping behavior. Q2 comparable sales declined 4%, with comparable transactions down 5%, and an average ticket value up 1%.
Denise A. Paulonis: We are pleased to see momentum returning to BSG with color and care both in positive territory.
Denise A. Paulonis: It is clear that our stylists are seeking value, which was reflected in the strength of our quarterly customer appreciation sale.
Denise A. Paulonis: In our Sally segment sales were at the low end of our expectations for the quarter as our customers continued to exhibit cautious shopping behavior.
Denise A. Paulonis: Q2, comparable sales declined 4% with comparable transactions down 5%.
Denise A. Paulonis: And average ticket value up 1%.
Denise A. Paulonis: Looking at the cadence of the quarter, as we shared on our Q1 call, we started the quarter with about $10 million of weather impact in January, which put outsized pressure on transactions for the quarter. Subsequently, Sally returned to a more normalized traffic and transaction trend line at the end of the month and into early February. Although transactions continued to improve throughout the quarter, our Sally US and Canada customers demonstrated price sensitivity, leaning into promotions more heavily than we've seen in recent quarters, negatively impacting average unit retail.
Denise A. Paulonis: Looking at the cadence of the quarter as we shared on our Q1 call. We started the quarter with about $10 million of weather impacted January which put outsized pressure on transactions for the quarter.
Denise A. Paulonis: Subsequently Sally returned to a more normalized traffic and transaction trend line at the end of the month and into early February.
Denise A. Paulonis: Although transactions continued to improve throughout the quarter, our Sally U S and Canada customers have demonstrated price sensitivity leaning into promotions more heavily than we've seen in recent quarters.
Denise A. Paulonis: Negatively impacting average unit retail.
Denise A. Paulonis: While promo offerings were approximately flat year over year, we believe the macro backdrop had a heightened impact on the increased take rate of promotional items by our lower income consumers, who are seeking value in response to the inflationary environment, including elevated credit card and buy now, pay later balances with higher interest rates. As we have seen, both our stylists and our retail customers have increased their promotional purchases in recent months. We are partnering with our vendors, and we are adjusting our tactics, including looking at the design, depth, and duration of our offers.
Denise A. Paulonis: While promo offerings were approximately flat year over year.
Denise A. Paulonis: The macro backdrop had a heightened impact on the increased take rate of promotional items by our lower income consumers, who are seeking value and response to the inflationary environment, including elevated credit card and buy now pay later balances with higher interest rates.
Denise A. Paulonis: As we have seen both our stylists and our retail customers increase their promotional purchases in recent months, we are partnering with our vendors and we are adjusting our tactics, including looking at the design depth and duration of our offers.
Denise A. Paulonis: We're taking these actions while remaining intensely focused on retaining and growing loyalty among our shoppers by leveraging our strategic initiatives from innovation to marketplaces and beyond. To that end, our ongoing focus on our core strategic initiatives, enhancing our customer centricity, growing our high-margin owned brands, amplifying innovation, and increasing the efficiency of our operations is bearing fruit. In Q2, Product Innovation, Territory Expansion, and New Services contributed over 250 basis points to our comparable sales results, and we remain on track to achieve 200 to 300 basis points of contribution from these initiatives for the full year. There are a number of highlights from the quarter and actions planned for the second half.
Denise A. Paulonis: We're taking these actions while remaining intensely focused on retaining and growing loyalty among our shoppers by leveraging our strategic initiatives from innovation to marketplaces and beyond.
Denise A. Paulonis: To that in our ongoing focus on our core strategic initiatives enhancing our customer centricity.
Denise A. Paulonis: Growing our high margin owned brands and amplifying innovation.
Denise A. Paulonis: And interest increasing the efficiency of our operations is bearing fruit.
Denise A. Paulonis: In Q2 product innovation territory expansion and new services contributed over 250 basis points to our comparable sales results.
Denise A. Paulonis: And we remain on track to achieve 200 to 300 basis points of contribution from these initiatives for the full year.
Denise A. Paulonis: There are a number of highlights from the quarter and actions planned for the second half.
Denise A. Paulonis: Starting with product innovation, this continues to be an important driver of growth and customer engagement in both our BSG and Sally sectors. At VSG, we recently secured substantial territory expansion with two important brands. We added key geographies with Moroccan oil, and we're now selling Amika across all stores and e-com in the U.S. and Canada. We also added two new compelling brands to our stable, Briogeo and Aprey, both of which have earned a cult following fueled by innovation. Considered a pioneer in scalp care, Briogeo brings a line of clean, plant-based products to approximately 500 Cosmoprof locations nationwide.
Denise A. Paulonis: Starting with product innovation. This continues to be an important driver of growth and customer engagement in both our BSG and Sally segment.
Denise A. Paulonis: At BSG, we recently secured substantial territory expansion with two important brands.
Denise A. Paulonis: We added key geographies with Moroccan oil.
Denise A. Paulonis: And we're now selling Amiga across all stores and E com in the U S and Canada.
Denise A. Paulonis: We also added two new compelling brands to our stable free IPO and a prey.
Denise A. Paulonis: Both of which have earned a cult following fueled by innovation.
Denise A. Paulonis: Considered a pioneer in scalp care Brioche Yo brings a line of clean plant based products to approximately 500 cross cosmair Prof locations nationwide.
Denise A. Paulonis: Founded by the scientist behind Olaplex, APRAE brings a new line of highly innovative bonding products to BSG, providing another efficacious tool to support our stylists as they serve their clients. From a trend perspective, blonding, glossing, and express coloring remain strong, as well as conscious beauty and textured hair products. In our Sally Beauty segment, innovation is also paramount across both owned and third-party brands. Major trends include dark vivids, toners with built-in color, and sustainable products, which we are beginning to promote under a new mindful banner.
Denise A. Paulonis: Founded by the scientist behind old Flex appraised brings a new line of highly innovative.
Denise A. Paulonis: Bonded products to BSG, providing another efficacious tool to support our stylists as they serve their clients.
Denise A. Paulonis: From a trend perspective, wanting glossing and express coloring remains strong as well as conscious beauty and textured hair products.
Denise A. Paulonis: In our Sally Beauty segment innovation is also paramount across both owned and third party brands.
Denise A. Paulonis: Major trends include dark is tuners with built in color and sustainable products, which we are beginning to telegraph under a new mindful banner.
Denise A. Paulonis: In Q2, owned brand sales penetration for the global Sally Beauty segment was 34 percent, up 60 basis points over the prior year. During the second half of the year, we have additional innovation forthcoming in skin care and men's grooming. Our latest marketing campaign, rooted in success, demonstrates our focus on creating branding moments that go beyond our Sally Beauty banner. Launched in conjunction with Black History Month, the campaign celebrates entrepreneurship and creativity.
Denise A. Paulonis: In Q2 owned brand sales penetration for the global Sally Beauty segment was 34% up 60 basis points over the prior year.
Denise A. Paulonis: During the second half of the year, we have additional innovation forthcoming in skin care and men's grooming.
Denise A. Paulonis: Our latest marketing campaign rooted in success demonstrates our focus on creating branding moments that go beyond our Sally beauty banner.
Denise A. Paulonis: Launched in connection with Black history month, the campaign celebrates entrepreneurs and creativity.
Denise A. Paulonis: We'll be building on this early success and the momentum we're seeing during other key moments throughout the year, including Pride Month and Hispanic Heritage Month. Turning now to customer centricity, let me start with a few updates on our new concepts and services, starting with licensed colors on demand. This service is available nationwide online and is now linked to all Sallie U.S. stores.
Denise A. Paulonis: We'll be building on this early success and the momentum we're seeing during other key moments throughout the year, including Pride month and Hispanic Heritage Man.
Denise A. Paulonis: Turning now to customer Centricity, let me start with a few updates on our new concepts and services.
Denise A. Paulonis: Starting with licensed colors on demand.
Denise A. Paulonis: This service is available nationwide online and is now linked to all Sally U S stores.
Denise A. Paulonis: Momentum continues to build. We saw over 3,000 consultations per week throughout Q2, with growth month over month throughout the quarter. In Q2, 40% of customers who engaged in the service were new to Sally. While it remains early days to understand the long-term benefit of the service, I'd note that for existing customers, we are seeing an uptick in visit frequency in the months following their consultations. Additionally, the average ticket value increased to $35 from $33 in Q1.
Denise A. Paulonis: Momentum continues to build.
Denise A. Paulonis: We saw over 3000 consultations per week throughout Q2 with growth month over month throughout the quarter.
Denise A. Paulonis: In Q2, 40% of customers, who engaged in the service or new to Sally.
Denise A. Paulonis: While it remains early days to understand the long term benefit of the service I would note that for existing customers. We are seeing an uptick in visit frequency in the months following their consultation.
Denise A. Paulonis: Additionally, average ticket value increased to $35 from $33 in Q1.
