EDGAR 10-K Filing

Company CIK: 1368458
Filing Year: 2024
Filename: 1368458_10-K_2024_0000950170-24-127217.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Our Company
Sally Beauty Holdings, Inc. is a leading international specialty retailer and distributor of professional beauty supplies. As experts in hair color and care, we aim to empower our customers to express themselves through their hair and beyond. We operate two business segments that offer beauty products in key categories, including hair care, hair color, styling tools and nails.
Sally Beauty Supply (“SBS”) - An omni-channel retailer that offers professional-quality beauty supplies at attractive prices and provides education to retail consumers and salon professionals throughout North America, South America and Europe. SBS operates primarily through retail stores (generally operating under the Sally Beauty banner) and digital platforms, including our www.sallybeauty.com website and a mobile commerce-based app.
Beauty Systems Group (“BSG”) - A leading full-service omni-channel distributor that offers professional beauty supplies exclusively to salons and salon professionals throughout the U.S. and Canada. These salon professionals primarily rely on just-in-time inventory due to capital constraints and limited warehouse and shelf space. BSG operates through company-operated stores (generally operating under the Cosmo Prof banner), franchised stores, distributor sales consultants (“DSCs”) and digital platforms, including our www.cosmoprofbeauty.com website, a mobile commerce-based app and chain portals.
The breadth, depth and professional quality of our hair color and care assortment provides us with a differentiated core business in an industry which is otherwise fragmented. Due to our long history, brand heritage, product and process-specific knowledge and training of associates, we provide unmatched hair color and care expertise to consumers. We also have strong positioning with suppliers given our focus and economies of scale of purchasing. By operating in a variety of channels, we are able to reach broad, diversified geographies and customer segments using a variety of product assortments and tactics.
Operating and Growth Strategy
Our operating and growth strategy is guided by our vision to own professional hair color and care for both the do-it-yourself (“DIY”) enthusiast and the professional stylist. SBS’s differentiation is to offer a vast array of hair color and care solutions for in-home use, supported by the content and education we provide our customers. At BSG, we are the largest North American distributor of professional hair color and care, offering stylists and salons the most extensive portfolio of third-party brands in the market.
We remain focused on driving top line growth and profitability by executing on our strategic initiatives:
Customer Centricity
Our DIY customers and professional stylists value the services, education and innovation we provide. We continue to build customer centricity through our value-added services and concepts, including Licensed Colorist on Demand (“LCOD”), Happy Beauty Co. and digital marketplaces such as Amazon, Walmart.com, DoorDash, and Instacart. Looking ahead, we plan on using technology to expand our role in the stylists ecosystem to create value for stylists and our brands. As we gain insights and customer feedback from these concepts, we believe there are opportunities for us to expand on these concepts further and to provide growth beyond our core.
Owned Brands and Innovation
We believe our focus on growing our owned brands at SBS and innovating will help us attract new customers and keep long-term relationships with existing customers. During the fiscal year, we continued to expand our owned brand portfolio and brought to market many innovative products from new and key vendors. At BSG, we further expanded our distribution with brands like Amika, Color Wow, and Moroccanoil and we continue to test new brands. Additionally, at the end of the fiscal year, we expanded our distribution rights and significantly strengthened BSG’s position in a strategically important market with the acquisition of Exclusive Beauty. Going into next fiscal year, we are focused on expanding our owned brand offerings to drive higher sales penetration in Sally, increasing our BSG distribution footprint through expanding high-profile brands, and bringing to market innovation across our key categories of hair care and hair color.
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Efficiency and Optimization
During the fiscal year, we were able to continue our Fuel for Growth (“FFG”) initiative that was initially launched in fiscal year 2023. FFG is a mandate to rethink the way we work, generating cost savings and modernizing key parts of our business. For example, our transition to pooled distribution and ongoing changes to our store shipping frequency have lowered our transportation costs. During fiscal 2024, we transitioned select information technology functions to a best cost location, which allowed for the consolidation of our vendor base, lower costs, and the creation of organizational efficiencies.
We believe focusing in these areas will position our company for future growth, further enhance our ability to meet our customers where they are and help us attract new customers.
Store Design and Locations
	Sally Beauty Supply
SBS has retail stores in the U.S. (including Puerto Rico), Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain and Chile. Stores are designed to highlight our extensive product offerings and differentiated position in hair color, hair care, styling tools and nails. We apply strong category management processes, including store specific planograms, to maintain consistent merchandise presentation across our store base. In the U.S. and Canada, our average store offers an average of 7,000 beauty products and is approximately 1,700 square feet in size. Stores are typically located in strip shopping centers, which are occupied by other high-traffic retailers such as grocery stores, mass merchants and home improvement centers. Store formats, including average size and product selection, vary by marketplace to meet the needs of the local customer.
We calibrate store renewals, remodels and expansions between new and existing geographies. In existing marketplaces, we add stores to provide additional coverage and strategically close or relocate underperforming stores as necessary. In new marketplaces, SBS selects geographic areas and store sites on the basis of demographic information, the quality and nature of neighboring tenants, store visibility and location accessibility. SBS generally seeks to expand in geographically contiguous areas to leverage its expertise and brand recognition.
During the fiscal year, we continued testing our new Happy Beauty Co. store concept. Happy Beauty Co. is a unique new retail store concept that brings to market an engaging beauty experience with thousands of quality products priced under $10 in an accessible, fun and expressive environment. Stores feature both third-party brands and our owned brands encompassing four key categories: cosmetics and facial care, bath and body, nails, and hair. The initial pilot stores were opened in the Dallas/Ft. Worth, Texas and Phoenix, Arizona markets. We currently anticipate opening a small number of additional pilot stores within the same markets during fiscal year 2025.
Additionally, we have made the decision to move away from services in our Studio by Sally store concept given the solid traction we are seeing with our LCOD online consultation services. We are taking the knowledge from the Studio by Sally stores and applying the learnings to the rest of the SBS fleet, including piloting a store refresh that reflects modernized branding, an expanded assortment, as well as new floor plans and fixtures.
SBS’s store count for the last three fiscal years is summarized in the following table:
Fiscal Year
Beginning store count
3,148
3,439
3,549
Opened (1)
Closed (2)
(51
)
(345
)
(155
)
Franchises closed
-
-
(2
)
Ending store count
3,129
3,148
3,439
(1) In fiscal years 2024 and 2023, we opened two pilot stores and 10 pilot stores, respectively, for Happy Beauty Co.
(2) In fiscal years 2023 and 2022, we closed 294 stores and 36 stores, respectively, in connection with our Distribution Center Consolidation and Store Optimization Plan (the "Plan”).
	Beauty Systems Group
BSG stores, including franchise-based Armstrong McCall stores, are designed to highlight our extensive product offerings to salons and salon professionals. Our stores, on average, offer approximately 8,000 professional beauty products tailored to the territory and are segmented into distinctive areas arranged by product type, with certain areas
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dedicated to leading third-party brands. Our company-operated stores average approximately 2,700 square feet and are located primarily in secondary strip shopping centers, and are a destination exclusively for licensed cosmetologists.
BSG’s store count for the last three fiscal years is summarized in the following table:
Fiscal Year
Beginning store count
1,338
1,355
1,362
Opened
Closed (1)
(20
)
(55
)
(61
)
Franchises opened
-
Franchises closed
(2
)
-
(2
)
Ending store count
1,331
1,338
1,355
(1) In fiscal years 2024, 2023 and 2022, we closed 2 stores, 26 stores and 7 stores, respectively, in connection with the Plan.
Merchandise
We believe our product offerings, led by our hair color and care categories, provide us a competitive advantage. During the last three fiscal years, our hair color and care products made up approximately 70% of our total consolidated sales. Key products included within our sales categories are as follows:
•Hair Color - Developer/lightener, semi-permanent/demi-permanent/permanent hair color, toner
•Hair Care - Shampoo and conditioner, hair gels, creams, oils, and other styling products
•Styling Tools - Hair dryers, irons, curling rods/rollers/pins, brushes/combs, clippers/trimmers/accessories, shears, razors, salon accessories, including chargers for tools & appliances
•Nails - Polish, gel, acrylics, dips, nail accessories, supplies & tools
•Skin and Cosmetics - Cosmetics, cosmetic accessories, lashes and accessories, hair removal, skincare, jewelry
•Other Beauty Products - Salon chairs, dryers, shampoo bowls, basics
Additionally, as a top destination to shop for professional color and care, our goal is to be in-stock in these core categories at every opportunity.
	Sally Beauty Supply
SBS carries an extensive selection of leading third-party, owned and exclusive-labeled brand professional beauty products across a variety of categories. As leaders in the beauty industry, we believe we are uniquely positioned to adapt and innovate within our brands, partnerships and product offerings to provide the looks customers want. We believe this focus helps us attract new customers and keep long-term relationships with existing customers. During the fiscal year, we continued to focus on our owned brands, driving significant growth in our newest brands; bondbar, Inspired by Nature and Strawberry Leopard. Furthermore, we expanded our selection of mindful products, by adding Xmondo, Better Natured and Sauce Beauty, that are vegan-free, cruelty free, consciously packaged and provide charitable contributions to communities. Lastly, we continue to grow our nail category with a large selection of dips, gels and press on nails.
