Sally Beauty Holdings to implement cost reduction plan, shifts focus to hair care and color

By

Robin Driver

Published
Apr 5, 2018

Denton, Texas-based beauty retailer Sally Beauty Holdings, Inc. announced on Wednesday that its Board of Directors has approved a cost reduction strategy including headcount reductions at its corporate HQ, as the company seeks to streamline its operations in order to ensure long-term growth, focusing increasingly on the hair care and hair color categories.

Denton, Texas-based beauty retailer Sally Beauty Holdings, Inc. announced on Wednesday that its Board of Directors has approved a cost reduction strategy including headcount reductions at its corporate HQ as the company seeks to streamline its operations in order to ensure long-term growth.
 
Besides the layoffs at its Denton headquarters, which constitute the first step in Sally Beauty’s new plan, the strategy also includes cost saving initiatives focusing on organizational efficiency, sourcing of product and brands for resale, indirect procurement and store operating expenses, as well as inventory management.

The measures are expected to result in annualized benefits of between $14 million and $15 million, while benefits in fiscal 2018 are estimated at between $6 million and $7 million. The company also expects to incur around $15 million to $16 million in charges through the plan this year, largely related to costs connected to employee separation and third-party consultants.
 
Sally Beauty intends to reinvest the benefits obtained in ensuring market-competitive wages in its stores and accelerating the development of technology aiming to improve in-store customer experience, drive e-commerce growth and facilitate the consultation of store-level inventory.
 
To strengthen its business in the US and Canada, the company will also be investing in repositioning initiatives as it shifts its focus to its core categories of hair color and hair care products.
 
“Our unique assortment and demonstrated expertise have established us as the market leader in hair color and hair care, and these categories have sustained healthy growth while other categories have faced increasing competition,” explained Sally Beauty President and CEO Chris Brickman. “We will be reinvesting in strategic initiatives to accelerate growth in color and care, which, combined, represent more than half of Sally’s revenue in the U.S. and Canada.”
 
The new measures are an expansion of the 2018 restructuring plan announced by the company at the end of last year, focused initially on its international business. The actions previously outlined in November are still expected to generate annualized benefits of between $12 million and $14 million, with approximately $8 million predicted for fiscal 2018.
 
Total costs related to all the measures in the company’s 2018 restructuring plan are now estimated to be around $28 million to $30 million, most of which will be recorded in the current fiscal year. This includes a charge of $6 million already reported with the company’s first-quarter fiscal 2018 results.
 
Sally Beauty’s sales for the three-month period ended December 31, 2017 totaled $994.96 million, an increase of just 0.5% compared to the same period in the previous year, while net income rose 49%.