Denise A. Paulonis: We're also seeing strong results from our marketplace initiative, with both Amazon and Walmart performing well. Additionally, we are up and running with DoorDash as of March, and we'll launch Instacart in Q3. We view our marketplaces as an important omni-channel offering for our customers, allowing us to meet our existing customers where they are while also building awareness with new consumers. Looking at Studio by Sally, we're generating key ICE insights around
Denise A. Paulonis: We're also seeing strong results from our marketplace initiatives with both Amazon and Walmart performing well.
Denise A. Paulonis: Additionally, we are up and running with door dash as of March and we will launch <unk> in Q3.
Denise A. Paulonis: Our marketplaces as an important omnichannel offering for our customers.
Denise A. Paulonis: Allowing us to meet our existing customers, where they are while also building awareness with new consumers.
Denise A. Paulonis: Looking at studio by Sally, we're generating key insights around format.
Denise A. Paulonis: Store layout, services, and education, all of which are informing new ways to engage the customer. Although we're seeing pockets of strength, results are mixed, and we need more time to evaluate our KPIs before we take definitive steps to expand the initiative. More to come on this in the quarters ahead.
Denise A. Paulonis: Store layout services and education.
Denise A. Paulonis: All of which is informing new ways to engage the customer.
Denise A. Paulonis: Although we are seeing pockets of strength results are mixed and we need more time to evaluate our kpis before we take definitive steps to expand the initiative.
Denise A. Paulonis: More to come on this in the quarters ahead.
Denise A. Paulonis: Moving now to happy beauty Coke.
Denise A. Paulonis: As we test the concept and read results, we're pleased with the performance of our initial 10 pilot stores. Traffic is continuing to build as our teams implement creative marketing strategies around social media, grassroots initiatives, and DIY events in stores. Gifting continues to be a strong driver, and we've been seeing that in the lead-up to Mother's Day this weekend. Average ticket and units for transactions are tracking strongly, and we've recently started testing a luxury close-out section on items above $10.
Denise A. Paulonis: As we test the concept and read results. We're pleased with the performance of our initial 10 pilot stores.
Denise A. Paulonis: Traffic is continuing to build as our teams implement creative marketing strategies around social media grassroots initiatives and DIY events in stores.
Denise A. Paulonis: Gifting continues to be a strong driver and we've been seeing that in the lead up to mother's day. This weekend.
Denise A. Paulonis: Average ticket and units per transaction are tracking strongly and we've recently started testing a luxury closeouts section on items above $10.
Denise A. Paulonis: Early uptake there has been positive. Based on the strength of our initial Happy Beauty rollout, we plan to open up to an additional ten pilot stores prior to Thanksgiving in the Dallas and Phoenix markets. These additional stores will further test the demographic and co-tenancy profiles that are showing strength. As part of the expanded pilot, we'll also test mall locations, which we believe could be well suited for the concept, given their inherent traffic and exposure to demographic profiles that are responding in our pilot to date.
Denise A. Paulonis: Uptake there positive.
Denise A. Paulonis: Based on the strength of our initial happy Vd rollout, we plan to open up to an additional 10 pilot stores prior to Thanksgiving in the Dallas and Phoenix market.
Denise A. Paulonis: These additional stores, we will further test the demographic and co tenancy profiles that are showing strength.
Denise A. Paulonis: As part of the expanded pilot, we'll also test small locations, which we believe could be well suited for the concept given their inherent traffic and exposure to demographic profiles that are resonating in our pilot to date.
Denise A. Paulonis: Longer term, we have conviction that there will be an opportunity for more accelerated expansion in fiscal 2025 and beyond. Profitability remains a priority across the organization, and our teams are coalesced around our Fuel for Growth initiative. We're on track to capture previously announced pre-tax benefits of $20 million in Fiscal 2024.
Denise A. Paulonis: Longer term, we have conviction there will be an opportunity for more accelerated expansion in fiscal 2025 and beyond.
Denise A. Paulonis: Profitability remains a priority across the organization and our teams are coalesced around our fuel for growth initiatives.
Denise A. Paulonis: We're on track to capture previously announced pre tax benefits of $20 million in fiscal 2024.
Denise A. Paulonis: And, as shared on our last earnings call, we have identified another tranche of potential pre-tax benefits totaling approximately $50 million in Fiscal 2025, with cumulative run rate benefits in Fiscal 2026 approaching $120 million. In closing, this was a quarter with a number of learnings to build upon as we look to the future. We're pleased to see Momentum return to BSG with comparable sales in positive territory for two consecutive quarters. We believe the path to continued growth there will be driven by a combination of innovation, distribution expansion, and strengthening salon demand.
Denise A. Paulonis: And as shared on our last earnings call. We have identified another tranche of potential pre tax benefits totaling approximately $50 million in fiscal 2025 with cumulative run rate benefits in fiscal 2026 approaching $120 million.
Denise A. Paulonis: In closing this was a quarter with a number of learnings to build upon as we look to the future. We're pleased to see momentum return to BSG with comparable sales in positive territory for two consecutive quarters we.
Denise A. Paulonis: We believe the path to continued growth there will be driven by a combination of innovation distribution expansion and strengthening foreign demand.
Denise A. Paulonis: On the Sally side, we anticipate that macro pressures will persist in the near term and remain sharply focused on controlling the control volume, which includes enhancing customer centricity through our marketplaces and licensed colorist on-demand initiatives. As we remain focused on delivering engaging customer experiences and executing our strategic initiatives, we are responding to the continued shift in customer dynamics with thoughtful adjustments to our promotional cadence and Maintaining Strict Cost Disposal. We greatly appreciate the ongoing support of our shareholders, and we remain committed to serving our customers and driving long-term profitable growth and value creation for all of our stakeholders. Now, I'll turn the call over to Marlowe to discuss the financials. Thank you, Denise. And good morning, everyone.
Denise A. Paulonis: On the Sally side, we anticipate that macro pressures will persist in the near term and remains sharply focused on controlling the controllable.
Denise A. Paulonis: Which includes enhancing customer centricity through our marketplaces and licensed <unk> on demand initiative.
Denise A. Paulonis: As it remained focused on delivering engaging customer experiences and executing our strategic initiatives. We are responding to the continued shift in customer dynamics with thoughtful adjustments to our promotional cadence.
Denise A. Paulonis: And maintaining strict cost discipline.
Denise A. Paulonis: We greatly appreciate the ongoing support of our shareholders and we remain committed to serving our customers and driving long term profitable growth and value creation for all of our stakeholders.
Speaker Change: Now I'll turn the call over to <unk> to discuss the financials.
Marlo M. Cormier: Our second quarter was a dynamic one, and while we saw points of strength, our profit results came in below our expectations. Of note, sales came in at the lower end of our range, while gross margin, relative to our internal expectations, was our pressure point. And SG&A was in line.
Denise A. Paulonis: Thank you Denise and good morning, everyone are.
Speaker Change: Our second quarter was a dynamically and while we saw points of strength our profit results came in below our expectations.
Speaker Change: Of note sales came in at the lower end of our range, while gross margin relative to our internal expectations with our pressure point and SG&A was in line.
Marlo M. Cormier: Let me unpack the major drivers of the quarter. First, starting with sales. We were pleased to see BSG deliver slightly ahead of expectations with a second consecutive quarter of comparable sales growth. However, turning to Sally, sales came in at the low end of our expectations. We started the quarter with about $10 million of weather impact in January, but subsequently, Sally returned to a more normalized trend line at the end of the month and into early February.
Speaker Change: Let me unpack the major drivers of the quarter.
Speaker Change: First starting with sales we were pleased to see BSG deliver slightly ahead of expectations with a second consecutive quarter of comparable sales growth.
Speaker Change: Turning to Sally sales came in at the low end of our expectations.
Speaker Change: We started the quarter with about $10 million of weather impact to January <unk>.
Speaker Change: Sequentially Sally returned to a more normalized trend line at the end of the month and into early February.
Marlo M. Cormier: Although transactions continued to improve throughout the quarter, performance at Sallie U.S. and Canada was further impacted by a decline in average unit retail prices. As Denise pointed out, we saw customers increase their take rate on promotions, and we attribute this to the inflationary environment that continues to persist. Turning to gross margin, although gross margin came in above our 50% target range at 51%, this was lower than we anticipated, primarily driven by a higher take rate on promotions across both business segments as our customers sought value, combined with a lower mix of our higher-margin Sally U.S. sales. Now, let me take you through the details.
Speaker Change: Although transactions continued to improve throughout the quarter performance at Sally U S and Canada was further impacted by a decline in average unit retail prices as Denise pointed out we saw customers increase their take rate on promotion and we attribute this to the inflationary environment that continues to persist.
Speaker Change: Turning to gross margin, although gross margin came in above our 50% target range at 51%. This was lower than we anticipated primarily driven by a higher take rate on promotions across both business segments as our customers sought and value.
Speaker Change: Bind with a lower mix of our higher margin Sally U S sales.
Speaker Change: Now let me take you through the details.
Marlo M. Cormier: Second quarter consolidated net sales of $908 million declined 1.1 percent, while consolidated comparable sales declined 1.5 percent. Global e-commerce sales were $90 million and represented 10% of total net sales. Looking at gross profits, we delivered solid gross margins, which came in at 51% and were flat to the prior year, excluding last year's true-up of the non-cash inventory write-down related to the distribution center consolidation and store optimization plan that we executed last year.