We believe that many of our owned brands, available only at SBS, offer equal or better quality than leading third-party brands. During the fiscal years 2024, 2023, and 2022, our SBS U.S.- and Canada-owned brand sales have been approximately 34%, 34%, and 32%, respectively, of total SBS U.S. and Canada sales.
	Beauty Systems Group
BSG carries an extensive, industry-leading selection of third-party branded products, many of which have exclusive distribution rights with us. We are a trusted partner to the licensed stylist community and therefore have competitive prices across a variety of product categories. Our assortment and distribution are unique in certain geographies, and we continue to pursue the acquisition of additional distribution rights as well as expand our channels of operations with our existing brand portfolio. As one of the largest North American distributors of professional hair color and care products, carrying an extensive selection of branded merchandise and educating on the latest technology and techniques are critical to maintaining relationships with our community of professional stylists and estheticians.
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Marketing and Advertising
	Sally Beauty Supply
We target existing and potential customers through an integrated marketing approach designed to reach the customer through a variety of media channels, including digital advertising, e-mail, social media, text messaging, mobile app push notifications, direct mail, radio and experiential advertising.
SBS’s marketing initiatives are designed to drive customer traffic through added education, content and community building. We leverage a combination of internal and external influencers/content experts to educate and make customers feel confident about DIY hair color, hair care, nails and other beauty trends. Our external influencers consist of content creators and/or professional stylists who are DIY experts in their areas of focus and aim to inspire, educate and empower beauty enthusiasts. Additionally, our internal Sally Beauty Associate Affiliate Program encourages our associates to share their unique expertise with customers on social media to curate a community of inspiring, diverse creators who are using SBS merchandise for their DIY beauty, nails, hair and self-expression.
	Beauty Systems Group
BSG’s marketing programs are designed to promote its extensive selection of brand partners' products at competitive prices and to educate, motivate and empower existing and potential customers. We work closely with our vendors to provide promotional offers for certain products to target existing and potential customers. We distribute promotional material through multiple channels, including print mail, e-mail, SMS, mobile app push notifications, social media, trade shows, educational events, virtual education events, store personnel and DSCs. As of September 30, 2024, we had a network of 652 DSCs who personally consult, support and sell directly to salons and salon professionals. In addition, we believe that our digital platforms enhance other efforts intended to promote awareness of our products by salons and salon professionals.
Customer Loyalty
In the U.S. and Canada, we have approximately 16 million loyal customers, of which a majority are part of our Sally Beauty Rewards Program. Our Sally Beauty Rewards Program is designed to earn SBS customer loyalty and was recognized as one of “America’s Best Loyalty Programs” by Newsweek and Statista in recent years. The program is free to join, and it provides our loyalty customers the ability to earn points on their SBS purchases and to convert those points to Sally Beauty Rewards when certain thresholds are attained. Through the program, these customers may also receive exclusive savings and personalized marketing offers.
The following table highlights the size of the Sally Beauty Rewards membership and the percentage of sales for which their membership accounts:
Fiscal Year
Sally Beauty Reward members
15.0 million
15.6 million
16.3 million
% of Sales
76.7%
76.3%
75.7%
In the U.S., we also offer our SBS customers the opportunity to apply for the Sally Beauty Rewards Credit Card which provides additional benefits to Sally Beauty Rewards members. Additionally, we offer our SBS professional customers and BSG customers the opportunity to apply for the Cosmo Prof Rewards Credit Card, which provides (i) discounts on Cosmo Prof purchases or (ii) points through the Sally Beauty Rewards Program on SBS purchases.
Through these programs, we are able to collect valuable point-of-sale customer data in order to increase our understanding of customers and enhance our ability to personalize our marketing. We will continue to monitor and adjust our Sally Beauty Rewards Program in an effort to further enhance our customer experience and promote repeat sales from both retail customers and salon professionals. Outside of the U.S. and Canada, our customer loyalty and marketing programs vary by marketplace.
Digital Strategy
We continue to grow our digital footprint, not only through our marketing and customer relationship efforts, but also through our digital platforms in each segment. We believe we are uniquely positioned to continue expanding our digital sales penetration thanks to our omni-channel business model, which enables us to meet our customers where they are: in store or online, or through a hybrid approach such as our “buy online, pick up in store” ("BOPIS") option. Additionally, our digital strategy of enhancing our customer centricity aims to expand our services ecosystem to
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support professional stylists as well as increase education and expertise to inspire and support all of our customers. For the fiscal years 2024, 2023, and 2022, our global e-commerce sales represented approximately 9.8%, 9.3%, and 8.7%, respectively, of our consolidated sales.
To that end, we are excited to continue our digital expansion through our recent initiatives, such as expanding online digital marketplaces and our LCOD featured on our website, www.sallybeauty.com.
In SBS, we offer LCOD to provide our customers with a more engaging shopping experience. Our LCOD is a digital-focused initiative where customers can live chat with a licensed colorist by text, voice or video to learn more about our hair color product offerings and how to use our products to achieve their desired results. This online option is available in all 50 states and appears as a chat box when customers are browsing our selection of hair color merchandise on our website. As mentioned above, we are seeing positive insights and customer feedback around our LCOD initiative. Furthermore, over the past few years, we launched digital marketplaces with Walmart.com and Amazon.com, and this year expanded to other online partners, like DoorDash and Instacart, to fuel digital sales growth and attract new customers to our Sally brands.
Distribution
We currently receive our merchandise through several distribution centers in the U.S. and various other countries. Our distribution centers service our stores, orders from our DSCs and ship-to-customer orders through various freight carriers. We procure our owned brand merchandise through domestic and foreign vendors and work closely with our overseas vendors to fulfill production orders and schedule ocean and freight carriers to deliver to our distribution centers.
Over the past several years, we have made significant investments in our end-to-end supply chain systems and processes to build a best-in-class merchandising and supply chain platform for the future. As a result, we were recently able to adjust to a new shipping frequency from our distribution centers to a majority of our SBS and BSG stores in the U.S. and Canada by leveraging investments within our supply chain systems. This change has resulted in improved labor productivity and reduced freight costs, while allowing us to maintain healthy in-stock levels.
Additionally, customers are looking for more convenient options for receiving merchandise, which is helping drive their purchasing decisions. As such, we have made significant investments to “meet them where they are.” When ordering through our digital platforms, our customers can select different fulfillment options, including the following: BOPIS; deliver by common carrier (from store or distribution centers); 2-hour delivery; and fulfilling from certain digital marketplaces.
Seasonality
Our business is generally not seasonal.
Our Competition
The primary competitive factors in our industry are: the price of branded and owned brand products; exclusive distribution contracts; the quality, perceived value, brand name recognition, packaging and variety of the products sold; customer service; efficiency of distribution networks; and the availability of desirable store locations.
SBS competes primarily with beauty product wholesale and retail outlets, including local and regional open-line beauty supply stores, professional-only beauty supply stores, mass merchandisers, online retailers, drug stores, department stores and supermarkets as well as salons that sell hair care products. BSG competes primarily with beauty product wholesale suppliers, including online retailers and manufacturers selling their products directly to salons and salon professionals.
We face competition from certain manufacturers that use their own sales forces to distribute their professional beauty products directly or that align themselves with our competitors. Some of these manufacturers are vertically integrated through the acquisition of distributors and stores. We also face competition from authorized and unauthorized retailers as well as internet sites offering professional salon-only products that are not brand-approved for distribution.
Our Suppliers
We purchase our branded merchandise directly from manufacturers through supply contracts and purchase orders. For fiscal year 2024, our five largest suppliers - Henkel AG & Co. KGaA; Wella Company; the Professional Products Division of L'Oreal USA S/D, Inc.; John Paul Mitchell Systems; and Kao Corporation - accounted for approximately
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47% of our consolidated merchandise purchases. We have developed long-standing, relationships, some of which are exclusive, with these suppliers and many others, which we believe are core to our competitive advantage. We purchase products from these and many other manufacturers on an at-will basis or under contracts which can generally be terminated without cause upon 90 days or less notice or that expire without express rights of renewal.
Intellectual Property
In the U.S. and in other countries where we operate, we have registered or legally protected trademarks, copyrights, internet domain names, service marks and trade names that are used to promote and market our business, stores, digital platforms and products. We believe many of these are well recognized and have significant value, including but not limited to the following: Sally®, Sally Beauty®, Cosmo Prof®, Armstrong McCall®, ION® and Beyond the Zone®.
Our Company Purpose & Values
Our Company Purpose & Values are intended to establish our rallying cry and focus our teams on the impact we intend to have in the world.
	Our Purpose: TO INSPIRE A MORE COLORFUL, CONFIDENT AND WELCOMING WORLD
	Our Values:
•BE YOURSELF. Come as you are-everyone is welcome here.
•BE AN INSPIRATION. Share your passion and knowledge with your team, your customers, the world.
•BE BOLD. Dive in. Move fast. Say yes.
•BE AN OWNER. Drive growth. Create your future.
•BE PART OF SOMETHING BIGGER. Take care of each other, our community and our planet.
