Q4 2025 Sally Beauty Holdings Inc Earnings Call

I only mode.

After managements prepared remarks, there will be a question and answer session.

Instructions will be given at that time now.

Now I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer for Sally Beauty Holdings.

Denise Paulonis: We are planning to bring Sally Ignited to an additional 50 locations throughout the remainder of fiscal 2026. Because these refreshes are mostly occurring in stores that were previously slated for updates or relocation, the investment is not incremental to our planned capital spending for the year. Looking further ahead, we continue to have conviction in the opportunity to refresh up to 1,500 stores for approximately two-thirds of the Sally fleet. Sally's strong brand equity and 60 years of heritage certainly provide a powerful foundation from which to build. In fact, we are incredibly proud that just last month, Sally was ranked as the number three beauty retail brand in the prestigious Alice Partners Consumer Sentiment Index for 2025. Turning to our BSG business, we're looking at new category expansion. We're focused on expanding BSG's addressable market by entering adjacent product categories either organically or through acquisition.

Thank you.

Everyone and thank you for joining us with me on the call today are Denise followed us 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 $19 95.

Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in risk factors section of our most recent annual report on Form 10-K, and other filings with the SEC.

Any forward looking statements made in 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 reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website.

Denise Paulonis: We recently began testing a couple of brands in the skin and spa space while pursuing estheticians. More to come on this in the coming quarters. Now moving to an update on our Happy Beauty Initiative, which currently has 20 stores. We have leaned into Happy Beauty as an indie brand headquarters, known for on-trend brands and key categories such as skincare and fragrance. Leading up to the holiday season, we recently completed key merchandising updates and implemented new marketing tactics, including increased influencer engagement and messaging that highlights indie brands, test before you buy, dupes, and value. We're putting a lot of energy behind the holiday selling season and believe that coming out of that period, we'll be better positioned to understand the trajectory of the concept and the optimal path forward. Underpinning the top-line growth drivers I discussed is a core discipline focused on profitability unlocks.

Now I'd like to turn the call over to Denise to begin the formal remarks.

Thank you, Jeff and good morning, everyone.

Fiscal 2025 with a meaningful year for the company highlighted by strong operating and financial performance in the context of a rapidly changing and uncertain macro environment.

We're pleased to report both Q4 and full year results that exceeded our expectations.

For our fourth quarter, we delivered comparable sales growth of one 3%.

100 basis points of gross margin expansion to 52, 2%.

Adjusted operating margin of nine 4%.

And a 10% increase in adjusted diluted earnings per share to <unk> 55.

On a full year basis, we delivered $3 $7 billion in revenue positive comparable sales.

Gross margin gross margin north of 51% and adjusted operating margin of eight 9%, which is up 40 basis points to the prior year and above the high end of our guidance range.

Denise Paulonis: In fiscal 2025, we generated meaningful operating efficiencies through our Fuel for Growth program. This work is ongoing and encompasses merchandising, sourcing, supply chain, best-cost location, and non-trade spend, where we have carried out deep dives and are continuing to extract value. In the first two years of the program, we generated cumulative run rate gross margin and SG&A benefits of $74 million, above our original expectation for $70 million, and we expect to capture cumulative run rate savings of $120 million by the end of our current fiscal year. Key levers we're focused on include SKU optimization, further supply chain optimization, promotion, and pricing. The expected benefits will continue to be an important contributor to gross margin and bottom-line profitability in fiscal 2026. Looking further ahead, we're committed to delivering significant value for our customers, associates, and shareholders.

Adjusted diluted earnings per share came up came in at $1 90.

Representing 12% growth compared to last year.

Our core strategic pillars drove customer engagement and sales contributing approximately 260 basis points of comp sales growth for the full year.

The business also generated strong cash flow from operations of $275 million, which we deployed towards investing for growth further strengthening our balance sheet with $119 million of debt paydown and returning value to shareholders through more than $50 million of share repurchases.

These results are a testament to the execution excellence across our organization and demonstrate the underlying strength of our business model.

Denise Paulonis: Our focused strategies and consistent execution position us to achieve compounding growth, while the strength and flexibility of our balance sheet will enable us to remain disciplined capital allocators. As part of our long-range planning, we're introducing financial targets to reflect our three-year planning horizon ending with fiscal 2028. On an annual basis, we expect to generate net sales growth in the range of 1% to 3%, adjusted operating earnings growth of 3% to 5%, adjusted diluted EPS growth of at least 10%, including approximately 50% of free cash flow going to share repurchases, capital expenditures in the range of $90 million to $120 million, and free cash flow of approximately $200 million. Our foundation is strong, and our focus is clear.

We have resilient customers defensible categories, and strategic initiatives built to drive growth and increase profitability.

Touching on some of the strategic highlights of the year, we advanced the business through several important initiatives.

We maintained our leadership position in color delivering growth of 7% in fiscal Q4, and 4% for full year 2025.

We delivered on our promise of customer Centricity driving strong growth in our licensed colors on demand consultation service by delivering standout education and advice.

We extend our reach and fueled digital growth with the expansion of our marketplace strategy, adding Uber eats to already strong roster of partners, which includes door dash in CCAR Amazon and Walmart.

Denise Paulonis: Our fiscal 2025 performance underpins our confidence that we have the strategy, capabilities, and team in place to scale and win with significant runway for growth and value creation. Now I'll turn the call over to Marlo to discuss the financials. Thank you, Denise, and good morning, everyone. We concluded the year with strong business momentum, enabling us to deliver fourth-quarter and full-year results ahead of our expectations on the top and bottom line. Our performance reflects our disciplined execution and commitment to long-term value creation. Turning to the details of the fourth quarter, consolidated net sales increased 1.3% to $947 million, which included 40 basis points of favorable impact from foreign currency translation, while operating 38 fewer stores compared to the prior year. Consolidated comparable sales increased 1.3%.

We delivered a continuous pipeline of product innovation, adding new powerhouse brands like <unk> at BSG.

And expanding our partnership with source beauty as well as adding newness and color from Wella and Euro Euro at Sally.

We launched a comprehensive Sally brand refresh, which we're now calling Sally ignited designed to transform the business from a trusted beauty supplier to a modern dynamic beauty powerhouse.

Adding Uber Eats to our already, strong roster of Partners, which includes door Dash instacart Amazon and Walmart.

We generated an incremental $46 million of benefits through our fuel for growth program in fiscal 2025 builder.

Building, our cumulative run rate benefits to $74 million.

And expanding our partnership with sauce Beauty. As well as adding newness in color from Wella and eroero at Sally.

That cumulative total approximately $42 million flow to the bottom line with the remaining $32 million being reinvested in the business.

We launched a comprehensive Sally brand refresh, which we are now calling Sally Ignited.

Denise Paulonis: On the Sally side, we saw strong growth in our core category of color, our digital marketplaces, and from our Sally e-commerce site. At BSG, color also performed well, and extended distribution and new brands drove another quarter of positive comp sales. Global e-commerce sales increased 15% to $105 million and represented 11% of total net sales. We maintained our strong margin profile in Q4, with gross margin expanding 100 basis points to 52.2%. The year-over-year improvement is primarily attributable to higher gross margin in both business segments, driven by the benefits of our Fuel for Growth program. We expect to maintain our healthy margin profile in fiscal 2026, and anticipate we can continue to offset potential cost of goods impacts related to tariff increases through cost-sharing with vendors, sourcing optimization, and modest price increases on select products. Looking at expenses, Q4 adjusted SG&A totaled $405 million.

And lastly, we are responsible stewards of capital focused on building long term value for all of our stakeholders.

Designed to transform the business from a trusted. Beauty Supplier to a modern dynamic Beauty Powerhouse.

Entering fiscal 2026, we have proven our ability to navigate a complex and dynamic external backdrop, and we will continue to execute leveraging the power of our competitive and structural advantages our global scale, our compelling value proposition and the strong fundamentals of our business.

We generated an incremental 46 million of benefits through our fuel for growth programs, in fiscal 2025

Of that cumulative total approximately 42 million dollars flowed to the bottom line with the remaining 32 million being reinvested in the business.

Our topline and bottom line growth.

Throughout the year, our teams will focus on Actioning at four key growth drivers.

We are responsible stewards of capital focused on building long-term value for all of our stakeholders.

Understanding and activating the customer.

Unlocking and harvesting digital value.

Differentiating with product assortment and innovation.

And accelerating new growth pathways.

Entering fiscal 2026. We have proven our ability to navigate a complex and dynamic external backdrop and we will continue to execute leveraging the power of our competitive and structural advantages.

I'll discuss each of these.

Our global scale.

Our customer activation strategy is focused on acquisition retention and share of wallet.

Much of our success is rooted in our customer centric capabilities.

Our compelling value proposition and the strong fundamentals of our business to drive Topline and bottom line growth.

Denise Paulonis: That's up $14 million to last year, reflecting higher labor costs, bonus expense, rent expense, and IT costs, partially offset by $7 million in Fuel for Growth benefits. In total, we captured an incremental $13 million of pre-tax Fuel for Growth benefits to both gross margin and SG&A in Q4, enabling us to deliver an incremental $46 million in pre-tax benefits in full-year fiscal 2025. This translates to $74 million of cumulative run rate benefits since we initiated the program in fiscal 2024. Of that amount, gross margin benefits totaled $32 million, coming from the optimization of our supply chain, vendor partnerships, and promotional efficiencies. SG&A benefits totaled $42 million, coming from transportation efficiencies, outsourcing, and reductions in non-trade spend. Approximately $32 million was reinvested in the business to support our strategic initiatives, with $42 million flowing to the bottom line as profit or to offset inflation.

We've always been intensely focused on delivering unmatched levels of education service and advice.

Throughout the year, our teams will focus on actioning at 4 key, growth drivers.

Understanding and activating the customer.

Today, we are deepening our understanding of customers beyond the transactional view by.

Unlocking and harvesting digital value.

By leveraging our rich customer data.

Differentiating with product assortment and innovation.

Danced analytics, such as our enhanced media mix model.

I'll discuss each of these.

And robust customer research, we can better target high potential segments.

Our customer activation strategy is focused on acquisition retention and share of wallet.

This will enable us to improve customer engagement across touch points that include performance marketing and personalization at both Sally and BSG as well as refresh of brand marketing and our license callers on demand offering at Sally.

Much of our success is rooted in our customer-centric capabilities.

We've always been intensely focused on delivering unmatched levels of Education Service and advice.

On the performance marketing fronts, we're refining our paid search social media PR and Influencer strategies informed by our enhanced media mix model to acquire new customers and drive sales growth.

Today, we are deepening our understanding of customers beyond the transactional view.

By leveraging, our Rich customer data Advanced analytics such as our enhanced media mix model.

And robust customer research. We can better Target, high potential segments,

When it comes to personalization, we are focused on expanding our personalization experiences across all customer touch points.

Denise Paulonis: We anticipate delivering an additional $45 million in run rate savings in fiscal 2026, with about two-thirds coming from gross margin, and 1/3 from SG&A. By the end of fiscal 2026, we expect that our cumulative run rate savings will be approximately $120 million. Returning to the P&L, we're pleased to report that bottom-line results exceeded our expectations, driven by gross margin expansion and cost reduction. Adjusted operating margin came in at 9.4%, and adjusted diluted earnings per share was $0.55, a 10% increase over the prior year. On a full-year basis, we delivered adjusted operating margin expansion of 40 basis points to 8.9%, and adjusted diluted earnings per share growth of 12% to $1.90. Moving to segment results, Sally Beauty net sales increased 1.4% to $542 million, which included 80 basis points of favorable impact from foreign currency translation while operating 33 fewer stores versus a year ago.

Deepening our customer insights to drive the richness of the personalization decisioning and targeting and.

This will enable us to improve customer engagement across touch points that include performance marketing and personalization at both Sally and BSG, as well as refresh brand marketing and our licensed callers on demand offering at Sally.

In strengthening our omnichannel communication and customer connections.

A great example of our refined marketing campaign is our plan for holiday at Sally.

We're bringing elevated marketing to our stores and digital channel that has contemporary unified look and feel designed to resonate with today's beauty consumer while staying true to Sally's brand heritage.

On the performance marketing firm. We are refining. Our paid search social media, PR and influencer strategies. Informed by our our enhanced media mix model to acquire new customers and drive sales growth.

