Sally Beauty’s first quarter was marked by a complex mix of factors, with the company missing Wall Street’s revenue expectations but delivering non-GAAP earnings above analyst consensus. Management credited disciplined expense control and margin improvements as key drivers, even as softer consumer sentiment and external disruptions like a harsh flu season weighed on top-line results. CEO Denise Paulonis highlighted “healthy gross margins of 52% and strict expense control,” and pointed to ongoing strength in the core color category and the company’s digital marketplace as bright spots, despite a challenging sales environment.
Is now the time to buy SBH? Find out in our full research report (it’s free).
Sally Beauty (SBH) Q1 CY2025 Highlights:
- Revenue: $883.1 million vs analyst estimates of $901.1 million (2.8% year-on-year decline, 2% miss)
- Adjusted EPS: $0.42 vs analyst estimates of $0.39 (6.8% beat)
- Adjusted EBITDA: $104.8 million vs analyst estimates of $102.9 million (11.9% margin, 1.9% beat)
- Revenue Guidance for Q2 CY2025 is $942.3 million at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 7.9%, up from 6.6% in the same quarter last year
- Locations: 4,446 at quarter end, down from 4,468 in the same quarter last year
- Same-Store Sales fell 1.3% year on year, in line with the same quarter last year
- Market Capitalization: $1.04 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Sally Beauty’s Q1 Earnings Call
- Oliver Chen (TD Cowen) asked about the performance gap between Sally and BSG divisions; CEO Denise Paulonis explained that Sally saw softer transaction and ticket trends while BSG was more affected by the flu season, and both segments leveraged strategic initiatives to offset weakness.
- Oliver Chen (TD Cowen) inquired about ecommerce momentum; Paulonis highlighted ongoing digital marketplace expansion and investments in personalization, projecting continued growth in online sales penetration.
- Oliver Chen (TD Cowen) questioned the impact of store refreshes and the Happy Beauty concept; Paulonis noted early positive customer response and increased cross-shopping, with further assessment planned as more stores are refreshed.
- Korinne Wolfmeyer (Piper Sandler) focused on guidance changes and segment outlook; Paulonis explained that BSG is expected to recover post-flu season, while Sally may see ongoing consumer caution, prompting prudent guidance.
- Simeon Gutman (Morgan Stanley) asked whether tariff changes were assumed in margin guidance; CFO Marlo Cormier confirmed that current guidance does not reflect a material impact from tariffs, due to inventory timing and mitigation strategies.
Catalysts in Upcoming Quarters
Our team will be monitoring (1) the uptake and impact of Sally’s digital marketplace and LCOD services on customer engagement, (2) the effectiveness of new product launches and brand partnerships in driving category growth, and (3) the results from ongoing store refreshes and the expansion of the Happy Beauty format. Additionally, progress in managing cost pressures and adapting to evolving tariff policies will be important signposts for sustained profitability.
Sally Beauty currently trades at $10.34, up from $8.18 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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