More information on our Purpose & Values can be found at: www.sallybeautyholdings.com/our-company/purpose-and-values.
Human Capital Management
As of September 30, 2024, we had approximately 27,000 global associates, including approximately 12,000 full-time associates. We believe they are our greatest asset, with their combined skills, knowledge, work/life experiences and capabilities. At the front line interacting with our customers or behind the scenes supporting our field teams, our associates play a major role in our business. While we often emphasize our technology-based transformations and our wide variety of professional beauty products as key attributes, nothing happens or succeeds without our people.
In return for what they do for us, we strive to, among other things:
•Ensure our associates work in a safe, healthy environment;
•Provide competitive compensation and benefits packages that attract and retain talent in every facet of our business - stores, direct sales, distribution centers and corporate headquarters. Our benefits range from medical, dental and vision care - including options for our part-time associates - to 401(k), short and long-term disability and a robust Employee Assistance Program. Starting fiscal year 2023, we began providing six weeks of paid parental leave for mothers, fathers or partners upon the birth or placement of a child;
•Provide meaningful, engaging learning and development that grows our associates’ knowledge of and capability with respect to our business and skills that will help them in business and life; and
•Create an environment and culture where everyone can bring their true self to work because our differences are what make us beautiful. At SBH, we believe our focus on Diversity, Inclusion & Belonging are crucial to improving how we interact with and influence our associates, customer environments and broader communities. We are committed to being a force for change.
Associate Health & Safety
We strive to create a safe and healthy work environment for all associates.
We place a high value on the health and safety of our associates, customers, suppliers and vendors. This commitment is evidenced, in part, by our background check policy for new hires, training and policy implementations related to
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handling both associate and customer incidents, partnerships to maintain the stores and make necessary repairs, as well as ongoing support in the field and at the support center.
Additionally, we value our partnerships with suppliers and vendors and understand the impact they can have on our associates. Thus, SBH has included rules governing their conduct, both with respect to expectations while interacting with our associates and, for our foreign suppliers, assurances that they too are providing a safe and healthy working environment for their associates.
Labor Practices
We provide competitive wages and benefits in a positive work environment where we focus on doing what is right.
We are an Equal Opportunity Employer with up-to-date policies, procedures and practices with respect to important issues such as safety, discrimination, harassment and retaliation. We provide focused training on these issues to our associates and managers.
We clearly communicate that any concerns related to issues such as discrimination, harassment, retaliation - and other issues such as wage law compliance and fraud - should be reported immediately. We also communicate the avenues available to our associates to do so through our “SBH CARES” communications and posters. The reporting avenues include options to do so by phone or online through our “Employee Concern Line” and to do so anonymously if an associate prefers to take that approach.
We ensure compliance with other important labor and employment law issues through a variety of processes and procedures, using both internal and external expertise and resources.
We also emphasize the importance of taking care of our associates in our Company’s Code of Business Conduct and Ethics, the standard of conduct that applies to all of our associates, executive officers and Board of Directors (the "Board"). The Code reflects the core principles of conducting our business as a good corporate citizen in compliance with all laws, rules and regulations applicable to us and with regard for the welfare of our associates and providing equal opportunity to all associates and job applicants. You can review this important document at http://investor.sallybeautyholdings.com.
Associate Engagement, Development and Culture
We live our values, listen to our associates and take action.
We make significant efforts to ensure our associates are informed, engaged and excited about the work they are doing and contributions they are making to our Company and our customers. We are committed to providing associates with what they need to thrive and grow their career. We significantly invest in our talent processes and set clear expectations around leadership competencies and our cultural values at all levels in the organization. At SBH, we consider the whole end-to-end talent cycle of an associate to ensure we select exceptional people to represent our business and best serve our customer. This includes robust interviewing processes as well as comprehensive onboarding programs to ensure new hires are set up to succeed in their early stages of joining SBH. There is also a strong cadence of completing regular cycles of performance management, linked to our Company values and leadership competencies, as well as regular reviews of our talent and succession pipelines.
Importantly, we devote significant effort and resources to the development of our associates, including providing almost all of our associates access to state-of-the-art learning management systems. We use these platforms to provide specifically designed and interactive award-winning e-learning courses in sales and service, product and hair knowledge, compliance training, and health and safety.
We also place significant value and attention on responding to feedback and input from associates. This includes surveys regarding issues such as Diversity, Inclusion & Belonging and our engagement survey. We review our team’s input and comments, identify common themes and set out action plans to respond. We believe listening is crucial, but taking action and making commitments are even more important.
As discussed below, our efforts around Diversity, Inclusion & Belonging are a core focus of our associate engagement and culture.
Diversity, Inclusion & Belonging
At SBH we celebrate differences, inclusivity and self-expression. This fundamental aspect of SBH’s culture is rooted in our belief that beauty is for everyone, and everyone should find their own path to beauty. Our associates and our customers care about celebrating diversity and self-expression. We want our Company and our stores to be places where all of our associates and customers feel valued for who they are and experience a sense of belonging.
We come together to create a culture for “One & All”
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Diversity, Inclusion & Belonging are at the heart of who we are as a company - at the Board level, throughout our global workforce and in our shared commitment to serving a diverse customer base and their communities.
Our Diversity, Inclusion & Belonging Mission Statement:
We find beauty in YOU!
Finding beauty in diversity is in our DNA because our differences are what make us beautiful. Our diversity, inclusivity and self-expression are what fuel our innovation and growth.
At SBH, we come together to create a culture for ONE & ALL.
At the Board Level: Our Board’s composition leads the Company’s commitment to Diversity, Inclusion and Belonging. Having diverse voices on our Board enhances the Board’s expertise, broadens its viewpoint and sets the tone to encourage leaders at all levels of the Company to listen to the concerns of our associates and customers alike. Our Compensation & Talent Committee provides hands-on oversight and guidance of our Diversity, Inclusion & Belonging initiatives. Our Board believes listening and responding to diverse voices is crucial to the Company’s success and long-term sustainability.
In Our Workforce: Our SBH team in the U.S. & Canada is approximately 90% women and approximately 50% people of color. In recent years, Newsweek has recognized SBH among America’s Greatest Workplaces, America’s Greatest Workplaces for Diversity and America’s Greatest Workplaces for Women. We recognize and celebrate the bedrock values of workforce diversity, inclusion, belonging and engagement within our teams. For us, these are key drivers of the success of the business, as our associates should - and do - reflect the various qualities of our customers and what they desire and expect from SBH.
During the fiscal year, we furthered our work with our existing Employee Resource Groups ("ERGs"). Our first four ERGs represent our Black, Hispanic, Women and LGBTQ+ associates, and this year, we added two additional ERGs focused on Veterans and Associates with Disabilities/Neurodivergent Thinking. These ERGS have made a meaningful impact on our team and business, and we will continue to connect and engage them on how we do business, how we best serve our customers, and how we enhance our team and culture.
In Our Customer Base: Our customers span the entire continuum of gender and ethnic diversity. We sell beauty products to treat and style every kind of hair; we deliver a tailored assortment of beauty products that serve the local communities where our over 3,500 U.S. and Canada stores are located. Serving the diverse demographics and needs of our customers drives a culture and workforce that embraces and reflects the communities we serve.
We will continue to develop and evolve how we enhance Diversity, Inclusion & Belonging throughout SBH. We recognize the value these initiatives bring to our Company, our associates, our customers and the communities we serve.
More information on our approach to Diversity, Inclusion & Belonging can be found at: www.sallybeautyholdings.com/our-company/diversity-inclusion-and-belonging.
Regulation
We are subject to a number of U.S., federal, state and local laws and regulations as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products.
For example, in the U.S., most of the products we sell and the content and methods of advertising and marketing that we utilize are subject to both federal and state regulations administered by a host of federal and state agencies, including, in each case, and among other agencies, one or more of the following: the Food and Drug Administration (the "FDA"), the Federal Trade Commission and the Consumer Products Safety Commission. The transportation and disposal of many of our products are also subject to federal and state regulation. State and local agencies regulate many aspects of our business. We also face comprehensive regulation outside the U.S., focused primarily on product labeling and safety issues, such as cosmetic regulations administered by the EU Commission, Health Canada, Mexico COFEPRIS, and Chile ISP. We believe we are in material compliance with the laws and regulations to which we are subject, although no assurance can be provided that this will remain true going forward or that we will not be required to incur meaningful expenses to comply with such laws and regulations.
As of September 30, 2024, we supplied franchised stores primarily located in the U.S. As a result of these franchisor-franchisee relationships, we are subject to regulation when offering and selling franchises. The applicable laws and
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regulations affect our business practices, as franchisor, in a number of ways, including restrictions placed upon the offering, renewal, termination and disapproval of assignment of franchises. To date, these laws and regulations have not had a material effect upon our operations.
Access to Public Filings
Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to such reports are available, without charge, on our website, www.sallybeautyholdings.com, as soon as reasonably possible after they are filed electronically with the Securities and Exchange Commission ("SEC") under the Exchange Act. The SEC maintains an internet site that contains our reports, proxy and information statements, and other information we file electronically with the SEC at www.sec.gov. We will provide copies of such reports to any person, without charge, upon written request to our Investor Relations Department at our principal office. The information found on our website shall not be considered to be part of this or any other report filed with or furnished to the SEC.