Speaker Change: Second quarter consolidated net sales of $908 million <expletive>.
Speaker Change: <unk> declined one 1%, while consolidated comparable sales declined one 5%.
Speaker Change: Global E Commerce sales were $90 million and represented 10% of total net sales.
Speaker Change: Looking at gross profit, we delivered solid gross margins, which came in at 51% and was flat to the prior year, excluding last year's true up of the noncash inventory write downs related to the distribution center consolidation and store optimization plan that we executed last year adjusted.
Marlo M. Cormier: Adjusted gross margin was 51%, an increase of 30 basis points compared to 50.7% in the prior year. The year-over-year increase reflects lower distribution and freight costs resulting from supply chain efficiencies, partially offset by a lower mix of our higher-margin DALUS sales, which I mentioned earlier. Second quarter adjusted SG&A was up $5 million versus the prior year to $395 million. The year-over-year increase primarily reflects increased labor costs as well as higher rent expense, partially offset by lower accrued bonus expense.
Speaker Change: Adjusted gross margin was 51% an increase of 30 basis points compared to 57% in the prior year.
Speaker Change: Year over year increase reflects lower distribution and freight costs, resulting from supply chain efficiencies, partially offset by a lower mix of our higher margin <unk>.
Speaker Change: <unk> sales, which I mentioned earlier.
Speaker Change: Second quarter, adjusted SG&A was up $5 million versus prior year to $395 million.
Speaker Change: The year over year increase primarily reflects increased labor costs as well as higher rent expense, partially offset by lower accrued bonus expense.
Marlo M. Cormier: For the full year, we expect adjusted SG&A dollars to be up modestly versus fiscal 2023. This primarily reflects increased labor costs as well as investments in upper funnel marketing and other expenses related to our strategic growth initiatives, partially offset by the favorable impact of our fuel for growth initiatives. As a reminder, we expect to realize $20 million of pre-tax benefits to gross margin and SG&A that is weighted more heavily towards the second half of fiscal 2024.
Speaker Change: For the full year, we expect adjusted SG&A dollars to be up modestly versus fiscal 2023.
Speaker Change: This primarily reflects increased labor costs as well as investments in upper funnel marketing and other expenses related to our strategic growth initiatives, partially offset by the favorable impact of our fuel for growth initiatives.
Speaker Change: As a reminder, we expect to realize realized $20 million a.
Speaker Change: Our pre tax benefits to gross margin and SG&A that is weighted more heavily towards the second half of fiscal 2024.
Marlo M. Cormier: For perspective, approximately 75% of the benefits will be realized in SG&A. We expect to incur pre-tax cash charges associated with the Fuel for Growth program in the range of $25 to $30 million in the current fiscal year, including $14 million that has been realized year-to-date.
Speaker Change: For perspective, approximately 75% of the benefits will be realized in SG&A.
Marlo M. Cormier: We expect to incur pretax cash charges associated with the fuel for growth program in the range of $25 million to $30 million in the current fiscal year, including $14 million.
Speaker Change: That had been realized year to date.
Marlo M. Cormier: Additionally, we are working with external partners on additional opportunities and expect to approach $120 million in cumulative run rate benefits by the end of fiscal 2026. Turning now to earnings, adjusted operating margins came in at 7.6%, adjusted EBITDA margin at 11%, and adjusted their looted earnings per share at $0.35. Moving to segment results.
Marlo M. Cormier: Additionally, we are working with external partners on additional opportunities and expect to approach a $120 million in cumulative run rate benefits by the end of fiscal 2026.
Marlo M. Cormier: Turning now to earnings adjusted operating margin came in at seven 6%.
Marlo M. Cormier: <unk> EBITDA margin was 11% and adjusted diluted earnings per share was <unk> 35.
Marlo M. Cormier: Moving to segment results Sally beauty comparable sales declined 4%, while net sales were down 3%, reflecting the factors I outlined outlined earlier, including the January weather impact and ongoing frugality against the macro backdrop.
Marlo M. Cormier: Sally Beauty comparable sales declined 4% while net sales were down 3%, reflecting the factors I outlined earlier, including the January weather impact and ongoing frugality against the macro backdrop. At constant currency, Sally Beauty e-commerce sales were $34 million and represented 7% of segment net sales for the quarter. For the global Sally Beauty segment, color was down 4% and care was up 1%.
Marlo M. Cormier: At constant currency Sally E Commerce sales were $34 million and.
Marlo M. Cormier: And represented 7% of segment net sales for the quarter.
Marlo M. Cormier: For the global Sally Beauty segment color was down 4% and care was up 1%.
Marlo M. Cormier: At Sally U.S. and Canada, Color was down 6% and Care was down 1%. Of note, in Q2, we generated 79% of our Sally U.S. and Canada sales from our 16 million loyalty members. Gross margin in our Sally segment was 59.9%, up 10 basis points from last year, reflecting supply chain efficiencies partially offset by last year's true-up of the non-cash inventory write-down related to the distribution center consolidation and store optimization plan. Segment operating margin came in at 15%.
Marlo M. Cormier: Our Sally U S and Canada color was down 6% and care was down 1%.
Marlo M. Cormier: Of note in Q2, we generated 79% of our Sally U S and Canada sales from our 16 million loyalty members.
Marlo M. Cormier: Gross margin in our Sally segment was 59, 9% up 10 basis points to last year.
Marlo M. Cormier: Reflecting supply chain efficiencies, partially offset by last year's true up of the noncash inventory write down related to the distributor distribution center consolidation and store optimization plan.
Marlo M. Cormier: Operating margin came in at 15%.
Marlo M. Cormier: Moving to the BSD segment, the combination of product innovation, expanded distribution, and strengthening salon demand trends drove strong performance in the quarter. Comparable sales and net sales were both up 2%. On a constant currency basis, BSG e-commerce sales were $56 million, representing 14% of segment net sales for the quarter.
Marlo M. Cormier: Moving to the BSG segment, the combination of product innovation expanded distribution and strengthening salon demand trends drove strong performance in the quarter.
Marlo M. Cormier: Apparel sales and net sales were both up 2%.
Marlo M. Cormier: On a constant currency basis, BSG e-commerce sales were $56 million.
Marlo M. Cormier: Representing 14% of segment net sales for the quarter.
Marlo M. Cormier: The color category was up 6%, and care was up 3%. Growth margin at VSG increased 50 basis points to 39.4%, reflecting supply chain efficiencies partially offset by lower product margin, which was driven mostly by higher take rates on promotions and brand mix. Segment operating margin was 10.9%. Turning to the balance sheet and cash flow, we ended the second quarter with $97 million of cash and cash equivalents and $62 million outstanding under our asset-based revolving line of credit. Our net debt leverage ratio stood at 2.2 times.
Marlo M. Cormier: The color category was up 6% and care was up 3%.
Marlo M. Cormier: Gross margin at BSG increased 50 basis points to 39, 4%, reflecting supply chain efficiencies, partially offset by lower product margin, which was driven mostly by higher take rate on promotion and brand mix.
Marlo M. Cormier: Segment operating margin was 10, 9%.
Marlo M. Cormier: Turning to the balance sheet and cash flow. We ended the second quarter with $97 million of cash and cash equivalents and $62 million outstanding outstanding under our asset based revolving line of credit.
Marlo M. Cormier: Our net debt leverage ratio stood at two two times.
Marlo M. Cormier: Importantly, during the quarter, we were able to take advantage of an opportunity to further optimize our balance sheet by issuing a new $600 million, 8-year, senior unsecured note due 2032. The net proceeds from the transaction, in combination with existing cash and a modest draw under our asset-based revolving line of credit, were used to refinance our $680 million, 5.58% senior unsecured note due 2025. The new senior unsecured note was issued with a coupon rate of 6.75%.
Marlo M. Cormier: Importantly, during the quarter, we were able to take advantage of an opportunity to further optimize our balance sheet by issuing a new $600 million eight year senior unsecured notes due 2032.
Marlo M. Cormier: The lower principal amount of the new note will help offset the majority of the interest expense from the higher coupon rate. Quarter-end inventory was up 1.6% to slightly over a billion dollars, which is in line with our expectations and reflects a healthy overall position, including good in-stock levels. We generated positive cash flow from operations of $37 million, allowing us to repurchase another 1.5 million shares at an aggregate cost of $20 million this quarter under our share repurchase plan.
Marlo M. Cormier: The net proceeds from the transaction in combination with existing cash and a modest draw under our asset based revolving line of credit.
Marlo M. Cormier: Were used to refinance our $680 million identified 8% senior unsecured notes due 2025.
Marlo M. Cormier: The new senior unsecured note was issued with a coupon rate of 6% and three quarters percent.
Marlo M. Cormier: The lower principal amount of the new note will help offset the majority of the interest expense from the higher coupon rate.
Marlo M. Cormier: Quarter end inventory was up one 6% to slightly over $1 billion.