When it comes to personalization, we are focused on expanding our personalization experiences across all customer touch points.

Our holiday messaging platform.

Save while you ship the Salon was created based on our latest customer data and insights and represents a tactical shift from the buying bulk promotions of recent quarters.

Deepening our customer insights to drive the richness of the personalization, decisioning, and targeting.

And strengthening our Omni Channel, communication and customer connections.

Additionally, at Sally we are embedding licensed cars on demand or <unk>.

Our brand marketing strategy to reinforce our key pillars of expertise and accessibility.

Our leading indicators offer compelling view of the lifetime value of our <unk> customer.

A great example of our refined marketing campaigns is our plan for Holiday at Sally. We're bringing elevated marketing to our stores and digital channels that has a contemporary unified look and feel, designed to resonate with today's beauty consumer while staying true to Sally's grand heritage.

Our holiday messaging platform.

Denise Paulonis: Comparable sales increased 1.2%, with comparable transactions flat, and average ticket up 1%. For the global Sally Beauty segment, color increased 8%, while care declined 7% compared to the prior year. Sally e-commerce sales grew 23% to $47 million and represented 9% of segment net sales for the quarter. In addition, e-commerce sales for Sally US and Canada grew by 34%. Gross margin in our Sally segment increased 90 basis points to 61.3%, driven primarily by higher product margins from the benefits of our Fuel for Growth program. Segment operating margin came in at 15.9%. Looking at the BSG segment, net sales increased 1.1% to $406 million, which included 10 basis points of unfavorable impact from foreign currency translation, while operating five fewer stores versus a year ago. Comparable sales increased 1.4%, with comparable transactions up 6%, while average ticket was down 4%.

12 month spend is almost two times higher than non <unk> customers, including about two additional transactions per year.

New and reactivated customers comprise more than 50% of the <unk> customer base and the number of consultations at fiscal yearend was averaging a record 5000 plus per week.

Save while you skip. The salon was created based on our latest customer data and insights and represents a tactical shift from the buying bulk promotions of recent quarters.

Additionally, our licensed colors are strengthening their knowledge of the care category and beginning to test care consultations, where we're seeing positive early response.

Additionally, at Sally, we are embedding licensed colors on demand, or LCD, into our brand marketing strategy to reinforce our key pillars of expertise and accessibility.

our leading indicators offer compelling view of the lifetime value of our LCD, customer

Moving now to our digital strategy on.

On the Sally side, there is a clear opportunity to build on the momentum of our marketplaces success.

12 months spend is almost 2 times higher than non LCD customers including about 2 additional transactions per year.

Which continues to be a key driver of e-commerce sales at Sally U S and Canada.

In fiscal Q4 saw us in Kansas E Commerce sales increased 34% over the prior year and comprised 9% of total sales.

New and reactivated customers comprise more than 50% of the LCD customer base. And the number of consultations at fiscal year, end was averaging a record 5,000 plus per week.

Our teams are focused on unlocking greater digital value through the marketplace expansion, leveraging our speed to market delivery capabilities and strengthening our digital foundation.

Additionally, our licensed colors are strengthening their knowledge of the Care category, and beginning to test care, consultations where, we're seeing positive early response.

Denise Paulonis: From a category perspective, color increased 5%, and care was up 1%. BSG e-commerce sales increased 8% to $58 million, representing 14% of segment net sales for the quarter. Gross margin at BSG expanded 100 basis points to 40%, primarily reflecting higher product margins from the benefits of our Fuel for Growth program. Segment operating margin was strong, coming in at 12.6%, up 160 basis points to the prior year. Turning to the balance sheet and cash flow, we ended the year in strong financial conditions with $149 million of cash and cash equivalents and no outstanding borrowings under our asset-based revolving line of credit. Inventory levels totaled $988 million, down 5% versus last year. Entering fiscal 2026, we remained focused on driving process improvement to enable faster inventory turns and improve working capital productivity. Fourth-quarter cash flow from operations totaled $121 million, while free cash flow totaled $78 million.

Moving now to our digital strategy.

This will include website and App enhancements that feature an elevated beauty persona modern navigation and a more seamless customer journey designed to drive increased engagement and conversion.

On the Sally side, there's a clear opportunity to build on the momentum of our marketplaces success.

Which continues to be a key driver of e-commerce sales at Sally, US and Canada.

On the BSG side mobile App usage accounts for a significant portion of our digital traffic with increasing reliance on our app for education and transacting.

In fiscal Q4 sell us in Canada's e-commerce sales increased 34% over the prior year and comprise 9% of total sales.

We are targeting the spring of 2026, four substantial update to the BSG App and E Commerce platform designed to deliver improved user experience and enhanced personalization.

Our teams are focused on unlocking greater digital value through the marketplace expansion leveraging, our speed to Market delivery capabilities and strengthening our digital Foundation.

We believe this will fuel long term benefits, including higher conversion increased retention and engagement and enhanced brand loyalty.

This will include website and app enhancements that feature, an elevated Beauty Persona, modern navigation, and a more seamless, customer Journey designed to drive increased engagement and conversions.

We're also in the early stages of developing an exclusive digital ecosystem designed to expand <unk> relationship with the stylist and increasingly integrated into their businesses.

On the BSG side mobile app. Usage accounts for a significant portion of our digital traffic with increasing Reliance on our app, for education and transacting.

This will include a centralized hub for education community and services.

Denise Paulonis: In Q4, we utilized excess cash to repay $21 million of term loan debt, bringing our net debt leverage ratio at year-end down to 1.6x. We also deployed $20 million of cash to repurchase 1.7 million shares of stock under our existing share repurchase program. On a full-year basis, we generated $275 million of operating cash flow and $216 million of free cash flow, allowing us to repay nearly $120 million of term loan debt and repurchase more than $50 million of our shares. Turning to our fiscal 2026 guidance, on a full-year basis, we expect the following: consolidated net sales in the range of $3.71 to 3.77 billion, which includes approximately 50 basis points of favorable impact from foreign currency rates. Comparable sales flat to up 1%. Adjusted operating earnings of $328 to 342 million.

That will enable us to leverage data to continuously create incremental value for both our stylists and brand partners.

We are targeting the spring of 2026 for a substantial update to the BSG app and e-commerce platform, designed to deliver improved user experience and enhance personalization.

Turning to product assortment and innovation.

For the Sally segment, we're focused on driving multi category performance by continuing to bring in new brands and products, while expanding and nurturing categories beyond color.

This will fuel long-term benefits including higher conversion, increased retention and engagement and enhanced brand loyalty.

We're also in the early stages of developing, an exclusive digital ecosystem, designed to expand bsg's relationship with a stylist and increasingly integrate into their businesses.

The most obvious opportunities exist in the strategic categories of care and nails, where we already have a strong presence at authority.

This will include a centralized hub for Education, community and services.

In addition, we added fragrances is a new category and our top 1000, Sally U S stores at the beginning of November.

1 that will enable us to leverage data to continuously. Create incremental values from both our stylists and brand partners.

Turning to products, assortment and innovation.

We're also leveraging our higher margin owned brand offerings and have a number of initiatives on deck for fiscal 2026.

First we are refreshing and relaunching some of our key brands, including texture IV inspired by nature and ion semi grades.

For the Sally segment. We are focused on driving multi category, performance by continuing to bring in new brands and products while expanding and nurturing categories Beyond color.

And we're bringing infrared innovation to the market with a dynamic collection of ion styling tools.

Denise Paulonis: Adjusted diluted earnings in the range of $2 to $2.10 per share, which assumes that 50% of free cash flow goes towards share repurchases. Capital expenditures are expected to be approximately $100 million, and free cash flow is expected to be approximately $200 million. We expect our store count to be approximately flat, including about 40 new stores, 40 store closures, and 50 relocations. For our first quarter of fiscal 2026, we expect the following: consolidated net sales in the range of $935 to $945 million, which includes approximately 40 basis points of favorable impact from foreign currency rates. Comparable sales to be approximately flat. Adjusted operating earnings of $75 to $80 million, and adjusted diluted earnings in the range of $0.43 to $0.47 per share.

The most obvious opportunities exist in the Strategic categories of care and Nails, where we already have a strong presence and Authority.

We believe that building momentum with our higher margin owned brands will enable us to drive increased customer retention and frequency at Sally fueling long term growth and profitability.

In addition we added fragrances as a new category in our top 1,000, Sally Us stores at the beginning of November.

For the BSG segment, we are pleased to serve as a trusted and valued resource to our BSG stores, we're always seeking the latest and greatest in trends and innovation.

We're also leveraging, our higher margin owned brand offerings and have a number of initiatives on deck for fiscal 2026.

First, we are refreshing and relaunching, some of our key Brands including texture ID inspired by nature and ion semi breaks.

With our ability to reach nearly every stylists in the U S and Canada, we provided a valuable platform for brands to grow and we have found that one great brand begets another.

And we're bringing infrared Innovation to the market with a dynamic collection of ion styling tools.

Of note innovation drove upwards of 30% of Bsg's total air care sales in fiscal 2025.

We believe that building momentum with our higher margin own Brands will enable us to drive increased customer retention and frequency at Sally feeling long-term growth and profitability.

Our perspective, that's up approximately three times from just a few years ago.

In fiscal 2026, we have another exciting lineup of innovation coming.

Denise Paulonis: In summary, we are pleased to finish the year strong and look forward to making meaningful progress in fiscal 2026 toward the long-term financial targets Denise outlined. We appreciate your time this morning. Now I'll ask the operator to open the call for Q&A. If you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Oliver Chen with TD Securities. Hi, Denise and Marlo. On the quarter you just had, we'd love to hear about what were some of the key factors that helped drive the upside at both at each division.

For the BSG segment. We are pleased to serve as a trusted and valued resource to our BSG stylists. We are always seeking the latest and greatest in Trends and innovation.

Key trends include Boston, Blonding, smoothing molecular repair and scalp care and.

And we will be in stock will highly desired brands like <unk> color, while danger Jones, K 18, Moroccan oil schwartzkopf and unite.

When our ability to reach nearly every stylist in the US and Canada, we provide a valuable platform for Brands to grow and we have found that 1 great brand begets, another.

Of note Innovation drove upwards of 30% of bsg's, total Hair Care sales in fiscal 2025.

In addition, we see incremental opportunities for BSG to build upon its strong track record of expanding its distribution rights.

For perspective, that's up approximately three times from just a few years ago.

This can take shape by partnering with existing brands pursuing opportunistic acquisitions, and adding new brands all strategies, we successfully actions in recent years.

If this school 2026, we have another exciting lineup of innovation coming.

Key trends include glossing blonding, smoothing molecular repair and scalp care.

Lastly, looking at our strategy for new growth pathways.

For our Sally business, we view Sally ignited is a true game changer for our platform going forward.

And will be in stock will highly desired Brands like Bria Color. Wow, danger Jones. K18 Moroccan oil Schwarz, cough and Unite

Ignited is a comprehensive initiative encompassing both physical and digital refreshes category and brand expansion and immersive experiences focused on discovery and community.

Denise Paulonis: As we think about the comp complexion this quarter, did ticket run similar to what you expected in terms of the negative ticket trends at BSG relative to the positive ticket trends at Sally? We'd just love to hear your thoughts on your guidance, on your comp guidance relative to occupancy leverage. What do you see happening in terms of your ability to leverage some of the fixed costs with the comp outlook? Thank you. Morning, Oliver. We were very pleased with the performance in Q4. In terms of factors that drove the performance and drove the upside, I think what's really notable in the quarter is the strength of color in both of our businesses.

In addition, we see incremental opportunities for BSG to build upon its strong track record of expanding its distribution rights.

We see a tremendous opportunity to supercharge, a fundamentally better store experience, especially as we double down on multi category expansion continued to deliver a relentless flow of innovation and lean into momentum in areas like <unk> and marketplaces.

This can take shape by partnering with existing Brands pursuing opportunistic Acquisitions and adding new brands. All strategies we successfully actioned in recent years

lastly, looking at our strategy for New Growth pathways

For our Sally business. We view Sally ignited, as a true, game-changer for our platform going forward.

Our mission is to ensure that the Sally brand emotionally connects with our customers, while creating a discovery focused omnichannel specialty beauty experience.

All enabling us to more effectively compete in today's product obsess beauty marketplace.

Sally ignited is a comprehensive initiative encompassing, both physical and digital refreshes category, and brand expansion and immersive experiences focused on Discovery and community.