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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Important risk factors that could materially affect our business, financial condition or results of operations in future periods are described below. These factors are not intended to be an all-encompassing list of risks and uncertainties and are not the only risks and uncertainties we face. Additional risks not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition or results of operations in future periods.
Operational, Strategic and General Business Risks
The beauty products distribution industry is highly competitive and is consolidating.
We face significant competition from other beauty stores and outlets, salons, mass merchandisers, online retailers, drug stores and supermarkets. The primary competitive factors in the beauty products distribution industry are price, quality, perceived value, consumer brand name recognition, packaging and variety and availability, customer service, desirable store locations, in-stock inventory and, with respect to e-commerce, look and feel of website and delivery times and costs. Competitive conditions may limit our ability to maintain prices or may require us to reduce prices to retain business or channel share, particularly because customers are able to quickly and conveniently comparison-shop and can determine real-time product availability using digital tools. This behavior can lead to decisions driven solely by price, the functionality of the digital tools, or a combination of these and other factors. Some of our competitors have greater financial and other resources than we do and are less leveraged than our business and may therefore be able to spend more aggressively on advertising and promotional activities and may respond more effectively to changing business and economic conditions. Furthermore, there are few significant barriers to entry into the marketplace for most of the products we sell, making it easy for new market entrants to compete with us. We expect existing competitors, business partners and new entrants to the beauty products distribution industry to constantly revise or improve their business models in response to challenges from competing businesses, including ours. If these competitors introduce changes or developments that we cannot address in a timely or cost-effective manner, our business may be adversely affected.
In addition, our industry is consolidating, which may give our suppliers and our competitors increased negotiating leverage and greater marketing resources. For instance, we may lose customers if those competitors which have broad geographic reach attract additional salons (individual and chain) that are currently BSG customers, or if professional beauty supply manufacturers align themselves with our competitors or begin selling directly to customers. Not only does consolidation in distribution pose risks from competing distributors, but it may also place more leverage in the hands of certain manufacturers, resulting in smaller margins on products sold through our network.
If we are unable to compete effectively in our marketplace or if competitors divert our customers away from our networks, it would adversely impact our business, financial condition and results of operations.
We may be unable to anticipate and effectively respond to changes in consumer preferences and buying trends in a timely manner.
Our success depends in part on our ability, and our distributed third-party brands' ability, to anticipate, gauge and react in a timely manner to changes in consumer spending patterns and preferences for specific beauty products. If we or the brands we distribute do not timely identify and properly respond to evolving trends and changing consumer demands for beauty products in the geographies in which we compete, our sales may decline significantly. Furthermore, we may accumulate additional inventory and be required to mark down unsold inventory to prices that are significantly lower than normal prices, which would adversely impact our margins and could further adversely impact our business, financial condition and results of operations. Additionally, a large percentage of our SBS product sales come from our owned and exclusive-label brand products. The development and promotion of these owned and exclusive-label brand products often occur well before these products are sold in our stores. As a result, the success of these owned and exclusive-label brand products is largely dependent on our ability to develop products that meet future consumer preferences at prices that are acceptable to our customers. Furthermore, we may have to invest significant amounts on the advertising and marketing of our owned and exclusive-label brands to drive customer awareness of these brands. There can be no assurance that any new owned or exclusive-label brand will meet consumer preferences, gain acceptance among our customer base or generate sales to become profitable or to cover the costs of its development and promotion.
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We expect continuously changing fashion-related trends and consumer tastes to influence future demand for beauty products. Changes in consumer tastes, fashion trends and brand reputation can have an impact on our financial performance. If we or third-party brands we distribute are unable to anticipate and respond to trends in the marketplace for beauty products and changing consumer demands and/or maintain a strong brand reputation, our business could suffer.
Our future success depends in part on our ability to successfully implement our strategic initiatives to improve the customer experience, attract new customers and improve the sales productivity of our stores.
We are continuing the implementation of a significant number of strategic initiatives designed to enhance our customer centricity, increase our owned brand sales penetration, improve operational efficiencies and optimize our capabilities, including through the closure of underperforming stores and the consolidation of distribution centers. There can be no assurance that these or future strategic initiatives will be successful. Furthermore, we are investing significant resources in these initiatives and the costs of the initiatives may outweigh their benefits. If these strategic initiatives are not successful, our comparative sales will suffer and our growth prospects, financial results, profitability and cash flows will also be adversely impacted.
We depend upon manufacturers who may be unable to provide products of adequate quality or who may be unwilling to continue to supply products to us.
We do not manufacture any products we sell and instead purchase our products from recognized brand manufacturers and private label fillers. We depend on a limited number of manufacturers for a significant percentage of the products we sell.
Because we purchase products from many manufacturers and fillers pursuant to at-will contracts and contracts which can be terminated without cause upon 90 days’ notice or less, or which expire without express rights of renewal, manufacturers and fillers could discontinue sales to us immediately or upon short notice. Some of our contracts with manufacturers may be terminated if we fail to meet specified minimum purchase requirements. If minimum purchase requirements are not met, we do not have contractual assurances of continued supply. In lieu of termination, a manufacturer may also change the terms upon which it sells-for example, by raising prices or broadening distribution to third parties. For these and other reasons, we may not be able to acquire desired merchandise in sufficient quantities or on acceptable terms in the future.
Changes in SBS’s and BSG’s relationships with suppliers occur often and could positively or negatively impact the net sales and operating earnings of both business segments. Some of our suppliers may seek to decrease their reliance on distribution intermediaries, including full-service/exclusive and open-line distributors like BSG and SBS, by promoting their own distribution channels. These suppliers may offer advantages, such as lower prices, when their products are purchased from distribution channels they control. If our access to supplier-provided products were to diminish relative to our competitors or if we were not able to purchase products at the same prices as our competitors, our business could be materially and adversely affected. Further, consolidation among suppliers may increase suppliers' negotiating leverage, thereby providing them with competitive advantages that may increase our costs and reduce our revenues, adversely affecting our business, financial condition and results of operations. There can be no assurance that the impact of these developments, if they were to occur, would not adversely impact revenue or margins or that our efforts to mitigate the impact of these developments would be successful.
Furthermore, from time to time, our suppliers ship products to us that fail to conform to our quality control standards. Suppliers' failure to comply with our quality control program may result in diminished inventory levels and product quality, which in turn may result in increased order cancellations and product returns, decreased consumer demand for our products, or product recalls, any of which may have a material adverse effect on our results of operations and financial condition.
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Any unexpected significant interruption in manufacturers' and fillers' supply of products or disruptions in our supply chain infrastructure could disrupt our ability to deliver merchandise to our stores and customers in a timely manner, which could have a material adverse effect on our business, financial condition and results of operations.
Manufacturers and owned and exclusive-label brand fillers of beauty supply products are subject to certain risks that could adversely impact their ability to provide us with their products on a timely basis. Such risks include the following: inability to procure ingredients; industrial accidents; environmental events; strikes and other labor disputes; union organizing activity; disruptions in logistics or information systems; loss or impairment of key manufacturing sites; product quality control; safety, licensing requirements and other regulatory issues; and natural disasters, pandemics and other external factors over which neither they nor we have control.
In addition, we directly source many of our owned and exclusive-label brand products, including, but not limited to, styling tools, salon equipment, sundries and other promotional products, from foreign third-party manufacturers and many of our vendors also use overseas sourcing to manufacture some or all of their products. Any event causing a sudden disruption of manufacturing or imports from such foreign countries, including the imposition of additional or increased import restrictions, duties or tariffs, political instability, local business practices, legal or economic restrictions on overseas suppliers’ ability to produce and deliver products or acts of war or terrorism or pandemics, could materially harm our operations to the extent they affect the production, shipment or receipt of merchandise. Our operating results depend on the orderly operation of our receiving and distribution processes, which depend on manufacturers’ adherence to shipping schedules and our effective management of our distribution facilities and capacity.
The loss of exclusive distribution rights with key vendors could have a material adverse effect on our business, financial condition and results of operations.
We have exclusive and non-exclusive distribution rights with several key vendors for well-known brands in certain geographies. If key vendors ceased granting us exclusive distribution rights, or decided to utilize other distribution channels for their products, therefore widening the availability of these products in other channels, the revenue we earn from the sale of such products could be negatively impacted, which could have a material adverse effect on our business, financial condition and results of operations.
Fluctuations in the price, availability and quality of inventory may result in higher cost of goods, which we may not be able to pass on to the customers.
Our suppliers frequently attempt to pass on higher production costs, which have generally increased as a result of inflation over the past few years, which may impact our ability to maintain or grow our margins. The price and availability of raw materials may be impacted by inflation, demand, regulation, weather and other factors. Additionally, manufacturers have and may continue to experience increases in other manufacturing costs, such as transportation, labor and benefit costs. These increases in production costs result in higher merchandise costs to us. We may not always be able to pass on those cost increases to our customers, which could have a material adverse effect on our business, financial condition and results of operations.
Our e-commerce businesses may be unsuccessful or, if successful, may redirect sales from our stores.