Marlo M. Cormier: Which is in line with our expectations and reflects a healthy overall position, including good in stock levels.
Marlo M. Cormier: We generated positive cash flow from operations of $37 million.
Marlo M. Cormier: Allowing us to repurchase another one 5 million shares at an aggregate cost of $20 million this quarter under our share repurchase plan.
Marlo M. Cormier: Turning now to guidance, we are revising our full-year operating margin outlook to reflect our second quarter results. We continue to expect full-year net sales and comparable sales to be approximately flat. As a reminder, for the second half of the year, we expect BSD to benefit from continued momentum in new brand innovation and expanded distribution opportunities, as well as easier comparisons from the lapping of hair care headwinds from the last several quarters.
Marlo M. Cormier: Turning now to guidance, we are revising our full year operating margin outlook to reflect our second quarter results. We continue to expect full year net sales and comparable sales to be approximately flat.
Marlo M. Cormier: As a reminder for the second half of the year, we expect BSG to benefit from continued momentum in new brand innovation and expanded distribution opportunities as well as easier compares from lapping of hair care headwinds from the last several quarters.
Marlo M. Cormier: Additionally, at Sally, we expect incremental improvement on the top line to be driven by the ramp of Walmart Marketplace, as well as the addition of Instacart and DoorDash. Additionally, the expansion of license colors on demand and benefits in Europe from pricing and new brand loss.
Marlo M. Cormier: Additionally, at Sally we expect incremental improvement on the top line to be driven by the ramp of Walmart marketplace as well as the addition of into the cart and door dash the expansion of licensed colors on demand and benefits in Europe from pricing and new brand launches.
Marlo M. Cormier: Given the dynamics from our second quarter results, we are sharpening our guidance on growth margins and now expect the full-year growth margin rate to be in the range of 50.5 to 51 percent. We now expect adjusted operating margins of approximately 8.5%. Accordingly, we are also revising our operating cash flow outlook to approximately $240 million. Lastly, capital expenditures are still planned to be approximately $100 million.
Marlo M. Cormier: Given the dynamics from our second quarter results, we are sharpening our guidance on gross margin and now expect the full year gross margin rate to be in the range of 55% to 51%.
Marlo M. Cormier: We now expect adjusted operating margin of approximately eight 5%.
Marlo M. Cormier: Accordingly, we are also revising our operating cash flow outlook to approximately $240 million.
Marlo M. Cormier: Lastly, capital expenditures are still planned to be approximately $100 million.
Marlo M. Cormier: Looking at the third quarter, we expect net sales and comparable sales to be in the range of down 1% to up 1%. We expect the gross margin rate in Q3 to be down slightly from Q2, driven in large part by the Q2 factors I discussed earlier around higher take rates on promotions and overall sales mix. Third quarter adjusted SG&A dollars are expected to be approximately flat compared to our second quarter. Incremental investments in marketing will be offset by the savings from our Fuel for Growth program, as expected.
Marlo M. Cormier: Looking at the third quarter, we expect net sales and comparable sales to be in the range of down 1% to up 1%.
Marlo M. Cormier: We expect a gross margin rate in Q3 to be down slightly from Q2, driven in large part by the Q2 factors I discussed earlier around higher take rate on promotions and overall sales mix.
Marlo M. Cormier: Third quarter adjusted SG&A dollars are expected to be approximately flat compared to our second quarter.
Marlo M. Cormier: Incremental investments in marketing will be offset by the savings from our fuel for growth program as expected.
Marlo M. Cormier: Additionally, we expect, and anticipate that third quarter adjusted operating margins will be in the range of 8% to 8.5%. Lastly, we expect investments in share repurchases in the third quarter to be approximately $10 million. We appreciate your time this morning. Now, I'll ask the operator to open the call for Q&A.
Marlo M. Cormier: Additionally, we expect we anticipate that third quarter adjusted operating margin will be in the range of 8% to eight 5%.
Marlo M. Cormier: Lastly, we expect investments and share repurchases in the third quarter to approximately to be approximately $10 million.
Marlo M. Cormier: We appreciate your time this morning, now I'll ask the operator to open the call for Q&A.
Marlo M. Cormier: Yeah.
Operator: Thank you, and ladies and gentlemen, if you wish to ask a question, please press 1-0 on your touchtone phone. You will hear an acknowledgement tone that you've been placed into Q, and you may remove yourself from Q at any time by repeating the 1-0 command. And if you're on a speaker phone, please pick up your handset before pressing the number. Once again, please press 1 then 0 at this time. And one moment for our first question, and that question will come from the line of Korinne Wolfmeyer from Piper Sandler. Please go ahead. Hi, good morning, this is Sarah.
Korinne N. Wolfmeyer: Hands on.
Denise A. Paulonis: Yeah, happy to talk about that. We were extremely pleased to see continued stylist trends improve in Q2 and the strength of our BSG business overall, posting a positive 2 comp. As you mentioned, both stylist sentiment and our innovation and territory expansion were contributions to that. So on the stylist sentiment side, we're still seeing stylists buy closer to need, with an exception this past quarter where when there was a discounting opportunity like with our customer appreciation sale, we actually saw better stylist response to that than we had in the past, which suggests to us that search for value on the part of the stylist is the most predominant behavior right now.
Korinne N. Wolfmeyer: Yeah happy to talk about that we were extremely pleased to see a continued stylists ah trends improve in in Q2, and the strength of our BSG business overall, posting a posting a positive to comp and as you mentioned are both stylus sentiment and our innovation and territory expansion where.
Denise A. Paulonis: <unk> to that so on the salad sentiment side, we're still seeing stylus by closer to need with with an exception. This past quarter were when there was a discounting opportunity like with our customer appreciation sale, we actually saw better stylist response to that than we had in the past which suggests to us.
Denise A. Paulonis: That search for value on the part of the stylist is the most predominant behavior right now so it's certainly not stocking up for you know just preparing for the future, but we will take advantage of those deals when those deals come forward, but we're pleased to hear from our stylists that their chairs are relatively busy and returning to a bit of a <unk>.
Denise A. Paulonis: So certainly not stocking up for just preparing for the future, but we'll take advantage of those deals when those deals come forward. But we're pleased to hear from our stylists that their chairs are relatively busy and returning to a bit of a normal rhythm. If you think about it, the customers for those stylists are middle to higher-income customers that are kind of back on some of their core routines. When we look at VSG brands, the brands that we're bringing in don't materially change the shelf space of any of our existing brands or existing products.
Denise A. Paulonis: <unk>, if you think about it the customers for those stylists are middle to higher income customers that are are coming back on some of their core routine.
Denise A. Paulonis: When we look at BSG brands the.
Denise A. Paulonis: The brands that we're bringing in and don't materially changed the shelf space or any of our existing brands are existing products. He will trim a few skews from the assortment here and there, but no material changes in the reduction of an actual line and but with Moroccan oil and Mika and color, while clearly those three entries.
Denise A. Paulonis: You will trim a few skews from the assortment here and there, but there will be no material changes in the reduction of an actual line. But with Moroccan oil and amica and Color Wow, clearly, those three entries were big ones for us. And then, most recently, Briaggio and Aprey are nice additions, but they are limited in skew counts and can fit into our store assortment nicely.
Denise A. Paulonis: We're big ones for US and then most recently <unk> in a prey are nice additions, but they are limited skew counts and can fit into a into our store assortment nicely.
Speaker Change: Very helpful. Thank you.
Operator: Thank you. And our next question is from Oliver Chen of Cohen. Please go ahead.
Speaker Change: Thank you and our next question is all.
Oliver Chen: So I'm, calling please go ahead.
Denise A. Paulonis: Thank you very much. We'd love your color on the... difference in demand in terms of improving salons but consumer spend at SBS being softer. And also, how are you managing promotions as consumers remain cautious? What do you think about promotions and the back half? And then also, as we think about the software 2Q margins, any other underlying drivers, you know, for lower operating income margin guidance while you're reiterating the top line would be helpful as well.
Oliver Chen: Alright, Thank you very much would love your color.
Denise A. Paulonis: <unk>.
Denise A. Paulonis: The Princeton demand in terms of improving gallant, but consumer spend that'd be being softer.
Denise A. Paulonis: And then also how are you managing promotions as consumers remain.
Speaker Change: <unk>, what do you think about promos on the back huh.
Denise A. Paulonis: And then also as we think about <unk>.
Denise A. Paulonis:
Denise A. Paulonis: Any other underlying driver you know for lower operating income margin guidance.
Denise A. Paulonis: While you're reiterating the top line would be helpful as well thank you.
Denise A. Paulonis: Great. I'll cover off Oliver on both demand and promotions and then pass it to Marlo to talk a little bit more about margins and guidance. When we think about demand, we're really seeing a bifurcation of two different consumer populations. What we're seeing with stylists who predominantly serve middle to higher-income customers is a return of regular, more normalized services and cadence. We're seeing that with both strength in color and care coming through our sales portfolio.
Denise A. Paulonis: Thank you. Great.
Speaker Change: I'll cover off a little Oliver on both demand and promotions and then pass it tomorrow to talk a little bit more about margins and guidance.