Denise Paulonis: In the quarter, color was up 7% overall, 8% in Sally, and 5% in BSG, really speaking to the strength of the DIY kind of pro product in our Sally segment, and the importance of the brands that we carry on the BSG side. I think underlying that, the other things that we saw of great strength, marketplaces continued to overperform on the Sally side of the business, which we are pleased to see. Innovation in BSG helped to drive care back into positive sales growth territory, which we were pleased to see as well. Finally, customer activation. The strength of the LCOD program with 5,000 to 6,000 consultations a week and a nice conversion rate in there was a real benefit, complemented by personalization.

At the end of fiscal 2025, we have completed 30 store refreshes. The stores are modern on trend open warm and inviting with a new layout that increases the ease of way finding.

We see a tremendous opportunity to supercharge a fundamentally better store experience especially as we double down on multi-core expansion. Continued to deliver a Relentless flow of innovation and lean into momentum in areas like LCD and marketplaces.

We've continued to see customers spending more time in store and cross category shopping categories at an increased rate.

Our mission is to ensure that the Sally brand emotionally connects with our customers while creating a discovery focused Omni Channel specially Beauty experience.

Key indicators, including <unk> and HCV are trending above the rest of the fleet.

All enabling us to more effectively compete in today's product-obsessed beauty marketplace.

We are planning to bring salary ignited to an additional 50 locations throughout the remainder of fiscal 2026.

At the end of fiscal 2025, we had completed 30 store refreshes.

Because these refreshes are mostly occurring in stores that were previously slated for updates or relocation. The investment is not incremental to our planned capital spending for the year.

The stores are modern on Trend open warm and inviting with a new layout that increases the ease of waste time finding

Looking further ahead, we continue to have conviction and the opportunity to refresh up to 500 stores or accurately two thirds of the salary fleet.

We've continued to see customers spending more time in-store and cross-category shopping categories at an increased rate.

Denise Paulonis: Thrilled with the outcome, and I think there's a lot of things there that are positive momentum that will continue with us into fiscal 2026. When we think about the ticket, particularly I think you commented on the ticket in BSG, it was not surprising at all to us that ticket was down and transactions were up. The behavior that we're seeing from that stylist is they still have a fairly healthy book of business, but they continue to buy what they need when they need it. They're more likely to come in more frequently and pick up those items, which in turn makes it for a little bit lower basket. In total, delivering a little over 1% sales growth, 1.4% comp growth on the BSG side, the relationship with that customer is still extremely healthy.

Key indicators, including upt and ATV are trending Above the Rest of the fleet.

<unk> strong brand equity and 60 years of heritage certainly provide a powerful foundation from which to build in fact, we are incredibly proud that just last month salary was ranked as the number three BD retail brand in the prestigious Alex partners consumer sentiment index for 2025.

We are planning to bring Sally Ignited to an additional 50 locations throughout the remainder of fiscal 2026.

Because these refreshes are mostly occurring in stores that were previously, slated for updates or relocation. The investment is not incorrect incremental to our planned Capital spending for the year.

Turning to our BSG business, we're looking at new category expansion.

We're focused on expanding <unk> addressable market by entering adjacent product categories, either organically or through acquisition.

Looking for further ahead, we can continue to have conditions in the opportunity to refresh up to 1500 stores or approximately 2/3 of the Sally Fleet.

We recently began testing a couple of brands in the skin in phosphates, while pursuing S decisions.

Denise Paulonis: Marlo, maybe you'll talk a little bit about the occupancy leverage SG&A for the coming year. Yeah. For the coming year in Q1, the top line is a bit under pressure from some of the government shutdown. We'll see a little bit of de-leverage there. As we go through the year, we'll see that leverage improving. On a full-year basis, we would expect leverage to be fairly similar to last year. Yeah. I'll jump in. It'd be helpful to ask you a bit about the consumer environment because it's pretty bifurcated as what we see with more pressure in the middle and low, and as you called out, sentiment and government shutdowns on people's minds as well. How is that interplaying and what might drive comps better than your guidance?

More to come on this in the coming quarters.

Now moving to an update on our happy beauty initiatives, which currently has 20 stores.

And 60 years of heritage certainly provide a powerful foundation from which to build. In fact, we are incredibly proud that just last month, Sally was ranked as the number 3 beauty retail brand in the prestigious Alice Partners consumer sentiment index for 2025.

We've leaned into happy beauty as an indie brand headquarters known for on trend brands and key categories, such as skincare and fragrance.

Turning to our BSG business.

We're looking at new category expansion.

After the holiday season, we recently completed key merchandising updates and implemented new marketing tactics, including increased influencer engagement and messaging that highlights indie brands test before you buy dupes and value.

We're focused on expanding bsu's. Addressable Market by entering adjacent product categories, either organically or through acquisition.

We recently began testing a couple of brands in the skin and spa space while pursuing estheticians.

More to come on this, in the coming quarters.

We're putting a lot of energy behind the holiday selling season, and believe that coming out of that period will be better positioned to understand the trajectory of the concepts and the optimal path forward.

now moving to an update on our happy Beauty initiative, which currently has 20 stores,

Denise Paulonis: It feels somewhat conservative, but I know there's a cautious optimism in terms of what you're seeing with the top line. Second question on the long-term outlook on your net sales growth of 1% to 3% relative to operating earnings growth of 3% to 5%, where are the leverage points we should think about in that algorithm? Thank you very much on the margins. Absolutely. Let me start with on the consumer front. I think what we've seen today is that the Sally customer is resilient, continues to respond well to a lot of the key initiatives we have in play, like Licensed Colorist On-Demand, marketplaces, innovation. We also see the stylist business being nice and stable. Certainly, we look forward to them having a very positive holiday season upcoming here.

we have leaned into Happy Beauty as an indie brand, headquarters known for on Trend Brands and key categories, such as skin care and fragrance.

Underpinning the topline growth drivers I discussed is a core discipline focused on profitability unlocks.

In fiscal 2025, we generated meaningful operating efficiencies through our fuel for growth program.

It's work ongoing and encompasses merchandising sourcing supply chain best cost location and non trade spend where we have carried out deep dives and are continuing to extract value.

Leading up to the holiday season. We recently, completed key merchandising updates and implemented new marketing tactics including increased influencer engagement, and messaging that highlights Indie Brands test before you buy dupes and value.

And the first two years of the program, we generated cumulative run rate gross margin and SG&A benefits of $74 million above our original expectation for $70 million and we expect to capture cumulative run rate savings of $120 million by the end of our current fiscal year.

We're putting a lot of energy behind the holiday selling season and believe that coming out of that period, we will be better positioned to understand the trajectory of the concept and the optimal path forward.

Underpinning the top line growth drivers I discussed is a core discipline focused on profitability unlocks.

In fiscal 2025 we generated meaningful operating efficiencies through our fuel for growth programs.

Key levers or focus on include SKU optimization further supply chain optimization promotion and pricing mix.

Denise Paulonis: Underneath all of this, I'd say in particular on the consumer side, we are seeing consumers remain choiceful. That's not new news. For us, choiceful means continuing to spend in the core color category, but spending a little lighter in styling tools, and leaning into value a bit more. We did see a bit of a slowdown, particularly on the low-income customer coming into our stores as we've navigated through the 40-plus days of the government shutdown. At this point, we hope that that's transitory behavior. We're certainly watching and monitoring what is happening with that consumer base. I think if we step back, we just feel really good about the momentum in the business, with the strategic initiatives driving over 250 basis points of comp this past year, and those continuing into the new year. Focused on innovation, performance marketing, personalization, licensed colors on demand.

We expected benefits will continue to be an important contributor to gross margin and bottom line profitability in fiscal 2026.

This work is ongoing and encompasses merchandising sourcing supply chain, best cost location and non-trade. Spend where we have carried out deep Dives and our continuing to extract value.

Looking further ahead, we are committed to delivering significant value for our customers associates and shareholders are focused strategies and consistent execution position us to achieve compounding growth, while the strength and flexibility of our balance sheet will enable us to remain disciplined capital allocators.

In the first 2 years of the program we generated cumulative, run rate, gross margin and sgna benefits of 74 million above. Our original expectation for 70 million and we expect to capture cumulative, run rate, Savings of 120 million dollars by the end of our current fiscal year.

Q levers or focused on include skew optimization further supply, chain optimization promotion and pricing.

As part of our long range planning, we are introducing financial targets to reflect our three year planning horizon ending with fiscal 2028.

The expected benefits will continue to be an important contributor to gross margin and bottom-line profitability in fiscal 2026.

On an annual basis, we expect to generate.

Net sales growth in the range of 1% to 3%.

Adjusted operating earnings growth of 3% to 5%.

Adjusted diluted EPS growth of at least 10%, including approximately 50% of free cash flow going to share repurchases.

Denise Paulonis: If we said what could help us a little bit more and drive a little bit outsized growth, we always have the potential on the BSG side for expanded distribution, tuck-in M&A that continues to expand our reach with brands existing or new brand partners that are out there. We're also excited with the work that we're doing on Sally Ignited. We're starting to understand, while that's just in a few stores today, what things we're learning that we can lift and shift. For example, putting in 1,000 Sally stores, our fragrance assortment kind of coming into holiday. I think those are things that could trend positive. We think with what we just witnessed with the government shutdown, it's prudent in the way that we're thinking about Q1, but feel great momentum for the full year.

Looking further ahead we're committed to delivering significant value for our customers Associates and shareholders, our Focus strategies and consistent execution position us to achieve compounding growth. While the strength and flexibility of our balance sheet will enable us to remain disciplined capital allocators.

Capital expenditures in the range of $90 million to $120 million.

And free cash flow of approximately $200 million.

As part of our long range planning, we are introducing Financial targets to reflect our 3-year planning Horizon, ending with fiscal 2028.

Our foundation is strong and our focus is clear.

on an annual basis, we expect to generate

Our fiscal 2025 performance underpins our confidence that we have the strategy capabilities and team in place to scale and win with significant runway for growth and value creation.

Net sales growth in the range of 1 to 3%.

Adjusted operating earnings growth of 3% to 5%.

Now I will turn the call over tomorrow to discuss the financials.

Adjusted diluted EPS growth of at least 10%, including approximately 50% of free cash flow going to share repurchases.

Thank you Denise and good morning, everyone. We concluded the year with strong business momentum, enabling us to deliver fourth quarter and full year results ahead of our expectations on the top and bottom line.

Capital expenditures in the range of 90 to 120 million dollars.

And free cash flow of approximately 200 million dollars.

Our performance reflects our disciplined execution and commitment to long term value creation.

Our foundation is strong, and our focus is clear.

Denise Paulonis: Marlo, do you want to comment a bit on the sales-to-profit equation I think Oliver asked about? Yeah. I think you were asking for the longer term. I think the growth on the top line, on top of that, where we see additional leverage coming and additional growth opportunity to the bottom line is certainly through the continuation of our Fuel for Growth program. Most of the heavy lifting will be done through the end of fiscal 2026, but it's the muscle memory that will remain within our organization and continue as we go forward. We'll continue to optimize and leverage the capabilities of our Fuel for Growth program for incremental opportunities to drive savings for both reinvestment and flow through to the bottom line. On top of that, our own brand performance continues to drive those results. Thank you. Best regards.

Turning to the details of the fourth quarter consolidated net sales increased one 3% to $947 million, which included 40 basis points of favorable impact from foreign currency translation, while operating 38 fewer stores compared to the prior year.

Our fiscal 2025 performance underpins our confidence that we have the strategy capabilities and team in place to scale and win with significant runway for growth and value creation.

now, I'll turn the call over tomorrow to discuss this now,

Thank you, Denise. And good morning everyone.

We concluded the

Consolidated comparable sales increased one 3%.

strong business momentum enabling us to

On the selling side, we saw strong growth in our core category of color, our digital marketplaces and from our selling E Commerce site at.

order and fully your results ahead of our expectations on the top and bottom line.

Our performance, reflects our disciplined execution.

And commitment to long-term value creation.

At BSG color also performed well and extended distribution in new brands drove another quarter of positive comp sales.

Global E Commerce sales increased 15% to $105 million and represented 11% of total net sales.

Turning to the details of the fourth quarter and solidated, net sales, increase 1.3% to 947 million, which included 40 basis points of favorable, impact from foreign currency translations.