We offer many of our beauty products for sale through our e-commerce businesses in the U.S. (such as www.sallybeauty.com, www.cosmoprofbeauty.com, www.cosmoprofequipment.com and mobile commerce-based apps) and abroad. We have undertaken a number of initiatives to significantly advance our digital commerce capabilities and grow our e-commerce businesses. As a result, we are more susceptible to risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our e-commerce operations, websites and software and other related operational systems. Furthermore, our e-commerce businesses face significant competition from larger retailers with more established e-commerce platforms, as well as online retailers, including Amazon, and online store e-commerce platforms, such as Shopify.
Although we believe our participation in both e-commerce and physical store sales is a distinct advantage for us due to synergies and the potential for new customers, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations. For example, growth in our e-commerce business relative to in-store sales may result in dilution of operating margin and profit due to higher delivery expenses incurred in our e-commerce sales. Furthermore, as our e-commerce businesses successfully grow, they may
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do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online rather than from our physical stores, thereby reducing the financial performance of our stores. In addition, offering different products through each channel could cause conflicts and cause some of our current or potential internet customers to consider competing distributors of beauty products. In addition, offering products through our e-commerce channels (particularly directly to consumers through our professional business) could cause some of our current or potential vendors to consider utilizing competitive internet offerings of their products either directly or through competing distributors. As we continue to grow our e-commerce businesses, the impact of attracting existing rather than new customers, of experiencing conflicts between product offerings online and through our stores, and of opening up our channels to increased internet competition could have a material adverse impact on our business, financial condition and results of operations, including operating margin, profit, future growth and comparative sales. Furthermore, our recent initiatives to upgrade our e-commerce platforms may not be successful in driving traffic to our websites and increasing our online sales in the long term, which could adversely impact our net sales.
Diversion of professional products sold by BSG could have an adverse impact on our revenues.
The majority of the products that BSG sells, including those sold by our Armstrong McCall franchisees, are meant to be used exclusively by salons and individual salon professionals or sold exclusively to their retail consumers. However, despite our efforts to prevent diversion, incidents of product diversion occur, whereby our products are sold by these purchasers (and possibly by other bulk purchasers such as franchisees) to wholesalers and ultimately to general merchandise retailers, among others. These retailers, in turn, sell such products to consumers. The diverted product may be old, tainted or damaged and sold through unapproved outlets, all of which could diminish the value of the particular brand. In addition, such diversion may result in lower net sales for BSG should consumers choose to purchase diverted products from retailers rather than purchasing from our customers or choose to purchase other products altogether because of the perceived loss of brand prestige. Furthermore, in many instances, BSG is subject to certain anti-diversion obligations under these manufacturers’ contracts that, if violated, may result in the termination of such contracts. In addition, our investigation and enforcement of these anti-diversion obligations may require us to cease selling to customers suspected of diversion, which could impact BSG’s net sales.
BSG’s financial results are affected by the financial results of BSG’s franchise-based Armstrong McCall business.
BSG receives revenue from its sale of products to Armstrong McCall franchisees. Accordingly, a portion of BSG’s financial results is dependent upon the operational and financial success of these franchisees, including their implementation of BSG’s strategic plans. If sales trends or economic conditions worsen for Armstrong McCall’s franchisees, their financial results may worsen. Additionally, the failure of Armstrong McCall franchisees to renew their franchise agreements, any requirement that Armstrong McCall restructure its franchise agreements in connection with such renewals, or any failure of Armstrong McCall to meet its obligations under its franchise agreements, could result in decreased revenues for BSG or create legal issues with our franchisees or with manufacturers.
Furthermore, our franchisees may not run the stores and sales teams according to our standards, which could have a material adverse effect on our brand reputation and our business.
If we are unable to optimize our store base, by profitably opening and operating new stores and closing less profitable stores, our business, financial condition and results of operations may be adversely affected.
Our future growth strategy depends in part on our ability to optimize and profitably operate our stores in existing and additional geographic areas, including in international geographies, and to close underperforming stores. While the capital requirements to open an SBS or BSG store, excluding inventory, vary from geography to geography, such capital requirements have historically been relatively low in the U.S. and Canada. Despite these relatively low opening costs, we may not be able to open all the new stores we plan to open, and we may be unable to optimize our store base, either of which could have a material adverse impact on our business, financial condition and results of operations. Furthermore, we may incur costs associated with the closure of underperforming stores and such store closures may adversely impact our revenues.
In addition, as we continue to open new stores, our management - as well as our financial, distribution and information systems - and other resources will be subject to greater demands. If our personnel and systems are unable to successfully manage this increased burden, our business, financial condition and results of operations may be materially affected.
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We may, from time to time, seek to develop and introduce new store concepts. Our ability to succeed in the early stages of new concepts could require significant capital expenditures and management attention. Additionally, any new concept is subject to certain risks, including customer acceptance, competition, product differentiation, challenges relating to economies of scale in merchandise sourcing and the ability to attract and retain qualified personnel, including management and designers. There can be no assurance that we will be able to develop and grow these or any other new concepts to a point where they will become profitable or generate positive cash flow. If we cannot successfully develop and grow these new concepts, our financial condition and results of operations may be adversely impacted.
If our marketing, advertising and promotional programs are unsuccessful, our results of operations and financial condition could be adversely affected.
Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities. We use marketing, advertising and promotional programs to attract customers through various media, including social media (Instagram, TikTok, Facebook, YouTube), websites, mobile applications, e-mail, and print. Our future growth and profitability will depend in part upon the effectiveness and efficiency of our advertising and marketing programs. Further, disruption to certain media channels could have a material adverse effect on our results of operations and financial condition.
In particular, there has been a substantial increase in the use of social media platforms - including blogs, social media websites and other forms of digital communications - and the influence of social medial influencers in the beauty products industry. Furthermore, social media advertising and marketing continues to increase in importance as consumers are paying less attention to more traditional media. As a result, the success of our marketing and advertising programs are increasingly dependent on the effectiveness of industry influencers that we engage to promote our products. Furthermore, actions taken by these individuals could harm our brand image and reputation. Our social media marketing efforts may not ultimately be successful, and the availability of these platforms may make it easier for smaller competitors to compete with us.
Negative commentary regarding us or the products we sell may also be posted on social media platforms or other electronic means at any time and may be adverse to our reputation or business. Customers value readily available information and often act on such information without further investigation and without regard to its accuracy. Any harm to us or the products we sell may be immediate without allowing us an opportunity for redress or correction.
If we fail to attract and retain highly skilled management and other personnel at all levels of the Company, our business, financial condition and results of operations may be harmed.
Our success has depended, and will continue to depend, in large part on our ability to attract and retain senior executives who possess extensive knowledge, experience and managerial skill applicable to our business. Significant leadership changes or executive management transitions involve inherent risk, and any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance. In addition, from time to time, key executive personnel leave our Company, and we may not be successful in attracting, integrating and retaining the replacement personnel required to continue to grow and operate our business profitably. While we strive to mitigate the negative impact associated with the loss of a key executive employee, an unsuccessful transition or loss could significantly disrupt our operations and could have a material adverse effect on our business, financial condition and results of operations. We may similarly rely on other non-executive personnel and associates across our business, including those working in our corporate functions, to facilitate our ongoing operations and support our strategic initiatives. The recruitment and retention of qualified individuals in these roles are vital elements of the success of our business.
We are also dependent on recruiting, training, motivating, managing and retaining our store employees that interact with our customers on a daily basis. Many team members are in entry-level or part-time positions with historically high turnover rates. Competition for these types of qualified employees, especially in light of recent labor shortages among entry-level workers, is intense and the failure to attract, retain and properly train qualified and motivated employees could result in decreased customer satisfaction, loss of customers and lower sales. In addition, our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates, unemployment levels, and health and other insurance costs; the impact of legislation or regulations governing labor relations, immigration, minimum wage and healthcare benefits; changing demographics; and our reputation within the labor market. Our inability to control our labor costs could affect our results of operations and could result in lower margins in our two segments.
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The integration and use of artificial intelligence (AI) and similar technology in our business presents risks and challenges that could adversely affect our business, reputation, and results of operations.
We are in the early stages of integrating AI in our business, including machine learning AI and generative AI tools that collect and analyze data to support our business operations and customer-facing interactions. We also use products and services from third parties that use integrated AI technology. The use of AI tools and technology presents many challenges and risks to our business. Data sets used by AI may be overbroad, insufficient or contain flawed or otherwise biased information. AI tools that we use may include flaws in algorithms, which may create biased or inaccurate outcomes, and may generate offensive, illegal, malicious or otherwise harmful content that could adversely impact our brand, reputation, business, or customers. Since we use AI in customer-facing interactions, any inaccuracies in AI responses could affect customer satisfaction, lead to misinformation, and harm our brand's reputation. Unintended use of AI may lead to regulatory issues, reputational or financial harm, and operational disruptions. The use of AI may also increase the risks to us of data breaches, malware, ransomware, data loss and theft, or the improper handling of sensitive information, which could result in adverse financial and regulatory consequences. The rapid development and adoption of AI and AI-adjacent technology, and of AI’s competitive use cases, may make it more difficult for us to compete in our industry. Our competitors may have greater success implementing and using AI technology than us, which could harm our ability to compete effectively and could adversely affect our results of operations. Further, we may become increasingly reliant on AI technology and tools in the future. The legal, regulatory and compliance environment surrounding the design and use of AI technology - involving federal, state and foreign regulators -- is evolving and complex. Our obligation to comply with the evolving regulatory landscape could entail significant costs and negatively affect our business. In addition, there has been a significant increase in AI-related litigation and government regulatory actions targeting the design, deployment and other uses of AI, and claiming liability under numerous areas of the law, such as consumer protection, product liability, privacy, intellectual property, securities and defamation. Any of these risks could have an adverse effect on our business, reputation and results of operations.