Denise A. Paulonis: Let me think about demand, we're really seeing a bifurcation of two different consumer populations, yeah, what we're seeing with stylists, who predominantly serve a middle to a higher income customer is a return of regular more normalised services and cadence come through and we're in we're seeing that with those strength in.
Marlo: Color and care coming through our sales portfolio I think when you contrast that with the lower income consumer that's a more typical sally consumer they're feeling more pressure, we we see it as people come through and are selected in their baskets, you know feeling the part and just general price inflation food inflation.
Denise A. Paulonis: I think when you contrast that with the lower income consumer that's a more typical Sally consumer, they're feeling more pressure. We see it as people come through and are selected for their baskets, feeling just general price inflation, food inflation not going down in the way people would have hoped. By now, pay later balances, credit card balances, are starting to make people make a few more choices.
Denise A. Paulonis: You know not going down in the way people would've hoped and then you buy now pay later balances credit card balances starting to make people make a few more choices and the good news is relatively resilient and that what we believe is we maintained unit share in color in the category, but this category itself was pressured so we're expecting.
Denise A. Paulonis: The good news is relatively resilient in that, what we believe is, we maintain unit share in color in the category, but the category itself was pressured. We're expecting that some of that consumer pressure on the Sally side will persist, but we're working to navigate through it and still provide good value to our customers, but notably focusing on experiences like Licensed Colorist on Demand and our marketplaces that provide a reason beyond a deal to be shopping with us and having an experience with Sally. And to that end, you asked about promotions.
Denise A. Paulonis: Some of that consumer pressure on the Sally side will persist, but working to navigate through it and it's still provide good value to our customers, but notably focusing on experiences like license colorist on demand in our market places that provide a reason beyond a deal to be shopping with us and in having an experienced with Sally.
Denise A. Paulonis: And to that end you asked about promotions it was a quarter, where we saw that take right on promotions on both the pro and the retail side increase so this nature of everyone searching for an extra layer of values certainly came through as we watched that happen through the quarter. You. We quickly started to mobilize analytics on.
Denise A. Paulonis: It was a quarter where we saw the take rate on promotions on both the professional and the retail side increase. So this nature of everyone searching for an extra layer of value certainly came through. As we watched that happen through the quarter, we quickly started to mobilize analytics on where we could shift the design of some promotions, the absolute depth of promotion, and the duration of promotion. And you'll see some of those changes come through as we work through the second half of the year.
Denise A. Paulonis: Where we could shift.
Denise A. Paulonis: <unk> to the design of some promotion and the absolute depths of promotion the duration of promotion and you'll see some of those changes come through as we work through the second half of the year and we're really balancing a depth of understanding of how shoppers are putting product in their basket to be able to maintain that share of wallet.
Denise A. Paulonis: We're really balancing a depth of understanding of how shoppers are putting product in their baskets to be able to maintain that share of wallet while hopefully trimming a bit of that AUR pressure that we saw just from that higher promo penetration. That is true on both the BSG and the Sally side in terms of the work we have going on. So we expect to see that trend moderate a bit as we make these changes, but we're going to be very deliberate with our choices to maintain that customer loyalty and share of wallet. And I'll turn it over to Marlo to comment a bit on margins.
Marlo: Hopefully a trimming a bit about AUR pressure that we saw just from that higher promo furniture penetration that is true on both of the S. G M. The Sally side in in terms of the work we have going on so we expect to we expect to see that trend moderate a bit as we make these changes, but we're going to be very lives with our choices too.
Marlo: Maintain that customer loyalty and share of wallet and I will turn it over to Marlow to comment a bit on margin yeah in terms of Ah our margin update really that was driven syndrome predominantly from the adjustments to be made to our gross margins are gross margins for Q2 came in at 51% very solid.
Marlo M. Cormier: Yeah, in terms of our margin update, really that was driven predominantly from the adjustments we made to our gross margins. Our gross margins for Q2 came in at 51%, very solid. We had the benefits of our supply chain efficiencies.
Marlo: We had the benefits of our supply chain efficiencies and we did have some offset from lower mix of the higher margin fell U S business being a lower lower penetration.
Marlo M. Cormier: We did have some offset from the lower mix of the higher margin, Sal-U.S. business being a lower penetration. But overall, it was a bit lower than our expectations, not significantly, but modestly, where we thought, based on that performance, that it was prudent to take down our gross margin expectations for the remainder of the year. So we're guiding to a 50.5 to 51% range, and that's what translated through to the lowering of the operating margin.
Marlo M. Cormier: But overall it was a bit lower than our expectations. You know, it's not it's not significantly but modestly where we thought you know based on that performance that.
Marlo M. Cormier: But it was prudent to take down our gross margin expectations for the remainder of the year. So we're getting to a 55% to 51% range and affleck translated through to the to the lowering of the operating margin that range is still historically high. It has a very strong margin. We're very pleased with that margin, but as we learn more about the.
Marlo M. Cormier: That range is still historically high. It is a very strong margin. We're very pleased with that margin. But as we learn more about the shift in customer behavior and the adjustments we're making to our promotional cadence, we just thought it was prudent to make that adjustment.
Marlo M. Cormier: <unk> customer behavior, and your judgments were making to our promotional cadence. We just thought it was prudent to make that adjustment.
Denise A. Paulonis: Okay, very helpful. Just to follow up, as you think about upper funnel investing in marketing, it sounds like a great idea. What do you think about how this may be different from prior? And then finally, on the comps, and as we think about the back half, what are some underlying factors that give you confidence that they'll turn positive? Thanks so much, Denise and Marlo. So how about I take those in reverse order? So I think when we do it.
Speaker Change: Very helpful.
Speaker Change: The follow up as you think about upper Bunnell and best thing in marketing it sounds like a great idea. What do you think about how this may be different from Pryor and.
Speaker Change: And then finally on the Komsomol do we think about the bad cough what are some underlying factors that give you confidence at the altar and positive. Thanks, So much to me some marlo.
Denise A. Paulonis: Yeah, so how about I take those in in reverse order? So I think when we think about the second half of the year There's there's two predominant sets of trends going on when we look at BSG We do think the continued momentum and the new brand innovation is real and will continue to benefit We also see expanded distribution opportunities continuing and that will be there Underlying that BSG is also lapping the hair care headwind we had from a from a big brand in early Q2 So that's going to lead to some easier compares in the second half of the year And so so CBSG continuing on a nice solid trajectory And on the Sally side as we turn to the second half of the year, you know, we do see marketplaces license colors on demand product innovation own brands all Combined with CRM and some personalization activities as things that will provide a lift there as well So our strategic initiatives continuing to pay off even though we'll have that undercurrent of a little bit more macro pressure I think when we combine all of those with the fuel for growth activity and the Savings that we'll have coming through in the second half of the year.
Speaker Change: Yeah, So how about I take those in in reverse order. So I think when we think about the second half of the year. There's there's two predominant Ah set the trend going on when we look at DSG and we do think that continued momentum and the new brand innovation is real and will continue to benefit. We also expanded distribution opportunities continuing and that will be their underlying.
Denise A. Paulonis: Hang that BSG is also lapping the hair care headwind, we had for a minute from a big brand in early Q too. So that's going to lead to some easier compares in the second half of the year and so so C. BSG continuing on a on a nice solid trajectory and on this alley side as we turn to the second half of the year you know we do see.
Denise A. Paulonis: Marketplaces license colors on demand product innovation.
Denise A. Paulonis: Own brands, all combined with CRM and some personalization activities as things that will provide a lift there as well so our strategic initiatives continuing to pay off even though we will have that undercurrent of a little bit more macro pressure I think when we combine all of those with the fuel for growth activity in the.
Denise A. Paulonis: You know, we feel pretty confident about the guidance and the guidance update that we provided today. As for marketing, if I go back to your first question, marketing is a very interesting space for us in how we both serve our existing customers and attract new customers. And some of the things we're trying to do are use up-front marketing to take people more to something like a licensed colorist on demand.
Denise A. Paulonis: Savings that will have coming through in the second half of the year you. We feel will feel pretty confident about about the guidance and the guidance update that we provided today.
Denise A. Paulonis: And we look at marketing if I go back to your first question.
Denise A. Paulonis: Marketing is a very interesting space for us and how we both serve our existing customers and attract new customers.
Denise A. Paulonis: Some of the things we're trying to do our use upper frontal marketing to take people more to something like a license colorist on demand right. So how can we use social media and.
Denise A. Paulonis: So how can we use social media, how can we use performance marketing to direct people to an experience that will bring a new customer into Sally? When we think about that Licensed Colorist on demand and the results of having pushed that initiative this past quarter, we actually saw 40% of the customers who participated in that were new to Sally. We started to see a little bit of an increase in frequency in the month after those customers experienced it.
Denise A. Paulonis: How can we use performance marketing to direct people to an experience that will bring a new customer into Sally and when we think about that license colors on demand and the results of having having pushed to that initiative. This past quarter, where she saw 40% of the customers who participated in that were new to Sally we've.