While operating 38 fewer stores compared to the prior year.

We maintained our strong margin profile in Q4 with gross margin expanding 100 basis points to 52, 2%.

Consolidated comparable, sales increased 1.3%.

Denise Paulonis: Our next question comes from Susan Anderson with Canaccord Genuity. Hi. Good morning. Thanks for taking my questions. I was wondering if maybe you can give us an update on the Sally store remodel program. I guess where are you at with the store remodels? Have you completed any beyond the Orlando market? Maybe if you could just talk about where they're performing versus the core in the Orlando market, and also if you've completed ones outside. Thanks. Sure. Happy to provide an update there. As of this quarter, we've kind of branded our Sally brand refresh as Sally Ignited. We think it's a great representation of how our customers are reacting when they're coming into our new stores. Just as a reminder, what are we really doing? It's a physical and digital refresh.

The year over year improvement is primarily attributable to higher gross margin in both business segments.

On the selling side, we saw strong growth in our core category of color, our digital marketplaces and from our Sally e-commerce site,

Driven by the benefits of our fuel for growth program.

We expect to maintain our healthy margin profile in fiscal 2026, and anticipate we can continue to offset potential cost of goods impacts related to tariff increases through cost sharing with vendors sourcing optimization and modest price increases on prelim products.

At BSG color also performed well and extended distribution and new brands, drove another quarter of positive comp sales.

Global e-commerce sales, increased 15% to 105 million and represented 11% of total, net sales.

We maintained, our strong margin profile in Q4.

Looking at expenses Q4, adjusted SG&A totaled $405 million.

With growth margin expanding 100 basis points to 52.2%.

That's up $14 million to last year, reflecting higher labor costs bonus expense rent expense and it cost partially.

Driven by the benefits of our fuel for growth program.

Partially offset by $7 million in fuel for group benefits.

In total we captured an incremental $13 million of pretax fuel for group benefits to both gross margin and SG&A in Q4 <unk>.

Denise Paulonis: It really is about creating a more immersive experience that lets us get more discovery and community. The store update in particular really has a new layout. Nail is displayed in a rotunda that is very dramatic as you come into the store. There is a discovery bar to help you in hair color choices. It is fixtures built for purpose to shop as a specialty retailer rather than a supply store. There is a cash drop in the center that really helps our associates deliver the high-quality service that customers have come to expect with us. Where we are today, at the end of the fiscal year, we had about 30 stores open, which included the full Orlando market, as well as a handful of stores in other locations throughout the country.

Enabling us to deliver an incremental $46 million and pre tax benefits and full year fiscal 2025.

We expect to maintain our healthy margin profile, in fiscal 2026 and anticipate. We can continue to offset potential cost of goods. Impacts related to tariff increases through cost sharing with vendors, sourcing optimization and modest price increases on select products.

This translates to <unk> $74 million of cumulative run rate benefit since we initiated the program in fiscal 2024.

Of that amount gross margin benefits totaled $32 million coming from the optimization of our supply chain vendor partnerships and promotional efficiencies.

looking at expenses Q4 adjusted sgna totaled 405 million, that's up 14 million to last year, reflecting higher, labor costs, bonus expense, rent expense, and it costs

partially offset by 7 million in fuel for growth benefits.

SG&A benefits totaled $42 million coming from transportation efficiencies outsourcing and reductions in non trade spend.

In total, we captured an incremental $13 million of pre-tax fuel for growth benefits to both growth margins and SG&A in Q4.

Approximately $32 million was reinvested in the business to support our strategic initiatives with $42 million flowing to the bottom line as profit or to offset inflation.

Enabling us to deliver an incremental 46 million, in pre-tax benefits and full year of fiscal 2025.

Denise Paulonis: We're doing both of those models because Orlando will let us test kind of a full marketing program tied with the new program. When you think about the drop-in markets, we'll have a great ability to read kind of APT results against specific changes that we're making in the stores to understand what's working, what we might do differently. We plan for 50 stores in fiscal 2026 that will let us continue to extend that reach and test and try. The great news is that's within our capital program for the year because we would have been doing remodels or relocations in a number of stores, and we're really doubling down on Sally Ignited specifically on what we're seeing.

We anticipate delivering an additional $45 million and run rate savings in fiscal 2026 with about two thirds coming from gross margin and a third from SG&A.

This translates to 74 million of cumulative, run rate benefits since we initiated the program in fiscal 2024.

Of that amount growth margin benefits totaled. 32 million coming from the optimization of our supply chain, vendor Partnerships and promotional efficiencies.

By the end of fiscal 2026, we expect that our cumulative run rate savings will be approximately $120 million.

Returning to the P&L, we're pleased to report that Bottomline results exceeded our expectations driven driven by gross margin expansion and cost reduction.

SG&A benefits total $42 million coming from transportation efficiencies, outsourcing, and reductions in non-trade spend.

Approximately 32 million was reinvested in the business, to support our strategic initiatives, with 42 million flowing to the bottom line, as profit, or to offset inflation.

Adjusted operating margin came in at nine 4% and adjusted diluted earnings per share was <unk> 55.

A 10% increase over the prior year.

On a full year basis, we delivered adjusted operating margin expansion of 40 basis points to eight 9% and adjusted diluted earnings per share growth of 12%.

We anticipate delivering an additional 45 million in run rate Savings in fiscal 2026 with about 23, coming from gross margins and a third from sgna.

Denise Paulonis: We love that we're seeing customers have higher dwell time and shop cross-category when they come into the store, which is a great part of the design that we were looking to do. That hair color customer exploring a nail, that textured hair customer looking and thinking differently about styling tools is what we were trying to drive. In turn, we are seeing UPT as well as ATV, so our units per transaction and our average transaction value higher than the rest of the fleet. That's very encouraging to us, and what we hope we'll continue to see as the test progresses. I'd be remiss not to say we are working to lift and shift things that we're finding that are working quite quickly into some of our core fleet.

By the end of fiscal 2026, we expect that our cumulative run rate savings will be approximately $120 million.

Two $1 to $1 97.

Moving to segment results.

Sally beauty net sales increased one 4% to $542 million.

Returning to the P&L, we're pleased to report that bottom line results exceeded our expectations during Q4, driven by gross margin expansion and cost reduction.

Which included 80 basis points of favorable impact from foreign currency translation, while operating 33 fewer stores versus a year ago.

Adjusted operating margins came in at 9.4% and adjusted diluted into earnings per. Share was 55 cents. A 10% increase over the prior year.

Comparable sales increased one 2% with comparable transactions flat and average ticket up 1%.

With a global Sally beauty segment color increased 8%, while care declined 7% compared to the prior year.

On a full year basis. We delivered adjusted operating margin expansion of 40 basis points to 8.9% and adjusted diluted earnings per share growth of 12%.

To a dollar to 1. 9 0.

Selling E Commerce sales grew 23% to $47 million and represented 9% of segment net sales for the quarter.

Moving to segment results.

Denise Paulonis: A great example of that is the expansion of fragrances into 1,000 stores in Sally here for the holiday. Okay. Great. Interesting. I wanted to maybe follow up just on the strong growth in color at Sally. I think you had said that you are seeing, I guess, more new low-income consumers coming in. I guess, one, are you seeing more people do their hair themselves? Is that, I guess, do you think being driven by just their wallets being stretched and wanting to save some money on that front? I guess, are these new consumers as well to Sally? Are they just coming back? While they're in the stores, I guess, are you seeing them pick up other products in the stores when they do come in to buy color? Thanks. Yeah. We love what's happening with color in Sally.

In addition, e-commerce sales for Sally U S and Canada grew by 34%.

Gross margin in our Sally segment increased 90 basis points to 61, 3% driven primarily by higher product margins from the benefits of our fuel for growth program.

Valley Beauty, net sales increased 1.4% to 542 million, which included, 80 basis points of favorable, impact from foreign currency translation. While operating 33 fewer stores versus a year ago.

Comparable sales increased 1.2% with comparable transactions flat and average ticket up 1%.

Segment operating margin came in at 15, 9%.

For the global Sally. Beauty segment color increased 8% while cared declined 7% compared to the prior year.

Looking at the BSG segment net sales increased one 1% to $406 million.

Which included 10 basis points of unfavorable impact from foreign currency translation, while operating five fewer stores versus a year ago.

Sally, e-commerce. Sales grew 23% to $47 million and represented 9% of the segment's net sales per quarter.

In addition, e-commerce sales for Sally Beauty in the U.S. and Canada grew by 34%.

Comparable sales increased one 4% with comparable transactions up 6%, while average ticket was down 4%.

From a category perspective color increased 5% and care was up 1%.

Growth margin error, Sally, segment, increased 90 basis points, to 61.3% driven primarily by higher product margins from the benefits of our fuel for growth program.

Denise Paulonis: I'd say the great thing is that we are seeing new, reactivated, and existing customer growth. When we think about the new customer growth, we think there's an extra benefit from Licensed Colorist On-Demand. When that customer can get support from an expert to get confidence in what is really a high-stakes category that you're going to go purchase and take on in your own DIY endeavor, we're seeing that customer come in, and that is fueling some of the growth in the model. There's no doubt about that. Secondarily, when you think about the customer and them trying to manage their budget, no matter what income level you are, doing your hair in a salon all the time is a very expensive proposition.

Segment. Operating margin came in at 15.9%

E Commerce sales increased 8% to $58 million.

Representing 14% of segment net sales for the quarter.

Gross margin at BSG expanded 100 basis points to 40%.

Primarily reflecting higher product margins from the benefits of our fuel for growth program.

looking at the BSG segment, that sales increased 1.1% to 406 million, which included 10 basis points of unfavorable impact from foreign currency translation while operating 5 pure stores versus a year ago,

Segment operating margin was strong coming in at 12, 6%.

Comparable sales increased 1.4%, with comparable transactions up 6%.

160 basis points to the prior year.

While average ticket was down 4%.

Turning to the balance sheet and cash flow. We ended the year in strong financial condition with $149 million of cash and cash equivalents and no outstanding borrowings under our asset based revolving line of credit.

From a category perspective color, increased 5% and Care was up. 1%

E-commerce sales increased 8% to $58 million, representing 14% of segment net sales for the quarter.

Denise Paulonis: We recently did a survey, and out of the 61% of customers who told us they color their hair, it was quite fascinating that 25% of them do it just DIY, 25% of them split their time between DIY and salon. Think about that as they might get a big update at the salon, and they might do touch-ups at home. It was only that remaining 11% to 12% that actually said, I only go to a salon. Our ability to have them understand how we can help them get that better outcome with things like our in-store support and our LCOD, we think is driving people into the store, complemented by a great lineup of product and really easy accessibility. Yeah. Great. Thank you so much. Good luck with this holiday. Our next question comes from Simeon Gutman with Morgan Stanley. Hi.

Inventory levels totaled $988 million down.

Gross margin at PSG expanded. 100 basis points to 40%.

Down 5% versus last year.

Entering fiscal 2026, we remain focused on driving process improvements to enable faster inventory turns and improve working capital working capital productivity.

Primarily reflecting higher product, margins from the benefits of our fuel for growth program.

Segment, operating margin was, strong coming in at 12.6%, up 160 basis points to the prior year.

Fourth quarter cash flow from operations totaled $121 million.

While free cash flow totaled $78 million in Q4, we utilized excess cash to repay $21 million of term loan debt, bringing our net debt leverage ratio at year end down to one six times.

Turning to the balance sheet and cash flow. We ended the year in strong financial conditions with 149 million of cash and cash, equivalents

And no outstanding borrowing under our asset-based revolving line of credit.

We also deployed $20 million of cash to repurchase one 7 million shares of stock under our existing share repurchase program.

Inventory levels told 900888 million down 5% versus last year.

On a full year basis, we generated 270 $275 million of.

Entering fiscal 2026. We remained focused on driving process, improvements to enable faster, inventory, turns, and improve, or can Capital working capital productivity.

Operating cash flow and $216 million of free cash flow.

Allowing us to repay nearly a $120 million of term loan debt and repurchase more than $50 million of our shares.