General Economic, Market and Foreign Risks
The political, social and economic conditions in the geographies we serve may affect consumer purchases of discretionary items such as beauty products and salon services, which could have a material adverse effect on our business, financial condition and results of operations.
Our results of operations may be materially affected by conditions in the global capital markets and the economy and regulatory environment generally, both in the U.S. and internationally. Concerns over inflation, rising interest rates, labor shortages, energy costs, geopolitical issues, and conflicts and wars, as well as uncertainty with respect to elections, terrorism, civil unrest, the availability and cost of credit, the mortgage market, and the real estate and other financial markets in the U.S. and Europe have contributed to increased volatility and diminished expectations for the U.S. and certain foreign economies. We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail consumers and salons and salon professionals. Continued uncertainty in the economy could adversely impact consumer purchases of discretionary items such as beauty products as well as adversely impact the frequency of salon services performed by professionals using products purchased from us. Factors that could affect consumers’ willingness to make such discretionary purchases include the following: inflation, general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit and consumer confidence in future economic conditions. A prolonged economic downturn or acute recession can adversely affect consumer spending habits and result in lower than expected net sales. The economic climate could also adversely affect our vendors. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.
In addition, the disruption to the global economy and to our business, along with any sustained decline in our stock price, could lead to triggering events that may indicate that the carrying value of certain assets - including inventories, accounts receivable, long-lived assets, intangibles and goodwill - may not be recoverable, which could lead to impairment or other asset write-downs in the future.
Price inflation for labor, materials and services could adversely affect our business, results of operations and financial condition.
During the fiscal year, inflationary pressures have eased, but over the past few years, we experienced considerable price inflation in costs for labor, materials and services. While inflation is stabilizing, we may not be able to continue
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to pass through inflationary cost increases and, if inflationary pressures return, we may only be able to recoup a portion of our increased costs in future periods. Our ability to raise prices to reflect increased costs may also be limited by competitive conditions in the market for our products.
The occurrence of large-scale catastrophes or crises, including natural disasters, acts of violence, conflicts, wars or terrorism and global health crises, could adversely affect our operations and financial performance.
The occurrence of natural disasters (the severity and frequency of which may be exacerbated by climate change), acts of violence, conflicts, wars, terrorism or civil unrest or global health crises, including epidemics and pandemics, could result in physical damage to our properties, the temporary closure of stores or distribution centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods to our distribution centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers. If one or more natural disasters or acts of violence, conflicts, wars or terrorism were to impact our business, we could, among other things, incur significantly higher costs and longer lead times associated with distributing products. Furthermore, insurance costs associated with our business may rise significantly in the event of a large-scale catastrophe or crisis.
Currency exchange rate fluctuations could result in higher costs and decreased margins and earnings.
Many of our products are sold outside of the United States. As a result, we conduct transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Recently, these foreign currencies have weakened significantly against the U.S. dollar. Our international revenues and expenses are generally derived from sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations, including amounts recorded in foreign currencies and translated into U.S. dollars for consolidated financial reporting. Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials, transportation and freight more expensive and more difficult to finance. Foreign currency fluctuations could similarly have an adverse effect on our results of operations and financial condition.
We are subject to risks related to our international operations.
We operate on a global basis, and approximately 19% of our net revenues from continuing operations in fiscal year 2024 were generated outside the U.S. Our non-U.S. operations are subject to many risks and uncertainties, including those resulting from ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts, labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriers or other restrictions on foreign businesses, our failure to effectively and timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions. The presence of non-U.S. operations also increases the risk of non-compliance with U.S. laws and regulations applicable to such non-U.S. operations, such as those laws and regulations relating to sanctions, boycotts and improper payments.
In addition, sudden disruptions in business conditions as a consequence of the occurrence, or threat of, large-scale international events such as terrorist attacks, war or other military action, including the wars in Ukraine and in the Middle East, pandemics or other crises or vulnerabilities or as a result of adverse weather conditions or climate changes, may have an impact on consumer spending, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows, as well as the trading price of our securities.
A reduction in traffic to, or the closing of, other retailers in shopping areas where our SBS stores are located could significantly reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability and cash flows.
As a result of our real estate strategy, most of our SBS stores are located in strip shopping centers. These strip shopping centers are occupied by other high-traffic retailers such as grocery stores, mass merchants and home improvement centers. Because most of our SBS stores are located in strip shopping centers, our sales are derived, in part, from the volume of traffic generated by the nearby high-traffic retailers. A reduction in customer traffic to these strip shopping centers, including as a result of the closure of stores in the strip shopping center, a regional or global economic
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downturn, an outbreak of flu or other viruses (such as COVID-19), a general downturn in the local area where our SBS store is located, or a decline in the desirability of the shopping environment of a particular strip shopping center, could reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability and cash flows.
Regulatory, Legal and Cybersecurity Risks
Legal proceedings, including litigation, regulatory proceedings, and other claims, and the outcome of such proceedings, litigation or claims, could have a material adverse effect on our business, financial condition and cash flows.
From time to time, we are a party to claims, litigation, including single-plaintiff and class action litigation, and other legal proceedings that arise in the ordinary course of our business, including matters involving employment, premises, real estate, and product litigation. These matters could ultimately result in losses or liabilities to our business. Liabilities for loss contingencies, including those arising from such proceedings, are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There is inherent uncertainty in the assessment of the potential outcomes of these matters, and the ultimate resolution of these matters could differ from our predictions. Such outcomes may have a material adverse impact on our consolidated financial position, results of operations or cash flows. See Note 10 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for more information on litigation and other legal proceedings.
If products sold by us are found to be defective in labeling or content, our credibility and that of the brands we sell may be harmed, marketplace acceptance of our products may decrease, and we may be exposed to liability that exceeds our products liability insurance coverage and manufacturer indemnities.
We do not control the production process for the products we sell. We may not be able to identify a defect in a product we purchase from a manufacturer or owned and exclusive-label brand filler before we offer such product for resale. In many cases, we rely on manufactures' and fillers' representations regarding the composition, manufacture and safety of the products we purchase from them, as well as on the compliance of our product labels with government regulations. Our sale of certain products exposes us to potential product liability claims, recalls or other regulatory or enforcement actions initiated by federal, state or foreign regulatory authorities or through private causes of action. Such claims, recalls or actions could be based on allegations that, among other things, the products sold by us are misbranded, contain contaminants or impermissible ingredients, provide inadequate instructions regarding their use or misuse, include inadequate warnings concerning flammability or interactions with other substances or that we knew or should have known of an alleged defect. For example, numerous cases continue to be filed against beauty product manufacturers and distributors, alleging harm from chemical hair straighteners and hair relaxer products, which could have a material adverse effect on the Company’s business, financial condition, and results of operations. Claims against us could also arise as a result of the misuse by purchasers of such products or as a result of their use in a manner different than the intended use. We may be required to pay for losses or injuries actually or allegedly caused by the products we sell and to recall any product we sell that is alleged to be or is found to be defective. Furthermore, such claims could have an adverse impact on our reputation.
Any actual defects or allegations of defects in products sold by us could result in adverse publicity and could harm our credibility or the credibility of the manufacturer, which could adversely affect our business, financial condition and results of operations. Although we may have both indemnification rights against the manufacturers of many of the products we distribute and rights as an “additional insured” under the manufacturers’ insurance policies, it is not certain that any manufacturer or insurer will be financially solvent and capable of making payment to any party suffering loss or injury caused by products sold by us or that all losses would be covered by such indemnification rights or insurance policies. If we are forced to expend significant resources and time to resolve such claims or to pay material amounts to satisfy such claims, there could be an adverse effect on our business, financial condition and results of operations.
We could be adversely affected if we do not comply with current laws and regulations or if we become subject to additional or more stringent laws and regulations.
We are subject to a number of federal, state and local laws and regulations in the U.S. as well as applicable laws and regulations in each foreign marketplace in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell as well as the methods we use to sell
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and import these products. Non-compliance with applicable laws and regulations of governmental authorities, including the FDA and similar authorities in other jurisdictions - by us or the manufacturers and fillers of the products sold by us - could result in fines, product recalls and enforcement actions and could otherwise restrict our ability to market certain products, which could adversely affect our business, financial condition and results of operations.