Denise A. Paulonis: We've started to see a little bit of the increase in frequency in the month. After those customers experienced that so marketing really tailored to say, what's different about Sally and Y Sally can make a difference to you is what we're focused on is where.
Denise A. Paulonis: So marketing really tailored to say what's different about Sally and why Sally can make a difference to you is what we're focused on as we're kind of headed towards the back half of the year. We're also pleased that we're about six months into having a new performance marketing agency supporting us and see that a lot of the work they're doing to best target our efforts is going to pay off as well.
Denise A. Paulonis: Headed towards the back half of the year. We also are pleased we have we're about six months into having any new performance marketing agency supporting us and see that a lot of the work they're doing to best target.
Denise A. Paulonis: Our efforts is going to pay off as well.
Denise A. Paulonis: And I guess the last piece there is that we're also purposefully doubling down on a bit of a test in nine of our markets where we think we have a share of wallet opportunity. And understanding that if we put a little bit more fuel behind communications and messages in those markets, what can we do to see that push the needle a little bit more and hopefully convert a few more customers and drive a bit more frequency? So a number of pieces and parts there, but really trying to stay true to what's unique about Sally and pushing experiences, product offerings, and expertise in those communications.
Denise A. Paulonis: And I guess the last piece of there is we're also purposefully doubling down on a bit of a test into nine of our markets, where we think we have a share of wallet opportunity and understanding that if we put a little bit more fuel behind communications and messages in those markets and what can we do to see that pushed the needle a little bit more and and.
Denise A. Paulonis: Hopefully convert a few more customers and drive a bit more frequency. So a number of pieces and parts of their but really trying to stay true to what's unique about Sally and pushing experiences product offering expertise in those communications.
Denise A. Paulonis: Thanks very much. I appreciate it.
Speaker Change: Thank you very much I appreciate it.
Operator: Thank you. Our next question is from Olivia Tong from Raymond James. Please go ahead.
Denise A. Paulonis: Thank you. Our next question is from Olivia Thompson Raymond James. Please go ahead.
Denise A. Paulonis: Thanks, good morning. A few questions here. First, on the Sally Beauty stores, what did you see as you exited the quarter? Maybe talk through some of the initiatives to spur foot traffic. On the BSG side, can you help us understand how much the territory expansion added to sales and whether there's any pipeline fill that doesn't repeat? And then just the last question is on operating margin.
Olivia Tong Cheang: Thanks, Good morning Uhm.
Denise A. Paulonis: A few questions here first I'm Sally beauty on the Sally beauty stores, what did you see as you exited the quarter, maybe talk to some of the initiatives to square foot traffic.
Denise A. Paulonis: On on the B S. G side can you help us understand how much the territory expansion added to added to sales and whether there's any pipeline fell that that doesn't repeat.
Denise A. Paulonis: And then just last question as an operating margin.
Denise A. Paulonis: I understand the margin guide change as a result of the mix shift that impacted Q2 and likely impacts the second half. But are you adjusting second half expectations for margins by segment? And if not, can you talk about what's going to be the offset to keep second half margin targets unchanged if you want to have a little bit more flexibility on adjusting promotion?
Denise A. Paulonis: A point of clarification I understand the margin guide change as a result of the mix shift.
Denise A. Paulonis: That impact in Q2, and and likely impacts a second half but are you adjusting that.
Denise A. Paulonis: Could have expectations for margins by segment.
Denise A. Paulonis: And if not can you talk about what's going to be the opposite to keep second half margin target unchanged. If you want to have a little bit more flexibility on I wanted to just a promotion. Thank you so much.
Denise A. Paulonis: Happy to take those. We'll try to take them in order. You know, Sally, when we think about driving traffic to the stores and driving transactions overall, you know, I think we are thinking about it very holistically and very omni-channel. So as we look to the second half of the year and we look to the end of our second quarter, the marketplace is ramped up for us. So we were able to add DoorDash to our mix along with Walmart and Amazon and saw nice early results there. Instacart is getting turned on in the beginning of Q3. That's nice traffic.
Denise A. Paulonis: Thank you so much. I'm happy to take those. We'll try to take them in.
Speaker Change: I'm happy to take this it will try to take them an order Sally when we think about driving traffic to the stores and driving transactions. Overall, you know I think we are thinking about it very holistically and very lonely channels. So as we look to the second half of the year and we look to the end of our second quarter.
Denise A. Paulonis: Marketplaces ramped up for us So we were able to add in door dash to our mix along with Walmart and Amazon.
Denise A. Paulonis: And saw nice early results there instacart is getting turned on in the beginning of Q3, that's a nice traffic it's traffic that actually goes through our stores as you know as those will get shopped in the stores, particularly from the door Dash Instacart peace and delivered to the customer.
Denise A. Paulonis: It's traffic that actually goes through our stores, as you know, as those will get shopped in the stores, particularly for the DoorDash and Instacart piece, and delivered to the customer. You know, when we look beyond that, things that are generating those experiences and those reasons to shop with us were performing well at the end of the quarter. So, as I mentioned earlier, License Color is on demand.
Denise A. Paulonis: When we look beyond that things things that are generating those experiences and those reasons to shop with us we're performing well at the end of the quarter. So as I mentioned earlier license colorist on demand from our.
Denise A. Paulonis: Our own brands and Bon Bar are driving new customers into our store and building that loyalty piece as well. You know, and then our CRM activities as we continue to get more targeted and more personalized for the reason for somebody to come back and shop with Sally. So looking at it in a very omni-channel way and then when a customer gets into the store, you know, that store associate being knowledgeable, having the information that they need to really drive conversion.
Denise A. Paulonis: Our own brands and bonds are that are driving a new customers into our store and building and building that loyalty peace as well.
Denise A. Paulonis: Then our CRM activities as we continue to get more targeted and more personalized for the reason for somebody to come back and shop with Sally So looking at at a very Omnichannel way and then when a customer gets into the store that store associate being knowledgeable having any information that they need to really drive conversion and we've seen we've seen a modest up.
Denise A. Paulonis: And we've seen a modest uptick in conversion as we've come through the quarter as well. So, trying to capitalize on all fronts there in the, you know, as we also look to say a customer is shopping with a bit of frugality.
Denise A. Paulonis: Tick and conversion as we've come through the quarter as well so trying to capitalize on all fronts. There in this.
Denise A. Paulonis: We also look to say a customer is shopping with a bit of frugality and so pleased with what we're what we're working on an attraction that we're starting to get and I think that that will bear more fruit as we come in to the second half of the year.
Marlo M. Cormier: And I'm so pleased with what we're working on and the traction that we're starting to get and think that that will bear more fruit as we come into the second half of the year. On a BSG front, in terms of what's contributing to the upside, it's a broad-based set of things that span from innovation gains, new innovation gains, and distribution gains. We've also talked a little bit about stylist demand. We haven't broken out those individual component pieces beyond talking about the Goldwell of New York acquisition that we are starting in Q4, so it still has another couple of quarters to run.
Marlo M. Cormier: On a BSG front and in terms of what's contributing to the upside.
Marlo M. Cormier: It's a broad base set of things right that spanned from Ah innovation gains new new innovation gains distribution gains.
Marlo M. Cormier: We've also talked a little bit about the stylus demand, we haven't broken out those individual component pieces beyond talking about the global all of New York acquisition that we are.
Marlo M. Cormier: Asserted in Q4, so it's still has another couple of quarters to run their I believe that that was it's $10 million to $15 million in top line sales that will be on an annualized basis, you'll all the other pieces. We really believe are in the run rate and that is these items start to laugh. We do have continued innovation in the pipeline behind them. So.
Marlo M. Cormier: I believe that that was $10 to $15 million in top-line sales that will be on an annualized basis. All the other pieces, we really believe, are in the run rate, and that is, these items will start to last. We do have continued innovation in the pipeline behind them, so Amica and Moroccan Oil and ColorWow are great strengths today. We think there's more to come, but adding things like Briogeo and Aprey, we just, And Marlo, do you want to talk a little bit about the margin guide?
Marlo M. Cormier: Mika and Moroccan oil and color Wow, great strength today, we think there's more to come but adding and things like <unk> and a pray we just want to continue that flywheel of innovation coming into.
Marlo M. Cormier: Into the <unk> ecosystem.
Marlo: You want to talk a little bit about that the margin guide the margin guide in terms of I think your question was directed at the segments. So <unk>.
Marlo M. Cormier: Yeah, the margin guide in terms of, I think your question was directed at the segments. So, you know, a key component is the mixed shift that we saw in Q2, and we expect that to continue again with the solid momentum around BSG and a little bit of softness in Sally, mainly from that AUR pressure. And then the gross margin guide, as we mentioned, again being a little more prudent there as we continue to work through our adjustments to our promotional offerings as we try to continue to drive traffic and gain share of all of that.
Marlo M. Cormier: He component is the the make shift that we saw in Q2, we expect that to to continue again with the the solid momentum around PSG and a little bit of softness and and Sally mainly from that AUR pressure.