Denise Paulonis: This is Lauren Englund for Simeon. Thanks for taking our question. Our first one is on the longer-term outlook you provided this morning. Just curious, as your Fuel for Growth initiatives wind down this year, what gives you confidence for achieving that longer-term outlook for the EBIT dollar growth, 3% to 5% range? Oh, yes. Yeah. The longer-term algorithm that we've set forward, certainly you're seeing this fiscal 2026 is on the path to that. Again, a big part of that is our growth drivers on the top line, which will help flow through to the bottom line. Also adding to that is the further opportunities within our Fuel for Growth program, which we've got more runway on our supply chain optimization, further opportunities within our vendor negotiations, as well as the combination of own brand penetration continuing to increase. Okay. Great. Thank you.

Turning to our fiscal 2026 guidance on a full year basis, we expect the following consolidated net sales in the range of $3 71 to $3 77 billion.

Fourth quarter, cash flows from operations to those 121 million. While free cash flow totaled. 78 million in Q4, we utilized excess cash to repay. 21 million of term loan debt. Bringing our net debt, leverage ratio at year end down to 1.6 times,

Under our existing, share repurchase program.

Which includes approximately 50 basis points of favorable impact from foreign currency rates.

Comparable sales flat to up 1%.

On a full year basis, we generated 270 275 million of operating cash flow and 216 million of free cash flow.

<unk> operating earnings of $328 million to $342 million.

Adjusted diluted earnings in the range of $2 to $2 10 per share, which assumes 50% of free cash flow goes towards share repurchases.

Allowing us to repay nearly million dollars of turn loan, debt and repurchase more than fifty million dollars of our shares.

turning to our fiscal 2026 guidance, on a full year basis, we expect the following

Capital expenditures are expected to be approximately $100 million.

Consolidated, net sales in the range of 3.71 to 3.77 billion.

Free cash flow is expected to be approximately $200 million.

Which includes approximately 50 basis points.

Favorable impact from foreign currency rates.

In addition, we expect our store count to be approximately flat <unk>.

Comparable sales flat to up 1%.

Including about 40, new stores 40 store closures and 50 relocations.

Adjusted operating earnings of 328 to 342 million.

Denise Paulonis: Just a shorter-term question. On the Sally side, it looks like transactions are still a little bit soft. Can you help us understand how you're thinking about maybe traffic versus ticket for 2026 as it relates to the Sally segment, and maybe how your initiatives are positioned to reignite growth for both in 2026? Yeah. Transactions in the Sally segment in the fourth quarter were pretty much flat, and our 1.5% sales growth came from a contribution of AUR and ticket coming into the stores. That's actually an improvement from what we've seen of late, where traffic had been a bit more pressured, particularly on that lower-income consumer side of the business. Looking ahead into 2026, we expect all the metrics will improve and continue to grow, right?

For our first quarter of fiscal 2026, we expect the following.

Consolidated net sales in the range of $935 to $945 million, which includes approximately 40 basis points of favorable impact from foreign currency rates.

Adjusted diluted earnings are expected to be in the range of $2.00 to $2.10 per share, which assumes that 50% of free cash flow goes toward share repurchasing.

Capital expenditures are expected to be approximately a hundred million dollars.

Comparable sales to be approximately flat.

A free cash flow is expected to be approximately $200 million.

Adjusted operating earnings of $75 million to $80 million.

in addition, we expect our store count to be approximately flat,

And adjusted diluted earnings in the range of 43 to <unk> 47 per share.

Including about 40 new stores, 40 store closures, and 50 relocations.

In summary, we are pleased to finish the year strong and look forward to making meaningful progress in fiscal 2026.

for our first quarter of fiscal 2026, we expect the following

Toward the long term financial targets Denise outlined.

We appreciate your time this morning, now I'll ask the operator to open the call for Q&A.

Consolidated, net sales and the range of 935 to 945 million, which includes approximately 40 basis points of favorable, impact from foreign currency rates.

If you'd like to ask a question at this time. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Denise Paulonis: Driving transactions will really be things around our performance marketing, attracting new customers into the fleet, the strength of our personalization, and how we continue to enable and fuel that with customer insights to really drive customer frequency. When we think about the basket itself, this focus on cross-category shopping is a primary effort that we have going on within our stores that I think is complemented nicely by new innovation coming in, and the continued success in our digital strategy that we've had of late. Okay. Great. Thank you. Our next question comes from Sydney Wagner with Jefferies. Hi. Thanks for taking our question. Can you just share a little bit more about your expectations for category growth that are underpinning that long-term net sales growth range? Curious kind of what trends and innovations you maybe are expecting to drive the category.

Comparable sales to the approximately flat.

Adjusted operating earnings of 75 to 80 million.

And adjusted diluted earnings in the range of 43 cents to 47 cents per share.

Please standby, while we compile the Q&A roster.

In summary, we are pleased to finish the year, strong and look forward to making meaningful progress in fiscal 2026.

Our first question comes from Oliver Chen with TD Securities.

for the long term, Financial targets Denise outlined

Hi, Nathan Marlow on the quarter, you just had would love to hear about what were some of the key factors that helped drive the upside at both.

We appreciate your time this morning now, I'll ask the operator to open the call for Q&A.

Each division and then as we think about the comp complexion this quarter.

If you'd like to ask a question at this time, please press star 1, 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please press star, 1 1 1 again.

Ticket run similar to what you expected in terms of the <unk>.

Please stand by while we compile the Q&A roster.

I get a ticket trends at BSG relative to the positive ticket trends at Sally.

Sally and then would just love to hear your thoughts on on your guidance on your comp guidance relative to occupancy leverage.

Our first question comes from Oliver Chen with TD securities,

What do you see happening in terms of.

Your ability to occupy to leverage some of the fixed cost with the comp outlook. Thank you.

Denise Paulonis: Maybe just an update on the promotional environment, what you saw during the quarter, and maybe what you're expecting into 2026. Thank you. Yeah, when we think about the long-term growth of the business, we believe color is still going to be at the core of both of our businesses, and we would anticipate continued nice growth in that space. When we look beyond that, we're looking to have, in the Sally business, hair and nails really continue to gain traction. Nail and what we're working on in the Sally Ignited stores is quite dramatic and quite exciting for us in what we're delivering. On the BSG side, the innovation flywheel, particularly on the care side of the business, is quite strong. I think the part that's exciting in our long-range plan is how we're working on further category expansion.

Good morning, Oliver and we were very pleased with the performance in Q4 in terms of factors that drove that performance and drove the upside I think what's really notable in the quarter is the strength of color in both of our businesses. So in the quarter, our color was up 7%.

Hi Denise and Marlowe. On the quarter you just had, I would love to hear about what were some of the key factors that helped drive the upside at each division. And then, as we think about the complexion of this quarter, the ticket trends are similar to what you expected in terms of the negative ticket trends.

Overall, 8% in Sally and 5% in BSG really speaking to the strength of the DIY can pro product in our Sally segment and then the importance of the brands that we carry on the BSG side and I think underlying that the other things that we saw great strength marketplaces continued to over perform.

BSG relative to the positive ticket Transit at Sally. Um and then would just love to hear your thoughts on, on your guidance, on your comp guidance, uh relative to occupancy Leverage. What do you see happening in terms of um your ability to to occupy to leverage some of the fixed costs with with the comp Outlook? Thank you.

On the salary side of the business, which we are pleased to see innovation.

BSG helped to drive care back into positive sales growth territory, which we were pleased to see as well and then finally customer activation the strength of the <unk> program with 505000 to 6000 consultations a week and a nice conversion rate and there was a real benefit complemented by person.

Denise Paulonis: When we think about that on the BSG side, we're starting to test into skin and spa, which not only can be bought by our existing beauty professionals that are coming into the store, but can expand our base to talk more to estheticians and what they need for their business. On the Sally side, the opportunity to understand how cosmetics, fragrance, men's grooming can play a larger role in the box and online is going to be an important part of that category side of growth as well. All good things that are underpinned by our ability to activate the customer, harvest digital value overall, and then our new growth pathways that can help us advance that as well.

Realizations, so thrilled with the outcome and I think theres a lot of things there that our positive momentum that will continue with us into fiscal 'twenty six.

When we think about the ticket, particularly I think you commented on the ticket and BSG. It was not surprising at all to US the ticket was down and transactions were up of the behavior that we're seeing from that stylists as they still have a fairly healthy book of business, but they continue to buy what they need when they need it so they're more likely to come in more frequently.

Denise Paulonis: Your other question on promotional levels and what we saw in the fourth quarter, in general, I'd say levels for us were fairly similar year over year at both businesses. A little bit of nuance underneath that. Sally running more promos but shorter days. That idea of, if this is important to you, there's an expiration time on when you can come in and get a certain offer has been something we've been working on. BSG ran a little bit heavier in promo, but a part of that as well was the strength of what we've been able to do with a lot of our brand partners in terms of preparing for the holiday selling season as we were approaching into the quarter. We felt good about that.

Morning Oliver. Um, we were very pleased with the performance in Q4, in terms of factors, uh, that drove the performance and drove the upside, you know, I think, what's, what's really notable in the quarter is the strength of color in both of our businesses. So, in the quarter, a color was up 7%. Um, overall 8% in Sally and 5% in BSG, really speaking to the, the strength of the DIY, kind of pro product, uh, in our Sally segment. And then the importance of the brands that we carry on the BSG side. And I think underlying that the other things that we saw of great strength, marketplaces continue to over-perform, uh, on the Sally side of the business, which we are pleased to see, um, Innovation, uh, in in BSG helped to drive care back into positive, uh, sales growth territory, which we were pleased to see as well. And then finally customer activation, uh, the strength of the LCD program with, you know, 500 5,000 to 6,000 consultations a week and a nice conversion rate in.

<unk> and pick up those items, which then in turn makes it for a little bit different lower basket, but in total delivering well over 1% sales growth one 4% comp growth on the BSG side the relationship with that customer is still extremely healthy.

I was a real benefit, complemented by personalization. I'm so thrilled with the outcome and I think there are a lot of things here that are positive momentum that will continue with us into fiscal 2026.

And then Marty maybe you'll talk a little bit about.

The occupancy leverage SG&A for coming year, yes over the coming year in Q1.

<unk>.

The top line is a bit under pressure from some of the government shutdown. So we'll see a little bit of deleverage there, but as we go through the year, we'll see that leverage improving on a full year basis, we would expect leverage to be fairly similar to last year.

Denise Paulonis: I think one thing that's really interesting that we're doing in Q1 here and the holiday on the Sally side is trying to move the customer a little bit more on the emotional reason to shop with us. We've historically done more buy-and-book, bulk promotions, buy-and-save promotions. The holiday message platform that we have out there now, which is Save While You Skip the Salon, is really the emotional appeal to say, how can you get the outcomes that you want when your budget might not be able to be perfect to be able to afford all of that? We're really looking to see how that resonates with the customer and are excited about it. Thanks. As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchtone phone. Our next question comes from Olivia Tong with Raymond James.

Yes.

Okay.

It'd be helpful to ask you a bit about the consumer environment, because its pretty bifurcated.

What we see with more pressure in the middle and low end as you called out.

And the government shutdowns on People's minds as well.

We're playing in.

What might drive comps better than your guidance it feels somewhat conservative, but I know, there's a cautious optimism in terms of.

And then Marlow, maybe you'll talk a little bit about, uh, the uh the occupancy, leverage sgna for coming here. Yeah. So for the coming year in q1, you know, we're we're uh, the top line is a bit under pressure, uh, from some of the government shutdown. So we'll see a little bit of delay there, but as we go through the year, we'll see that leverage improving and on a full year basis, we would expect leverage to be fairly similar to last year.

What youre seeing with the top line and then second question on the long term outlook on your.

Yeah, all right.

Net sales growth of 1% to three relative to operating earnings growth of three to five.

Where are the leverage points, we should.

We should we should think about in that algorithm. Thank you very much on the margin.

Absolutely. So let me start with on the consumer front I think what we've seen today is that the Sally customer is resilient and continues to respond well to a lot of the key initiatives. We have in play like licensed color on demand marketplaces innovation.

Denise Paulonis: Great. Thanks. Good morning. Great to hear your confidence in providing the long-term targets. Can you talk about the underlying category growth assumptions embedded in those targets, your market share assumptions, and how you think about the contribution of existing doors versus some of the newer categories and doors that you're expanding into or entering? Specific to Q1, the guide is a little bit lighter than we had expected and would be a deceleration versus Q4, but you also expect things to improve as the year progresses. Can you talk about the headwinds that you're seeing in Q1 and how you plan to build over the course of the year to give you the confidence despite the volatile backdrop? Thank you so much. Yeah. Maybe I'll actually do this in reverse order.