In addition, the laws and regulations applicable to us or manufacturers of the products sold by us may become more stringent. Failure to comply with these new and existing regulations could result in significant fines or damages, in addition to costs and expenses necessary to defend claims related thereto. Manufacturers may try to recover some or all of any increased cost of compliance by increasing the prices at which we purchase products, and we may not be able to recover some or all of such increased cost in our own prices to our customers. We are also subject to state and local laws and regulations that affect our franchisor-franchisee relationships. Increased compliance costs and the loss of sales of certain products due to more stringent or new laws and regulations could adversely affect our business, financial condition and results of operations.
Climate change and other environmental impacts, and increased focus by stakeholders on environmental issues, could adversely affect our business, financial condition and operating results.
Climatologists predict that the long-term effects of climate change and global warming will result in the increased frequency, intensity and duration of weather events, which could significantly disrupt supply chains, potentially impacting our vendors’ raw material costs and the production of products we sell. These weather events could also lead to an increased rate of temporary store closures and reduced customer traffic at our stores.
In addition, concern over climate change may result in new or increased regional, federal or global legal and regulatory requirements to reduce or mitigate the effects of climate change and greenhouse gases. These requirements may lead to an increase in tax, transportation and utility expenses.
Lastly, there is increased focus, including by governmental and non-governmental organizations, investors, customers and consumers, on these and other environmental sustainability matters, including deforestation, land use, climate impact and recyclability or recoverability of packaging, including plastic. Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment.
Failure to meet evolving expectations concerning environmental, social, and governance ("ESG") reporting could adversely affect our sales and results of operations.
Expectations from investors, customers, team members, government agencies and other third parties concerning ESG reporting have increased, and our ability to meet those evolving expectations is dependent on a variety of factors, many of which are outside of our control, including (i) cooperation from and access to sourcing vendors and other third parties that meet our standards; (ii) access to consistent and reliable data; (iii) evolving regulatory requirements affecting ESG standards or disclosures; and (iv) the availability and cost of raw materials that meet and further our sustainability and ESG goals. Negative customer perceptions regarding the safety and sourcing of the products we sell and the sufficiency and transparency of our reporting on ESG matters and events that give rise to actual, potential, or perceived compliance and social responsibility concerns could hurt our reputation, result in lost sales, cause our customers to seek alternative sources for their needs and make it difficult and costly for us to regain the confidence of our customers. Furthermore, costs associated with ESG initiatives may have an adverse impact on our business, financial condition and operating results. Our competitors’ ability to develop effective ESG practices and initiatives, and any perceived failure or inadequacy of our own such initiatives, may also have an adverse impact on our business, financial condition and results of operations.
If we fail to protect our intellectual property rights or if our products are found to infringe on the intellectual property rights of others, it could materially and negatively impact our business.
We rely upon trade secrets and know-how to develop and maintain our competitive position. Our trademarks, certain of which are material to our business, are registered or legally protected in the U.S., Canada and other countries in which we operate. The success of our business depends to a certain extent upon the value associated with our intellectual property rights. We protect our intellectual property rights through a variety of methods, including, but not limited to, applying for and obtaining trademark protection in the U.S., Canada and other countries throughout the world in which our business operates. We also rely on trade secret laws, in addition to confidentiality agreements with vendors, employees, consultants and others who have access to our proprietary information. While we intend to vigorously protect our trademarks against infringement, we may not be successful. In addition, the laws of certain
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foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. The costs required to protect our intellectual property rights and trademarks are expected to continue to be substantial.
Furthermore, the industry in which we operate is characterized by the need for a large number of copyrights, trade secrets and trademarks and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. A third party may at any time assert that our products violate such party’s intellectual property rights. Successful intellectual property claims against us could result in significant financial liabilities and/or prevent us from selling certain of our products. In addition, the resolution of infringement claims may require us to redesign our products, to obtain licenses to use intellectual property belonging to third parties, which may not be attainable on reasonable terms, or to cease using the intellectual property altogether.
We may be adversely affected by any disruption in our information technology systems.
Our operations are dependent upon our information technology systems, which encompass all of our major business functions. A substantial disruption in our information technology systems for any prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and could adversely affect our customer service and relationships. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including, without limitation, fire, natural disasters, power outages, systems disruptions, systems conversions, security breaches, cyberattacks, phishing attacks, viruses and/or human error. In any such event, we could be required to make a significant investment to fix or replace our information technology systems, and we could experience interruptions in our ability to service customers. Such delays, problems or costs may have a material adverse effect on our business, financial condition and results of operations.
We continuously need to improve and upgrade our systems and infrastructure while maintaining their reliability and integrity. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of our business increases, with no assurance that the volume of business will increase. The development and implementation of new systems and any other future upgrades to our systems and information technology may require significant costs and could divert our management’s attention and other resources from our core business. There are also no assurances that these new systems and upgrades will provide us with the anticipated benefits and efficiencies. Some of our systems are proprietary and, as a result, our options are limited in seeking third-party help with the operation and upgrade of those systems. There can be no assurance that the time and resources our management will need to devote to operations and upgrades, any delays due to the installation of any upgrade (and customer issues therewith), any resulting service outages, or the impact on the reliability of our data from any upgrade or any legacy system will not have a material adverse effect on our business, financial condition, control environment or results of operations.
Unauthorized access to confidential information and data on our information technology systems, security and data breaches.
As part of our operations, we, together with third parties acting on our behalf, receive, process and maintain sensitive and confidential information about our customers, employees and other third parties. Processing, maintenance and transmission of information is a critical part of our business operations. We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches, fraudulent transactions and other disruptive activities. We believe that our security safeguards follow appropriate practices for prevention of security and data breaches and the mitigation of cybersecurity risks. Despite these safeguards and our other security processes and protections, our systems and processes may be vulnerable to security breaches and cyber-attacks, which are evolving and increasingly sophisticated (such as denial-of-service, ransomware, phishing, supply chain and social engineering attacks), as well as to physical breach, vandalism, sabotage, user malfeasance, viruses, misplaced or lost data and inadvertent data disclosure by third parties or us.
A significant data security breach, including misappropriation of our customers’ or employees’ confidential information, could result in significant costs to us, which may include, among others, potential liabilities to payment card networks for reimbursements of credit card fraud and card reissuance costs, including fines and penalties, potential liabilities from governmental or third-party investigations, proceedings or litigation, legal, forensic and consulting fees and expenses, costs and diversion of management attention required for investigation and remediation actions, and the negative impact on our reputation and loss of confidence of our customers, suppliers and others, any of which could have a material adverse impact on our business, financial condition and operating results. Relatedly,
- 19 -
if our third-party suppliers or vendors are subject to cyber-attacks, data breaches, other security incidents, or disruption of information technology systems or software, such events could expose us to liability, damage our reputation, and have a material adverse effect on our business. While we carry insurance that would mitigate losses in connection with security breaches and cyber incidents, insurance may be insufficient to fully compensate us for potentially significant losses.
We understand that the techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures. The failure to promptly detect, determine the extent of and appropriately respond to a significant data security breach could have a material adverse impact on our business, financial condition and operating results.
Failure to comply with rapidly evolving data privacy laws could materially adversely affect our business, financial condition and operating results
We are subject to an evolving body of federal, state and non-U.S. laws, rules, regulations, guidelines and principles regarding data privacy and security, the scope and impact of which are uncertain. Several governments, as well as the European Union ("EU"), have regulations dealing with the collection and use of personal information obtained from their citizens, regulators are also globally imposing greater monetary fines for privacy violations, and there is an increase in private rights of action. In 2023, the California Privacy Rights Act (“CPRA”) expanded consumer privacy rights and extended application of the California Consumer Privacy Act to our California employees. A number of other U.S. states have enacted consumer privacy laws that are expected to take effect in 2024 and beyond or have revived existing state laws with new meaning, potentially subjecting retailers to privacy-based class action lawsuits.
We also expect to see rapid changes and corresponding regulator and private rights of action related to the use of text messaging to communicate with customers, the collection and use of biometric data and dark patterns. We continue to monitor our compliance with the General Data Protection Regulation (“GDPR”) of both the EU, which regulates how organizations handle the personal data of both EU citizens and individuals residing in the EU, and the UK, the latter of which has been applicable post-Brexit. Data privacy is, and may continue to be, a rapidly evolving area of law. Any potential inability to comply with such laws, rules, regulations, guidelines and principles, or to quickly adapt our practices to reflect them as they develop, could potentially subject us to significant fines, damages, liabilities and reputational harm, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Financial Risks
Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons.
Our comparable sales and quarterly results of operations have fluctuated in the past and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable sales and quarterly financial performance, including the following:
•changes in our merchandising strategy or mix;
•the fact that a portion of a typical new store’s sales come from customers who previously shopped at other existing stores;
•the timing and effectiveness of our marketing and promotional activities and those of our competitors;
•the effects of severe weather events or other natural disasters;
•the number of shopping days in a quarter;
•fluctuations in the cost to purchase products we sell;
•store closures in response to state or local regulations due to health concerns; and
•worldwide economic conditions and, in particular, the retail sales environment in North America and Europe.
Fluctuations in foreign currency exchange rates may also affect our quarterly financial performance. Accordingly, our results, including comparable sales, for any one fiscal quarter are not necessarily indicative of the results to be expected
- 20 -
for any other quarter, and may even decrease, which could have a material adverse effect on our business, financial condition and results of operations.