Marlo M. Cormier: And then the gross margin guidance as we mentioned again being a little more prudent there as we continue to work through our adjustments to our promotional offerings as we as we try to continue to drive traffic and Gainshare mall.
Speaker Change: And our next question is from actually.
Marlo M. Cormier: Jeffrey Scott.
Denise A. Paulonis: Thanks for taking our question. To start, maybe you could give us a little bit more color on kind of the specifics around the innovation that you saw this quarter that really helped drive the strength at BSG, and then any innovation that you're seeing within Sally would be helpful. And then I know you kind of mentioned promotions and people shifting towards buying more on promotions, but anything you can tell us about just the promotional rate this quarter versus last year would be great. So let me take those in reverse order.
Speaker Change: Hi, Thanks for taking my question just aren't maybe you can just give us a little bit more color.
Denise A. Paulonis: The specifics around that an invasion that you saw this quarter that really helped drive.
Denise A. Paulonis: Drop the strength up yesterday, and then any innovation that you're seeing within Sally would be it would be helpful. And then I know you kind of mentioned like promotions and people shifting toward buying more on promotion, but anything you can tell us about the promotional rate this quarter versus last year.
Denise A. Paulonis: Would be great. So let me let me take those in reverse order.
Denise A. Paulonis: So promotional rate this year versus last year and no meaningful difference in the offers that we had out there on the Sally Sighed, BSG, probably had a slight bit more promotion, but we've been seeing that with our vendors leaning in over the last few quarters, but in the Sally World.
Denise A. Paulonis: So, promotional rates this year versus last year, there was no meaningful difference in the offers that we had out there on the Sally side. BSG probably had a slight bit more promotion, but we've been seeing that with our vendors leaning in over the last few quarters. But in the Sally world, offers were out there; they were just being more consistently, more consistently pursued by our customer base. And in BSG, the most notable was our customers leaning in against the customer appreciation sale, which is a once a quarter event that we do.
Denise A. Paulonis: Offers were out there they were just being more consistently you more consistently pursued by our customer base and and BSG. The most notable was our customers leaning in against the customer appreciation sale, which is once a quarter event that we do but put it in proportion this quarter versus a quarter a year ago. The same two day.
Denise A. Paulonis: But to put it in proportion, this quarter versus a quarter a year ago, the same two-day customer appreciation sale, our sales were up 17%. So really leaning in and looking for that value is what came through, but the offers themselves were very, very similar year over year.
Denise A. Paulonis: Customer appreciation sale, our sales were up 17%.
Denise A. Paulonis: So really leaning in and looking for that value is what came through but the offers themselves very very similar a year over year.
Denise A. Paulonis: On the innovation front, as I said, we're extremely excited about the innovation cycle we're in and what we can bring to the table. And when you think about the drivers of innovation on the BSG side... Certainly, we continued to have some strength from core brands like Wella that were bringing out new innovation, but a lot of the strengths came from Moroccan oil, color wow, and amica. In some cases, that was expanding territory rights for some of those brands, and in other cases, it was expanding to our entire store fleet. And then cycling behind that, a new level of innovation with the launch of Briaggio as well as a new predator.
Denise A. Paulonis: On the innovation front as I said, we are extremely excited about the innovation cycle, we're in and what we can bring in when you think about the.
Denise A. Paulonis: Drivers innovation on the BSG side.
Denise A. Paulonis: Certainly continued to have some strength turn core brands like Wella that we're bringing out new innovation, but a lot of the strength came from Moroccan oil color Wow Ah Mika in some cases that was expanding territory rates and some of those brands and in other cases. It was expanding you to our entire store fleet and.
Denise A. Paulonis: Cycling behind that a new level of innovation with the launch of brioche Yeo as well as a prey.
Denise A. Paulonis: All of these are hair care products that, on the styling side, on the core care side, they just offer new and different alternatives for our stylists as they think about serving their customers and their clients, some of which are bonding, some of which are other functional solutions, but all of which are really responding through our customer base. On the Sally side, we continue to look favorably at opportunities around our mindful brands, so things that are more conscious beauty choices inspired by nature products performed well.
Denise A. Paulonis: All of these are hair care products that are.
Denise A. Paulonis: On the styling side on the on the core care side that just offer new and different alternative for our stylists as they think about serving their customers and their clients some of which are bonding some of which are.
Denise A. Paulonis: Other functional solutions, but all of which are really resonating through our customer base.
Denise A. Paulonis: On the Sally side, we continue to.
Denise A. Paulonis: Look favorably to opportunities around kind of are mindful brands. So things that are more conscious beauty choices are inspired by nature products performed well and we continue to see bond bar perform well and grow from our own brands perspective, and then we see interest interest remains.
Denise A. Paulonis: We continue to see Bon Bar perform well and grow from our own brand's perspective. And then we see interest remains in vivid color; it was about 22% of our penetration in the quarter, so that has also leveled off in those low 20s, but there's still a nice pipeline there. The innovation to come in Sally is exciting around some things that we're doing in skin care, continued leaning into textured care, that'll all come as we're entering the second half of the year. It's a great pipeline on both sides of the business that we actually think are fantastic offerings for our customers. Great. Thanks for all the color. The next question.
Denise A. Paulonis: Means in vivid color it was about 22% of our penetration in the quarter. So that is also leveled.
Denise A. Paulonis: Leveled off in those low twenties, but there's still a nice pipeline there the innovation to calm in Sally as exciting around some things that we're doing on skin care continued leaning into textured care that will all come as we're entering the second half of the year and so great pipeline on both sides of the business that we actually think are fine.
Denise A. Paulonis: [noise] tastic offerings for our customer.
Speaker Change: Great. Thanks for all the color.
Denise A. Paulonis: The next question.
Operator: From the line of Gina Gianelli from Morgan Stanley, please go ahead. Hi, this is Sarah on behalf of Jenna. Can you update us on your capital allocation?
Speaker Change: It's on the line.
Denise A. Paulonis: Wow.
Sarah: Please go ahead.
Operator: Hi, This is Sarah on for Jenna.
Sarah: Can you update us on your cap allocation priorities, if you're a leveraged target as a turn and a half to two terms still holds and how you're bouncing that with repurchases. Thanks.
Marlo M. Cormier: Yeah, thank you. Yeah, so our leverage range of one and a half to two times. We do believe that's appropriate for our business going forward. So we'll continue to work towards that. You know, this quarter we were pleased to be able to further optimize our balance sheet with the recent refinancing. We took $80 million of principal out of that secured note as we refinance into a new secured note.
Sarah: Yeah. Thank you.
Sarah: Yeah, So our our liberties range of the one and a half to two times, we do believe that's appropriate.
Marlo M. Cormier: For our business going forward. So we will continue to work towards that you know this quarter, we were pleased to be able to further optimized.
Marlo M. Cormier: Our balance sheet with the recent refinancing we did take $80 million a principal out of.
Marlo M. Cormier: That's secured note as we as we refinanced into a new secured note that says just given the timing of our cash flow were generally look heavier than the back half and certainly in queue for in terms of our pre class free cash flow generation.
Marlo M. Cormier: That's just given the timing of our cash flow; we're generally much heavier in the back half and certainly in Q4 in terms of our free cash flow generation. So we did use our ABL to help complete that refinancing. We've got about $60 million outstanding on that ABL.
Marlo M. Cormier: So we didn't use our ABL to help complete that refinancing we've got about $60 million outstanding on that that ABL. So we will continue to balance that pay down and share repurchase, but we do look to to get out of the ABM as we progress through the coming quarters and as we get into our heavier cash generation quarters.
Marlo M. Cormier: So we'll continue to balance debt paydown and share repurchase, but we do look to get out of that ABL as we progress through the coming quarters and as we get into our heavier cash generation quarters. But we'll take a balanced approach, as you heard us comment. We are guiding to about a $10 million share we purchase for $2. Great, thanks.
Marlo M. Cormier: But we will take a balanced approach as you've heard his comment we are guiding too about a $10 million share repurchase for Q3.
Marlo M. Cormier: And then just to follow up, can you speak to the extent to which the weakness on higher ticket items continues to weigh on sales and when we might start to comp out of that? Yeah, the way that I would think about it is that we guided Q3 sales down one to plus one. So, you know, in general, progress in returning to the total business headed toward a positive comp. So, as I mentioned earlier, our focus as we saw the uptake in promotion through Q2 take hold was really to think about our planning for Q3 and Q4.
Speaker Change: Great. Thanks, and then just a follow up can you speak to the extent to which the weakness on higher ticket items continues to weigh on sale then when we might start to cop out of that.
Marlo M. Cormier: Yeah, the way that I would think about it is.
Marlo M. Cormier: Guided Q3 sales are down one plus one so in general progress in returning to the total business headed towards a positive comps. So as I mentioned earlier, you know our focus as we saw the uptake in promotion through queue to.
Marlo M. Cormier: Take hold was really to think about our planning for Q3 and Q4 those actions and changes are underway now as we're as we're engaging with our customer and providing them with offers so.