We also see the silos business being nice and stable certainly we look forward to them, having a very positive holiday season upcoming here underneath all of this I would say in particular on the consumer side. We are seeing consumers remain choice for that's not new news and for US choice full means continuing to spend in.

Um, it'd be helpful to ask you a bit about the consumer environment because it's, it's pretty bifurcated. As what we see with more pressure in the middle and low and as you called out um sentiment and and government shutdowns on people's minds as well. Um how is that interplaying? And what might drive comps better than your guidance? It feels somewhat conservative but I know, there's a a cautious optimism in terms of of um of what you're seeing with the top line. And then second question on the long term outlook on your net sales, growth of 1 to 3 relative, to operating earnings growth of 3 to 5 um where where are the leverage points that we should? Um, we should we should think about and that algorithm thank you very much on the margins.

The core color category, the spending a little wider and styling tools and leaning into value a bit more and we did see a bit of a slowdown, particularly on the low income customer coming into our stores as we've navigated through the 40 plus days of the government shutdown.

Denise Paulonis: I think first and foremost, when we think about Q1, I want to reemphasize we feel great about the underlying momentum in the business. What we've seen in terms of Licensed Colorist On-Demand, innovation, performance marketing, and personalization, we think are all very strong. For the full year, when we think about what underpins that, we assumed that the consumer behavior and spending would be very similar to what we saw in fiscal 2025, which is choiceful but resilient. We still think that that's the case. We are realistic that we do expect that we will have seen some incremental pressure on lower-income consumers in Q1 from the government shutdown. Just the fear of the nature of when I'm getting that paycheck has an impact on lower-income consumers.

At this point, we hope that that's transitory behavior, we're certainly watching and monitoring what is what is happening with that consumer base, but I think if we step back we just feel really good about the momentum in the business with the strategic initiatives driving over 250 basis points of comp this past year and those continuing into the new year So focused on.

On innovation performance marketing personalization license color on demand, if we said what could help us a little bit more and drive a little bit outsized growth. We always have the potential on the BSG side for expanded distribution tuck in M&A that continues to expand our reach with <unk>.

Absolutely. So let me start with on the consumer front, you know, I think what we've seen today is that the Sally customer is resilient, um, continues to respond. Well, to a lot of the key initiatives we have in play, like, life of colors on demand, marketplaces Innovation. Um, we also see The Stylist business, being nice and stable. Uh, certainly we look forward to them, having a very positive holiday season. Um, upcoming here, underneath all of this, I'd say, in particular, on the consumer side, we are seeing, uh, consumers remain Choice, that's not new news. Um, and for us Choice, full means continuing to spend in the core color category, the spending a little lighter in styling tools, and leaning into value a bit more. Um, we did see a bit of a Slowdown, particularly on the low income customer coming into our stores as we've navigated through the 40 plus days of the government shutdown. Um, at this point we hope that that's transitory Behavior. We're certainly watching and and monitoring what is what is happening with that consumer?

Survey.

Denise Paulonis: We're hoping that we're going to be past that very soon, but it's reflected in the expectations for the quarter. I think, importantly, the model has really proven resilient with the hair color category at the core. It's really a staple category rather than a discretionary category. Strength there, and will remain nimble to respond to changes as the customer starts moving into the selling season. I think on the top line, the other important part to note is that as we move into Q2, we actually are up against an easier compare to last year. While it's our smallest quarter, recall last year there were a lot of transitory events, whether that was the announcements around tariffs, the very high flu season that hit our stylists quite hard.

<unk> existing or new brand partners that is out there. We're also excited with the work that we're doing on salary ignited we're starting to understand with <unk> just in a few stores today, what things we're learning that we can lift and shift. So for example, putting in 1000 Sally stores, our fragrance assortments tightening coming into holiday.

So I think those are things that could trend positive.

But I think if we step back, we just feel really good about the momentum in the business with the Strategic initiatives, driving over 250 basis points of comp this past year um and those continuing into the new year. So focused on Innovation Performance, Marketing personalization licensed colors on demand. If we said, what could help us a little bit more and and drive a little bit outside growth, you know, we always have the potential on the BSG side for expanded distribution.

But we think with what we just witnessed with the government shutdown, it's prudent in the way that we're thinking about Q1, but feel great momentum for the full year.

And then Mario do you want to comment a bit on the sales to profit equation I think Oliver asked about and I think you were asking to the longer term and.

Denise Paulonis: We expect Q2 to be a stronger category because of what we're lapping there, and the back half of the year to be on trend and on the base of the business. I think what we're just doing is we're watchful about how that consumer is spending through this government shutdown period, which is what you're seeing in our Q1 expectation. Your bigger question, I think, was about long-term growth and what is supporting our long-term growth drivers and that 1% to 3% top-line growth. Our guidance this year suggests that we'll be on the low end of that range as we move through the year.

So I think the growth on the top line on top of that where we see additional leverage coming in additional growth opportunity to the bottom line is certainly through the continuation of our fuel for growth program.

Um, tuck in m&a that continues to expand our reach, um, with Brands existing or new brand partners that is out there. You know, we're also excited with the work that we're doing on Sally ignited. We're starting to understand with while that's just in a few stores today, what things we're learning that we can lift and shift. So for example, putting in a thousand, Sally Stores, our fragrance assortment, um, kind of coming into holiday. So I think those are things that could Trend positive

Most of the heavy lifting will be done through the end of fiscal 'twenty six but its the muscle memory and that will remain within our organization and continue as we go forward.

You know, but we think with what we just witnessed with the government shutdown, it's prudent uh, in the way that we're thinking about q1, um, but feel great momentum for the full year.

So we'll continue to optimize and leverage the capabilities of our fuel for growth program for incremental opportunities to drive savings for both reinvestment and flow through to the bottom line and then on top of that our own brand.

Denise Paulonis: I talked about on the call the four key pillars that we're really focused on, which is understanding and activating the customer, unlocking and harvesting digital value, differentiating with product assortment and innovation, which includes category expansion, and then accelerating new growth pathways, which importantly is our Sally Ignited program as well as Happy Beauty. When I think about where we are in the cycle of these different initiatives, I think the thing to think about is all of these are proven track record in what we've delivered in FY2025 with about 250 basis points growth coming of those from comp.

Performance continues to drive those results.

Okay. Thank you best regards.

Our next question comes from Susan Anderson with Canaccord Genuity.

Hi, good morning, Thanks for taking my questions.

I'm wondering if maybe you can give us an update on the Sally store remodel program.

I guess, where are you at with the story models have you completed any beyond the Orlando market and then maybe if you could just talk about where they are performing versus the core and the Orlando market and then also if you've completed the points outside thanks.

Denise Paulonis: In terms of pacing and how we see the progression of impact, right, I think what's important to think about is as we go into 2027 and 2028, what customer activation can do for us, and this understanding of the customer, being able to respond to that, incorporating how artificial intelligence can help us on that curve. We think the impact in personalization, performance marketing, and our LCOD campaign, I can't overstate the opportunity that we see there in what we're working on and delivering. Secondarily, I would say category expansion is the other big opportunity as you look to the later years within that long-term guidance range. We're already working on how to think about this. In BSG, we're sampling into skin and spa.

And then Marlow, do you want to comment a bit on uh the the sales to profit equation? I think all of our asks about, yeah, and I think you were asking to the, to the longer term. Um, and so, you know, I think the the the growth on the top line on top of that where we see additional leverage coming and additional growth opportunity to the bottom line is certainly through the continuation of our field for growth program. Uh, we have, you know, most of the heavy lifting will be done through the end of fiscal 26, but it's the muscle memory that will remain within our organization and continue as we go forward. Uh so we'll continue to optimize and leverage the capabilities of our fuel for growth program incremental, opportunities to drive savings for both reinvestment and flow through to the bottom line. Uh and then on top of that our own brand um performance continues to to drive those results.

Thank you. Best regards.

Our next question comes from.

Sure I'm happy to provide an update there. So you as of this quarter, we kind of branded our Sally brand refresh as Sally ignited and we think it's a great representation of how our customers are reacting when they are coming into our new stores and just as a reminder, what are we really doing it's a physical and digital refresh it really is about.

Creating a more immersive experience that lets us get more discovery and community the store update in particular, it really has a new layout nail is displayed in a rotunda, that's very dramatic as you come into the store. There's a discovery bar to help you and in hair color choices, that's fixtures built for purpose to shop.

Thanks for taking my questions. Um, I was wondering if maybe you can give us an update on the Sally store remodel program, how I guess where are you at with the story models? Have you um completed any beyond the Orlando market and then maybe if you could just talk about where they're performing versus the core um in the Orlando market and then also if you've completed 1's outside, thanks.

As a specialty retailer rather than a supply store and there is a cash up in the center that really helps our associates to deliver at the high quality service that customers have come to expect with us.

Denise Paulonis: We're excited about seeing how our customers react to that and that ability to attract a new esthetician customer and how we might be able to grow that business meaningfully as we look to future years. In the Sally side of the business, we think that there's a lot more runway in the nail portion of the business, and the way that our Sally Ignited stores bring nail to the forefront in terms of what a new customer can experience coming in. We think there's a lot there. We expect that we will also start to more meaningfully play in categories like cosmetics and fragrance in Sally, as well as men's grooming. That's going to be some things that are going to go on our growth curve. We expect that we will continue to have extremely strong performance in color.

Where we are today at the end of the fiscal year. We had about 30 stores opened which included the full Orlando market as well as a handful of stores in other locations throughout the country.

We're doing both of those models, because Orlando will let us test kind of a full marketing program are tied with the new program and then when you think about the drop in markets will have a great ability to read and ADT results.

Against specific changes that we're making in the stores to understand whats working what we might do differently. We plan for 50 stores in fiscal 2006 that will let us continue to extend that reach and test and try the great news is that within our capital program for the year, because we would have been doing remodels or relocations and a number of.

Just as a reminder, you know what are we really doing? It's a it's a physical and digital refresh. It really is about creating a more immersive experience. That lets us get more Discovery in community. The store update. In particular, really has a new layout. Um, nail is displayed in a rotunda. That's very dramatic as you come into the store. There's a discovery bar to help you and and hair color choices. It's fixtures built for purpose to shop as a specialty retailer, uh, rather than a supply store. And there's a cash app in the center that really helps our Associates deliver, the high quality service, that customers have come to expect with us.

Denise Paulonis: It is the core of what we do and the expertise that we have. With these other categories of providing underlying growth, our confidence in that 1% to 3% top-line growth is quite solid. I think there's a lot of things underpinning that just for the Sally business as well. When you think about the global scale we have, as well as sticky customers and great high NPS scores, we think we're really on the path here to giving those customers what they want and being rewarded in return. Great. Thank you. Just want to follow up a little bit on BSG. You had mentioned how stylists are buying closer to demand just in time. Imagine you're pretty adept in terms of providing to them.

Stores, and we're really doubling down on salaries and guided specifically on what we're seeing we love that we're seeing customers have higher dwell time in shop Cross category when they come into the store, which is a great part of the design that we were looking to do so that haircolor customer exploring and nail that textured hair customer look.

You know where we are today at the end of the fiscal year. We had about 30 stores open, which included the full Orlando market, as well as a handful of stores in other locations throughout the country. Um, we're doing both of those models because Orlando will let us test kind of a full marketing program, a tied with the new program and then when you think about the, the drop in

Apt results.

And thinking differently about styling tools is what we were trying to drive in turn we are seeing.

C as well as HEV, so our units per transaction and our average transaction value higher than the rest of the fleet, that's very encouraging to us and what we hope will continue to see as the test progresses.

See in the stores to understand what's working. What we might do differently, we plan for 50 stores. Uh, in fiscal 26 that will let us continue to extend that reach and and test and try. The great news is that's within our Capital program for the year uh because we would have been doing remodels or relocations in the number of stores and we're really doubling down on Sally, ignited.

Denise Paulonis: Can you talk about what you're doing to support that given that you have that footprint and capability to do that? Absolutely. I think the great thing and the strength here is with 1,300 stores across the country, our stylists can easily access us, and then we can easily support them. In addition to being able to come directly into the stores, we do offer two-hour delivery. If you're engaging digitally and need that product right away, we're there and offer that service for you, as well as buy online, pick up in store. For our customers who buy in larger quantities, our full-service portion of our business is still there to actively serve our customers and pull through. I think what we're excited about is to make things even easier for our customers in the little bit later into 2026.

I'd be remiss not to say, we are working to lift and shift of things that we're finding that are working quite quickly into some of our core fleet. A great example of that is the expansion of fragrances into 1000 stores in Sally here for the holiday.

Okay, Great and testing and then I wanted to maybe follow up just on the strong growth in color at Sally I think you had said that you are seeing I guess more new low income consumers coming in I guess.

One are you seeing more people do their hair themselves and is that I guess do you think being driven by just their wallets being stretched in wanting to save some money on that front.

And I guess are these new consumers as well to Sally or are they just coming back and then while they're in the stores. I guess are you seeing them pick up other products in the stores and when they do come in to buy color. Thanks Scott.

Specifically on what we're seeing. We love that. We're seeing customers have higher dwell time and Shop cross category when they come into the store, which is a great part of the design that we were looking to do. So that hair color, customer exploring your nail that textured hair customer looking and thinking differently. About styling tools is what we were trying to drive in turn. We are seeing a up as well as ATV so our units, uh, per transaction and our average transaction value higher than, uh, the rest of the fleet, that's very encouraging to us. And what we hope will continue to see, uh, as the test progresses. You know, and I, I'd be remiss not to say, you know, we are working to lift and shift things that we're finding that are working quite quickly into some of our core Fleet. A great example of that is the expansion of, of fragrances into a thousand stores in Sally here for the holiday.

Denise Paulonis: We're actually relaunching our app. Our stylists heavily engage in the app. If you ever sat behind, got your haircut, they're on their phones all the time. It's how they place their orders, it's how they write down what they need, it's how they think about how they're going to serve their customers. Our ability to have that app be more intuitive, faster for them to be able to build a basket so that whether they want to buy online, pick up in store, whether they want to come shop in store, whether they want us to deliver that product to them, we can handle that in all the ways that we need to. That idea of supporting speed to market to that customer is very important to us. Great, thank you. Best of luck. That concludes today's question and answer session.

So we love, what's happening with color and Sally I'd say the great thing is that we are seeing new reactivated and existing customer growth. When we think about the new customer growth. We think there is an extra benefit from license color on demand when that customer can get support from an expert to get confidence in what is really a high stakes category.

That youre going to purchase and take on in in your own DIY endeavor, and we're seeing that customer come in and that is fueling some of the growth in the model.

Okay. Great interesting. Um and then I I wanted to maybe follow up just on the strong growth in color at Sally. I think you had said that you are seeing I guess more new low-income consumers coming in. I guess. I, you know, 1 are you seeing more people do their hair themselves and is that, I guess? Do you think being driven by just their wallets being stretched and you know, wanting to save some money on that front? Um and I guess are these new consumers as well to Sally or they just coming back and then you know, while they're in the stores, I guess. Are you seeing them pick up other products in the stores? When they do come in to

By color, thanks.

There is no doubt about that secondarily when you think about the customer and then trying to manage their budget no matter. What income level you are doing your Harris along all the time, it's a very expensive proposition. We recently did a survey and out of the 61% of customers, who told us they color their hair it was quite <unk>.

Denise Paulonis: I'd like to turn the call back to Denise Paulonis for closing remarks. Well, thank you for joining us all today. Thank you to our teams around the world for delivering a strong quarter and a strong year, but most importantly, supporting our customers and helping them get the looks that they love and what they like to achieve in their own personal life. Thank you to everyone, and an early Happy Holidays. We'll talk to you again next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.

We estimated that 25% on them do it adjusted DIY, 25% of them split their time between DIY and salons, So think about that as they might get a big update at the Salon and they might do touch ups at home and was only that remaining.

11%, 12% that actually said I only go to Epsilon, so our ability to have them understand how we can help them get that better outcome with things like our in store support and our <unk>. We think is driving people into the store complemented by a great lineup of products and really easy accessibility.

Yeah, great. Thank you so much good luck this holiday.

Yeah, so we we love what's happening with color and Sally. I'd say the great thing is that we are seeing new reactivated and existing customer growth. When we think about the new customer growth, we think there's an extra benefit from licensed colorist on demand when that customer can get support from an expert to get confidence in, in what is really a high stakes category that you're going to go purchase and and take on in in your own DIY Endeavor. Um, we're seeing that customer come in and that is fueling some of the growth in the model. Um, there's no doubt about that, you know, secondarily when you think about the customer and them trying to manage their budget at, no matter what income level you are you doing your hair in a salon. All the time is a very expensive proposition. We recently did a survey and out of the 61% of customers who told us they color their hair. It was quite fascinating. That 25% of them do it just a DIY. 25% of them split their time between DIY and salons. So think about that as they might.

Our next question comes from Simeon Gutman with Morgan Stanley.

Get a big update at the salon and they might do touch-ups at home and it was only that remaining.

Hi, This is Lauren on for Simeon Thanks for taking our question. Our first one is on the longer term outlook. You provided this morning, just curious as your fuel for growth initiatives wind down. This year, what gives you confidence for achieving that longer term outlook for the EBIT dollar growth, 3% to 5% range.

Uh, 11:12 that actually said, I only go to a salon. So our ability to have them understand how we can help them, get that better outcome with things like our in-store support. And our LCD. We think is, is driving people into the store complimented by a great lineup of product and, you know, really easy accessibility

Yes.

Oh, yes.

Yeah, great. Thank you so much. Good luck. This holiday.

Yes, the longer term algorithm that we've set forward certainly youre seeing this fiscal 'twenty six is on the path to that again, a big part of that is our growth drivers on the top line, which will help.

Our next question comes from Simeon, Goodman with Morgan Stanley.

Flow through to the bottom line, but then also adding to that is the further opportunities within our fuel for growth program.

Which we've got more runway on our supply chain optimization further opportunities within our vendor negotiations as well as the combination of owned brand penetration continuing to two.

Hi, this is Lauren angon for Simeon. Thanks for taking our question. Our first 1 is on the longer term route and looking provided this morning, just curious as your feel for both initiative, you know, wind down this year. What gives you confidence for achieving that longer term outlook for the ebit dollar growth 3 to 5% range?

To increase.

Okay, great. Thank you and then just a shorter term question on the Sally side. It looks like transactions are still a little bit soft can you help us understand how you're thinking about maybe traffic versus ticket for 2006 as it relates to the Sally segment and maybe how your initiatives are positioned to reignite growth for both <unk> and 'twenty six.

Um, yeah, the longer term, uh, algorithm that we've we've set forward. You know, certainly you're seeing, uh, this fiscal 26, is, is on the path to that. Um, again, a big part of that is our growth drivers on the top line, um, which will help, uh, flow through to the bottom line. But then also adding to that is, uh, the F further opportunities within our field school for growth program.

And transactions in our Sally segment in the fourth quarter were pretty much flat and one 5% sales growth came from a contribution of AUR and ticket coming into the stores. That's actually an improvement from what we've seen of late where traffic had been a bit more pressured, particularly on that lower income consumer side of the business.

uh, which we've got, uh, more runway on our supply chain optimization, uh, further opportunities within our vendor negotiations, um, as well as the combination of, uh, own brand penetration continuing to uh to increase

Looking ahead into 2026, we expect we expect all the metrics will improve and continue to grow driving transactions will really be things around our performance marketing and attracting new customers into the fleet the strength of our personalization and how we continue to enable and fuel that with customer insights.

Okay, great, thank you. And then just a shorter-term question on the Sally side. It looks like transactions are still a little bit soft. Can you help us understand how you're thinking about maybe traffic versus ticket for 2026 as it relates to the Sally segment, and maybe how your initiatives are positioned to reignite growth for both in 2026?

To really drive customer frequency.

Then when we think about the basket itself. This focus on cross category shopping is a primary.

Effort that we have going on within our stores that I think is complemented nicely by new innovation coming in and the continued driven.

The continued success in our digital strategy that we've had of late.

And transactions in the Sally segment in the fourth quarter. We're pretty much flat and, and our, uh, 1 and a half percent sales growth came from a contribution of of Aur and a ticket coming into the stores. That's actually an improvement from what we've seen of late, where traffic had been a bit more pressured. Uh, particularly on that lower income, consumer side of the business, looking ahead, uh, into 2026. You know, we expect, we expect all the metrics will improve and continue to grow, right? Did driving transactions will really be things around our Performance Marketing and attracting new customers in

Okay, great. Thank you.

Yes.

Our next question comes from Sydney Wagner with Jefferies.

Hi, Thanks for taking our question can you just share a little bit more about your expectations for category growth that are underpinning by long term net sales growth range curious kind of what trends and innovations you maybe are expecting to to drive the category and then maybe just an update on the promotional environment.

Into the fleet, the strength of our personalization, and how we continue to enable and fuel that with customer insights, to really Drive customer frequency. You know, and then when we think about the basket itself, this focus on Cross, category shopping is is a primary um effort that we have going on uh, within our stores. But I think it's complemented nicely by new innovation coming in and and the continued driven uh,

the continued success in our digital strategy that we've had of late.

Okay, great. Thank you.

You saw during the quarter and maybe what you're expecting into 2026. Thank you.

Yeah. So when we think about the long term growth of the business. We believe color is still going to be at the core of both of our businesses and we would anticipate.

Our next question comes from, Sydney Wagner with Jeffries.

<unk> had nice growth in that in that space. When we look beyond that we're looking to have in the Sally business care and nails really can.

<unk> gained traction nail and we're working on in the Sally ignited stores is quite dramatic and quite exciting for us and what we're delivering and on the BSG side, the innovation flywheel, particularly on the care side of the business is quite strong, but I think the part that is exciting and our long range plan is how we're working on further category expansion.

Hi, thanks for taking our question. Um, can you just share a little bit more about your expectations for category growth? That are underpinning that long term, net sales, growth range, carries kind of what trends and Innovations, you maybe are expecting to to drive the category and then maybe just an update on the, the promotional environment. Um what you thought during the quarter and and maybe what you're expecting into 2026? Thank you.

So when we think about that on the BSG side, we're starting to test into skin and spa, which not only can be bought by our existing beauty professionals that are coming into the store, but can expand our base to talk more to <unk> and what they need for their business and on the Sally side the opportunity to understand how cosmetics.

Yeah, you so when we think about the long term growth of the business, we believe color is still going to be at the core of both of our businesses and we would anticipate, um, continued, nice growth in that in that, uh, space. You know, when we look beyond that, you know, we're looking to have in the Sally business care and Nails really, uh, continue to gain traction nail and what we're working on in the Sally.

Fragrance men's grooming can play a larger role in the box and online is going to be an important part of that category side of growth as well. So all good things that are underpinned by our ability to activate the customer harvest digital value overall, and then our new gross pathways that can help us advance that as well.

<unk>.

And then your other question on promotional levels and what we saw in the fourth quarter.

In general I'd say levels for us were fairly similar year over year at both businesses, a little bit of nuance underneath that Sally running more promos, but shorter days. So that idea of if this is important to you. There is a there is an exploration time on when you can come in and get a certain offer has been something we've been.

Working on and then BSG ran a little bit heavier in promo, but a part of that as well as the strength of what we've been able to do with a lot of our brand partners in terms of preparing for the holiday selling season, as we were approaching into the quarter. So we felt good about that.

United stores is quite dramatic uh and quite exciting uh for us and what we're delivering and on the BSG side, The Innovation flywheel, particularly on the care side of the business is quite strong, but I think the part that's exciting in our long-range plan is how we're working on further category expansion. So when we think about that on the BSG side, you know we're starting to test into skin and Spa which not only can be bought by our existing uh Beauty professionals that are coming into the store but can expand our base to talk more to estheticians and what they need for their business and on the Sally side. You know, the opportunity to understand how Cosmetics fragrance, Men's Grooming can play a larger role in the box and online is going to be an important part of that category side of growth as well. So all good things that are underpinned by our ability to activate the customer Harvest, digital value overall. Um, and then our new growth Pathways that can help us advance that as well.

I think one thing that's really interesting that we're doing in Q1 here in the holiday on the Sally side.

Trying to move the customer a little bit more on the emotional reason to shop with us. So we've historically done more buying bulk promotions by and saved promotions and holiday message platform that we have out there now which is save while you skip the salon is really the emotional appeal to say how can you get the outcomes that you won.