Marlo M. Cormier: Those actions and changes are underway now as we're engaging with our customers and providing them with offers. So, you know, we'll gradually see comps improving as we go into Q3 and getting us back into kind of flat performance, which is what we expect for the full year.
Marlo M. Cormier: Progressively C comps improving as we go into Q3 and getting us back into a flat performance, which is what we expect for the full year.
Speaker Change: Thank you so much.
Operator: Thank you, and our final question will come from Samian Gutman, from Morgan Stanley. Please go ahead.
Speaker Change: Thank you and our final question will come from.
Simeon Ari Gutman: Stanley Please Scott.
Operator: Hi. Good morning, everyone.
Simeon Ari Gutman: Hi, Good morning, everyone I wanted to ask about the industry there seems to have been like synchronous slowing.
Simeon Ari Gutman: Little bit of beauty, and then a lot from it looked like middle and lower income.
Simeon Ari Gutman: Some of the prepared remarks, but curious.
Denise A. Paulonis: I wanted to ask Denise about the industry. There seems to have been this, like, synchronous slowing. A little bit in beauty and then a lot from – it looks like middle and lower income, and I missed some of the prepared remarks. But curious about the industry, if we've reached, you know, some kind of peak in innovation and consumption, or it's just the macro and the wallet pressure is waning. Is there anything with innovation that's not there? Why do you think that, you know, we might be seeing this pullback now?
Simeon Ari Gutman: On the industry.
Denise A. Paulonis: We've reached some kind of peak and innovation and consumption or just the mackerel in the wallet pressure is waning was there anything with innovation. That's not there why do you think we might be seeing this pullback bell.
Denise A. Paulonis: Yeah, Samian; I'm happy to share at least some perspectives that I see through the data that I can examine in our business. You know, what we talked about a little bit in the prepared remarks was a bit of the bifurcation of the customer, which is interesting that on the pro side, which serves more of a middle to more of an upper income customer demographic as that client sitting in the chair, we've actually seen pretty healthy stylus demand, which is, nice business there, and underneath that, the innovation cycle on the hair care and hair color side for the pro is pretty robust
Denise: Yeah, I mean happening happy to share at least some perspective and I see through the data that I can examine in our business, what we talked about a little bit in the prepared remarks with a bit of the bifurcation of the customer which is interesting that on the pro side, which serves more middle to more of an upper income customer demographic.
Denise A. Paulonis: Is that clients sitting in the chair, we've actually seem pretty healthy stylists demand, which you nice nice business, there and underneath that the innovation cycle on the hair care of hair color side for the pro is pretty robust and particularly what we're picking up and distribution on some core performing brands.
Denise A. Paulonis: And particularly what we're picking up in distribution on some core performing brands has been solid. And so as we look to the second half of the year, we see that continuing, and at least at this point, while we're monitoring it quite closely, our stylists feel pretty good about their books of business and where they're headed.
Denise A. Paulonis: <unk> has been solid and so as we look to the second half of the year, we see that continuing and at least at this point, while we're monitoring it quite closely or stylus feel pretty good about their book of business and where they're headed I think the bifurcation comes and what we can see through our Sally data is that.
Denise A. Paulonis: I think the bifurcation comes, and what we can see through our Sally data is that, you know, our lower income customers in Sally, because we do serve all income levels, but we mix a little bit more with the lower income. That lower income customer has been the customer where frugality is coming through more, that when they're buying, they are looking for the deals, they are looking for ways to stretch those dollars a little bit more or be a little bit more frugal.
Denise A. Paulonis: Lower income customer and Sally because we do serve all income levels, but we mix a little bit more lower income that lower income customer has been the customer where the frugality is coming through more.
Denise A. Paulonis: When they're buying they are looking for they are looking for the deals. They are looking for ways to stretch those dollars a little bit more or be a little bit more frugal.
Denise A. Paulonis: I don't think that the challenge is really an innovation cycle towards the lower end. As we mentioned, you know, we also have our happy beauty pilot, which serves, I'd call it right now primarily a middle-income customer, and you weren't necessarily seeing that same pullback or challenge with transactions and tickets there that we were seeing more on the Sally side. So I don't think the innovation cycle is really the cause. I think it's more of the customer pocketbook and that lower-income customer just feeling that much more pressure.
Denise A. Paulonis: Don't think that the challenge is really an innovation cycle towards the lower end as we mentioned we also have our happy beauty pilot, which serves I'd call. It right now primarily in middle income customer and you weren't weren't necessarily seeing that same pullback or challenge with transactions and tickets. There that we were that we're seeing more on the side.
Denise A. Paulonis: <unk>. So I don't think the innovation cycle is really the cause I think it's more of the customer pocket book in that lower income customer of just feeling that much more pressure.
Denise A. Paulonis: And.
Denise A. Paulonis: I know you mentioned a little bit about the back half of your year. I don't want to get into quarter to date, but curious if the trends have continued or what we were seeing in the last, like, I don't know, four to six weeks could have been a bit of a blip, I don't know, pent-up demand, consumer spending on other things because the weather got better, and maybe now the wallet can return to normal, because we've seen some head fakes before, whether it's the industry and or in the consumer.
Denise A. Paulonis: I know you mentioned a little bit about the back half of your your.
Denise A. Paulonis: I don't want to get into a quarter to date, but curious you know.
Denise A. Paulonis: The trends continued or what we were seeing in the last like four to six weeks could have been a bit of a blip I dunno.
Denise A. Paulonis: Pent up demand consumer spending on other things because the weather got better.
Denise A. Paulonis: And maybe not all the wallet can return to normal because we've seen some head fakes before whether it's the industry indoor and the consumer.
Denise A. Paulonis: If you are seeing any pivots again, not to get too granular North Dakota to date, but.
Denise A. Paulonis: You know, you have a different perspective. Yeah, you know, if I look out over the longer term, we've seen a very dynamic customer on both sides of the business, right, different choices being made at
Denise A. Paulonis: You know we have a different perspective.
Denise A. Paulonis: Yeah, you know, if I look out over the longer term, we've seen a very dynamic customer on both sides of the business, right? Different choices being made at different times, and I think, as you mentioned, these cycles that seem to happen around pockets of spending and then maybe pockets of a bit more frugality.
Denise A. Paulonis: Yeah, if I look out over the longer term, we've seen we've seen a very dynamic customer on both sides of the business right different different choices being made at different times and I think as you mentioned these cycles that seem to happen around.
Denise A. Paulonis: Pockets of spending and then maybe pockets of a bit more per gallon when I have more say as we certainly we guided to the minus one plus one which is a bit of a sequential improvement from where we were this past quarter in terms of our sales performance.
Denise A. Paulonis: You know, what I'd more say is that we certainly guided to the minus one to plus one, which is a bit of a sequential improvement from where we were this past quarter in terms of our sales performance. That reflects our quarter-to-date results and what we're seeing happen with the business, and I'd say, you know, in general, seeing continued solid performance on the BSG side and with a little bit of the softness continuing on the Sally side is what's underneath those numbers.
Denise A. Paulonis: That reflects our quarter to date results and what we're seeing happened with the business and I'd say you in general seeing you continued continued solid performance on that BSG side, and with a little bit of the softness continuing on the Sally side is what's underneath those numbers.
Denise A. Paulonis: You know, we expect that for us, a factor as we go through the year as well, now on the BSG side since we overcame one of the challenges with one of our hair care brands in the second quarter. But that's just an underlying good guy to deliver back into the territory of the flat sales, flat comp that we guided to for the full year. So everything about the trend of the start of this quarter is reflected in our guidance, and, you know, I feel like, following the new news of a slightly softer AUR that came through, we're at another inflection point here with the customer that we're managing through.
Denise A. Paulonis: We expected it for US a factor as we're going through the year as well as is now on the BSG side. Since we left one of the challenges with one of our hair care brands in the second quarter.
Denise A. Paulonis: But that's just an underlying good guy to deliver us back into the territory of the flat sales flat calm that we.
Denise A. Paulonis: We got into for the full year, so everything about the trend as of the start of this quarter is reflected in our guidance and.
Denise A. Paulonis: Feel like following the new news of a little bit softer AUR that came through.
Denise A. Paulonis: Another inflection point here with the customer that we're managing through.
Speaker Change: Thanks, Good luck.
Operator: And that's the final question. I'm sorry, but that's the last question.
Denise A. Paulonis: Mhm.
Speaker Change: I'm sorry, that's the final question.
Denise A. Paulonis: Great. Well, thank you all. We appreciate all of our shareholders and appreciate all of you tuning in to hear more about our quarter today. As always, thank you to all of our associates around the world for serving our customers, and we look forward to connecting with everyone again next quarter.
Speaker Change: Great well. Thank you all are we appreciate all of our shareholders and and I. Appreciate all of you are tuning in to hear more about our quarter today as always thank you to all of our associates around the world for serving our customers and we look forward to connecting with everyone again next quarter.
Operator: Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.
Speaker Change: Thank you, ladies and gentlemen that does conclude our conference for today and thank you for your participation in for using AT&T teleconference.
Operator: May now disconnect.
Speaker Change: We're sorry, you're conferences ending now please hang up.