And then your other question on promotional levels. And and what we saw in, uh, in the fourth quarter. You know, in general, I'd say levels for us, were, fairly similar year-over-year at both businesses. A little bit of nuance underneath that, you know, Sally running more promos, but shorter days. So that idea of, if this is important to you, there is a, there's an expiration time on when you can come in and get a certain offer, it's been uh, something we've been working on and then BSG ran a little bit heavier in promo, but a part of that as well.

When your budget might not be able to be perfect to be able to afford all of that and we're really looking to see how that resonates with the customer and are excited about it.

Was the strength of what we've been able to do with a lot of our brand Partners in terms of preparing for the holiday selling season as we were approaching into the quarter. So we felt good about that.

Thanks.

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Our next question comes from Olivia Tong with Raymond James.

Great. Thanks, Good morning, great to hear your confidence in providing the long term targets. So can you talk about the underlying category growth assumptions embedded in those targets your market share assumptions and then how you think about the contribution of existing doors versus some of the newer categories in doors, which are expanding and tour entering.

Buy and Save promotions and the holiday message platform that we have out there now, which is "Save While You Skip." The salon is really the emotional appeal to say, how can you get the outcomes that you want when your budget might not be able to be perfect to be able to afford all of that? We're really looking to see how that resonates with the customer and are excited about it.

Thanks.

And then specific to Q1, the guide is a little bit lighter than than than we had expected and would be a deceleration versus Q4, but you also expect things to improve as the year progresses. So can you talk about the headwinds that youre seeing in Q1.

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our next question comes from Olivia Tong with Raymond James,

And then how you plan to build over the course of the year to give you the comprehensive bite the volatile backdrop. Thank you so much.

Maybe I'll actually do those in reverse order. So I think first and foremost when we think about Q1 I want to reemphasize, we feel great about the underlying momentum in the business.

What we've seen in terms of license colors on demand innovation performance marketing personalization, we think are all very strong.

For the full year, when we think about what underpins that we assumed as the consumer behavior and spending will be very similar to what we saw in fiscal 2025, which is choice full but resilient and we still think that that's the case.

Great, thanks. Good morning. Um, great to hear your confidence in providing the long-term targets. So can you talk about the underlying category of growth assumptions? Uh, embedded in those targets, your market share assumptions. And then how you think about the contribution of existing doors versus some of the newer categories and doors that are expanding into or entering. Um, and then specific to q1. The guide is a little bit lighter than, than, than we had expected and would be a deceleration versus Q4, but you also expect things to improve as the year progresses. So can you talk about the headwinds that you're seeing in q1? Um, and then how you plan to build over the course of the year to give you the the confidence despite the volatile backdrop. Thank you so much.

We're realistic that we do expect that we will have seen some incremental pressure on lower income consumers in Q1 from the government shutdown I just the fear of the nature of when I'm getting that paycheck has an impact on lower income consumers and so we're hoping that we're going to be passed that very soon but it's reflected in the expectations before.

Yeah, maybe I'll actually do those in reverse order. So I, I think, first and foremost, when we think about q1, I want to re-emphasize. We feel great about the underlying momentum in the business.

Um, what we've seen in terms of licensed colors, on-demand innovation, performance, and marketing personalization, we think are all very strong.

um, for the full year, when we think about

For the quarter.

And I think importantly, the model has really proven resilient with the hair color category at the core it's really a staple category rather than a discretionary category. So strength, there and we'll remain nimble to respond to changes as the customer starts moving into the selling season.

While you're in spending, would be very similar to what we saw in fiscal 2025, which is Choice, full, but resilient. And, and we still think that that's the case.

On the top line what the other important part to notice that would move into Q2, we actually are up against an easier compare to last year. So while it's our smallest quarter recall last year. There were a lot of transitory events, whether that was the announcements around tariffs the very.

You know, we are really realistic, um, that we do expect that we will have seen some incremental pressure on lower income consumers in q1 from the government shutdown, right? Just the fear of the nature of when I'm getting that paycheck, you know, has an impact on lower income consumers. And so, you know, we're hoping that we're going to be past that very soon, but it's reflected in the expectations for the quarter.

Hi, flu season, our stylists quite hard so.

We expect Q2 to be a stronger category because of what we're lapping there and then the back half of the year to be on trend and on the base of the business. So I think what we're doing is we're watchful about how that consumer is spending through this government shutdown period, which is what youre seeing in our in our Q1.

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Your bigger question I think it was about long term growth and what is supporting our long term growth drivers in that 1% to 3% top line growth.

You know, and I think importantly, the model has really proven resilient with the hair color category at the core. It's really a staple category, rather than a discretionary category. So, strength there, and we'll remain nimble to respond to changes as the customer starts moving into the selling season. I think on the top line, what the other important part to note is that we move into Q2, we actually are up against an easier comparison compared to last year. So, while it's our smallest quarter, recall last year there were a lot of transitory events—whether that was the announcements around tariffs, or the very high flu season that hit our styles.

Our guidance. This year suggests it will be on the low end of that range as we move through the year.

Talked about on the call. The four key pillars that were really focused on which is understanding and activating the customer unlocking and harvesting digital value differentiating with product assortment and innovation, which includes category expansion and then accelerating new gross pathways, which importantly is our Sally ignited a program.

Quite hard. Um, so we expect Q2 to be a stronger category, uh, because of what we're lapping there, and then the back half of the year to be, you know, on trend, and on the basis.

So I think what we're just doing is we're we're watchful about how that consumer is spending through this uh government shutdown period. Which is what you're seeing in our in our q1 expectation.

As well as happy beauty, when I think about where we are in the cycle of these different initiatives I think the thing to think about is all of these are proven track record and what we delivered in FY 'twenty five was about 250 basis points growth coming of those from comp in terms of pacing and how we see the progression of impact right I think what's important to think about.

Your bigger question, I think was about long-term growth and and what is supporting our long-term growth drivers and that 1 to 3%, Top Line growth. Um, and our guidance this year suggests that we'll be on the low end of that range as as we move through the year.

<unk> is as we go into 27% in 2008, what customer activation can do for us and the understanding of the customer being able to respond to that incorporating how artificial intelligence can help us on that curve, we think the impact in personalization performance marketing and our <unk> campaign I can't over.

State the opportunity that we see there and what we're working on and delivering and then secondarily I would say category expansion is the other big opportunity as you look to the later years within that long term guidance range.

Already working on how it works how to think about this so in BSG, we're sampling into skin and Spa. We're excited about seeing how our customers react to that and that ability to attract a new <unk> customer and how we might be able to grow that business meaningfully as we look to future years, and then in the Sally side of the busy.

I talked about on the call, um, the 4 key pillars that we're really focused on which is, uh, understanding and activating the customer unlocking and harvesting digital value, you know, differentiating with product, assortment and Innovation, which includes category expansion. Um, and then accelerating New Growth Pathways, which importantly is our Sally ignited, uh, program as well as happy Beauty. You know, when I think about where we are in the cycle of these different initiatives, you know, I think the thing to think about is all of these are proven track record and what we've delivered in FY, 25 with about 250 basis points growth, coming of those from comp, in terms of pacing, and how we see the progression of impact, right. I think, what's important to think about is, as we go into 27 and 28, um, what customer, activation can do for us, and this understanding of the customer and being able to respond to that incorporating, how art

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We think that there is a lot more runway in the <unk> portion of the business and the way that our Sally ignited stores bring nail to the forefront in terms of what our new customer can experience coming in we think Theres a lot. There and then we expect that we will also start to more meaningfully play in categories like cosmetics and fragrance.

<unk> and valley as well as men's remains so thats going to be some things that are going to go on our growth curve.

We expect that we will continue to have extremely strong performance in color. It is is the core of what we do and the expertise that we have and then with these other categories, providing underlying growth our confidence in that 1% to 3% top line growth is quite solid and I think theres a lot of things underpinning that just for the Sally business as well.

Think about the global six hit the global scale, we have as well as sticky customers and great High NPS scores and we think we're really on the path here, obviously, given those customers what they want and being rewarded in return.

Great. Thank you just one follow up globally.

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You had mentioned how stylists are buying closer to the man just in time imagine you're pretty adept in terms of all of them are providing to them. So can you talk about what youre doing to support that.

How we might be able to grow that business. Meaningfully, as as we look to Future years, you know, and then in the Sally side of the business, you know, we think that there's a lot more runway in the nail portion of the business. And the way that our Sally ignited Stores bring nail to the Forefront in terms of what a new customer can experience coming in. We think there's a lot there and then we expect that we will also start to, um, more meaningfully play in categories, like cosmetics and fragrance in Sally as well as men's grouping. So that's going to be some things that are going to go on our growth curve. Um, we expect that we will continue to have extremely strong performance in color. It is, is the core of what we do and the expertise that we have, and then with these other categories of providing underlying growth, um, our confidence in that 1 to 3% Topline growth is, is quite solid. And I think there's a lot of things underpinning that just for the Sally business as well. But you, when you think about the global s hit, hit the global scale. We have as well as sticky customers.

Given that you have that footprint and capability to do that.

Absolutely. So I think the great thing in the strength here as with <unk> thousand 500 stores luxury.

And great High MPS scores. And we think we're really on the path here, um, to giving those customers what they want and being rewarded in in return.

Our stylists can easily access us and then we can easily support them. So in addition to being able to come directly into the stores and we do offer two hour delivery. So if you're engaging digitally and need that product right away, where they are and offer that service for you as well as buy online pickup in store.

Great. Thank you. Um, just want to follow up on some PSG. Um, you had mentioned, how stylists are buying closer to demand Just in Time? Imagine you're um, pretty Adept in terms of of that of, um, of providing to them. So can you talk about what you're doing to support that? Um, given that you have.

For our customers who buy in larger quantities are full service portion of our business is still there to actively serve our customers.

Have that footprint and capability to do that.

And pull through but I think what we're and we're excited about is to make things even easier for our customers.

Absolutely. So I think the great thing in the strength here is with 1300 stores across the country, um, C, our stylists can easily, access us, and then we can easily support them. So,

A little bit later into 2026, where she re launching our app and our stylists heavily engaged in the App. If you ever sat behind that got you haircut. They are on their phones. All the time is how they place their orders thats, how they write down what they need is how they think about how theyre going to serve their customers our ability to have that app be more intuitive faster.

For them to be able to build a basket so them, whether they want to buy online pickup in store, whether they want to come shop in store or whether they want us to deliver that product to them. We can handle that in all the ways that we need to but that idea of supporting speed to market to that customer is very important to us.

In addition to being able to come directly into the stores and we do offer 2-hour delivery. Um, so if you're engaging digitally and need that product right away, um we're there and offer that service for you as well as buy online pick up in store. Um for our customers who who buy in larger quantities, our full service portion of our business is still there um to actively serve our customers um and pull through. But I think what we're we're excited about is to make things even easier for our customers uh, in the uh, a little bit later into 2026 where she relaunching our app.

And our stylist's heavily engaged in the app. If you ever sat behind the, you know, got your haircut, they're on their phones all the time.

Great. Thank you best of luck.

That concludes today's question and answer session I would like to turn the call back to Denise <unk> for closing remarks.

And it's how they Place their orders, it's how they write down what they need. It's how they think about how they're going to serve their customers, our ability to have that app.

Well, thank you for joining us all today and thank you to our teams around the world for delivering a strong quarter and a strong year, but most importantly, supporting our customers and helping them get the looks that they love and what they like to achieve in their own personal lives. So thank you to everyone in an early happy holidays, and we'll talk to you again next quarter.

Be more intuitive faster for them to be able to build a basket. So that whether they want to buy online pick up in store, whether they want to come shop in store. Uh, whether they want us to deliver that product to them, we can handle that in all the ways that we need to, um, but that idea of supporting speed to Market to that customer is very important to us.

Great, thank you. Best of luck.

This concludes today's conference call. Thank you for participating.

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That concludes today's question and answer session. I'd like to turn the call back to Denise pelonis for closing remarks.

Well, thank you for joining us all today, and thank you to our teams around the world for delivering a strong quarter and a strong year. But most importantly supporting our customers and helping them, uh, get the looks that they love and and what they like to achieve in their own personal life. So, uh, thank you to everyone and an early happy holidays and we'll talk to you again. Next quarter.

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