A portion of our indebtedness is subject to floating interest rates.
Outstanding borrowings under our $500 million asset-based senior secured loan facility ("ABL facility") and our term loan B facility ("term loan B") are subject to variable rates of interest and therefore expose us to interest rate risk. If interest rates were to increase, our debt service obligations on any variable rate indebtedness would increase, even if the principal amount borrowed remained the same, and our net earnings and cash flows would correspondingly decrease. We are currently party to, and may enter into in the future, additional, derivative instruments, such as interest rate caps and swaps, to reduce our exposure to changes in interest rates on our term loan B. We may not maintain derivative instruments with respect to all of our variable rate indebtedness, however, and any instruments we enter into may not fully mitigate our interest rate risk.
We have substantial debt and may incur substantial additional debt, which could adversely affect our financial health, our ability to obtain financing in the future and our ability to react to changes in our business.
As of September 30, 2024, certain of our subsidiaries, including Sally Holdings LLC ("Sally Holdings"), had an aggregate principal amount of approximately $1.0 billion of outstanding debt.
Our substantial debt could have significant consequences. For example, it could have the following impact:
•make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness;
•limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes;
•require us to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of such cash flows to fund working capital, capital expenditures, share repurchases and other general corporate purposes;
•restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us, which could limit our ability to conduct repurchases of our own equity securities or pay dividends to our stockholders, thereby limiting our ability to enhance stockholder value through such transactions;
•increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations (because a portion of our borrowings are at variable rates of interest), including borrowings under our ABL facility and our term loan B;
•place us at a competitive disadvantage compared to our competitors who have proportionately less debt or comparable debt at more favorable interest rates and who, as a result, may be better positioned to withstand economic downturns;
•require us to comply with restrictive covenants that may restrict our ability to, among other things, pay dividends, conduct share repurchases, make acquisitions, dispose of assets or prepay debt;
•limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; and
•limit our flexibility to adjust to changing market conditions and ability to withstand competitive pressures, or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.
Each of our ABL facility, term loan B and senior notes contain certain covenants and restrictions with which we are required to comply. Our ability to comply with these covenants and restrictions may be affected by economic, financial and industry conditions beyond our control. The breach of any of these covenants and restrictions could result in a default under the relevant governing instruments, which could permit the applicable lenders or senior note holders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay debt, lenders holding secured obligations, such as the lenders under the ABL
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facility, could proceed against the collateral that secures such unpaid debt. In any such case, our subsidiaries may be unable to borrow under the ABL facility and may not be able to repay the amounts due under the senior notes and the term loan B. This could result in serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.
In addition, we and our subsidiaries may incur substantial additional indebtedness in the future. As of September 30, 2024, our ABL facility provided us commitments for additional borrowings of up to approximately $482.5 million, subject to borrowing base limitations, outstanding letters of credit and limitations on cash hoarding above certain balances, once utilized. If new debt is added to our current debt levels, the related risks we face would increase, and we may not be able to meet all our debt obligations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

---

ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Substantially all of our stores and a number of our warehouse and remote office locations are leased while our corporate headquarters in Denton, Texas (see below for more information) and three of our warehouses/distribution centers are owned. The average store lease is for a term of five years with customary renewal options. The following table provides the number of stores per state in the U.S. and certain international locations, as of September 30, 2024:
SBS
BSG
Location
Company-
Operated
Company-
Operated
Franchise
United States (including Puerto Rico)
Alabama
Alaska
-
Arizona
Arkansas
-
California
-
Colorado
-
Connecticut
-
Delaware
-
Florida
Georgia
-
Hawaii
-
Idaho
-
Illinois
-
Indiana
-
Iowa
-
Kansas
-
Kentucky
-
Louisiana
-
Maine
-
Maryland
-
Massachusetts
-
Michigan
-
Minnesota
-
Mississippi
Missouri
-
Montana
-
Nebraska
-
Nevada
-
New Hampshire
-
New Jersey
-
New Mexico
New York
-
North Carolina
-
North Dakota
-
Ohio
-
Oklahoma
Oregon
-
Pennsylvania
-
Puerto Rico
-
Rhode Island
-
South Carolina
-
South Dakota
-
- 24 -
SBS
BSG
Location
Company-
Operated
Company-
Operated
Franchise
United States (including Puerto Rico)
Tennessee
-
Texas
Utah
-
Vermont
-
Virginia
-
Washington
-
West Virginia
-
Wisconsin
-
Wyoming
-
-
Total United States (including Puerto Rico)
2,310
1,081
International:
Mexico
-
-
United Kingdom
-
-
Canada
-
France
-
-
Belgium
-
-
Chile
-
-
Netherlands
-
-
Spain
-
-
Germany
-
-
Total International
-
Total Store Count
3,129
1,200
The following table provides locations for our significant offices and warehouses and our corporate headquarters, as of September 30, 2024:
Location
Type of Facility
Approximate Sq. Feet
Business
Segment
Company-Owned Properties:
Denton, Texas
Corporate Headquarters (1)
200,000
N/A
Reno, Nevada
Warehouse
253,000
SBS
Columbus, Ohio
Warehouse
246,000
SBS
Jacksonville, Florida
Warehouse
237,000
SBS
Leased Properties:
Fort Worth, Texas
Warehouse
494,000
BSG
Greenville, Ohio
Warehouse
245,000
BSG
Fresno, California
Warehouse
200,000
BSG
Blackburn, Lancashire, England
Warehouse
195,000
SBS
Spartanburg, South Carolina
Warehouse
190,000
BSG
Ghent, Belgium
Office, Warehouse
94,000
SBS
Ronse, Belgium
Office, Warehouse
91,000
SBS
Guadalupe, Nuevo Leon, Mexico
Warehouse
78,000
SBS
Ghent, Belgium
Warehouse
67,000
SBS
Calgary, Alberta, Canada
Warehouse
60,000
BSG
Mississauga, Ontario, Canada
Warehouse
60,000
BSG
Saint-Jerome, Quebec, Canada
Warehouse
50,000
BSG
(1)As of September 30, 2024, we had entered into an agreement to sell the Denton, Texas location to Denton County, Texas and closed on the sale of the building on October 24, 2024.
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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We are involved, from time to time, in various claims, administrative proceedings and lawsuits incidental or related to the conduct of our business, which may range from single-plaintiff to class action litigation. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and may or may not cover any or all of our liabilities in respect of these matters. Although the ultimate disposition of these claims and proceedings cannot be predicted with certainty, we do not currently believe the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations. However, there can be no assurances that future adverse judgments and costs would not be material to our financial position, cash flows or results of operations for a particular period. See Note 10 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information on legal proceedings.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
- 26 -
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for the Registrant’s Common Equity
Market Information
Our common stock is listed on the New York Stock Exchange under the symbol “SBH.”
Holders
As of November 8, 2024, there were 409 stockholders of record of our common stock.
Dividends
We have not declared or paid dividends at any time during the two fiscal years prior to the date of this Annual Report. We currently anticipate we will retain future earnings to support investments in our business, to repay outstanding debt or to return capital to shareholders through share repurchases. Any determination to pay dividends will be made at the discretion of our Board and will depend on our financial condition, results of operations, contractual restrictions, including under our debt agreements and instruments, cash requirements and other factors our Board deems relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about the Company’s repurchases of shares of its common stock, excluding the impact of excise taxes, during the three months ended September 30, 2024:
Fiscal Period
Total Number
of Shares
Purchased (1)
Average
Price Paid
per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(3)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 through July 31, 2024
-
$
-
-
$
530,792,437
August 1 through August 31, 2024
561,470
12.49
561,470
523,781,464
September 1 through September 30, 2024
240,323
12.44
240,323
520,792,449
Total this quarter
801,793
$
12.47
801,793
$
520,792,449
(1)The table above does not include 500 shares of our common stock surrendered by grantees during the quarter to satisfy tax withholding obligations due upon the vesting of equity-based awards under our share-based compensation plans.
(2)The calculation of the average price paid per share includes the impact of commissions paid in connection with the shares repurchased.
(3)The Board approved a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock through September 30, 2025.
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Performance Graph
The following graph illustrates the five-year comparative total return among Sally Beauty Holdings, Inc., the S&P 500 Index (“S&P 500”) and the Dow Jones U.S. Specialty Retailers Index (“DJ US Specialty Retailers”) assuming $100 was invested on September 30, 2019, and dividends, if any, were reinvested. The DJ US Specialty Retailers is a non-managed index and provides a comprehensive view of issuers, including our common stock, that are primarily in the U.S. retail sector.
Fiscal year ended
September 30, 2019
September 30, 2020
September 30, 2021
September 30, 2022
September 30, 2023
September 30, 2024
Sally Beauty Holdings, Inc.
$
100.00
$
58.36
$
113.16
$
84.62
$
56.28
$
91.13
S&P 500
100.00
115.15
149.70
126.54
153.89
209.84
DJ US Specialty Retailers
100.00
143.52
182.92
119.93
136.29
202.54

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]
- 28 -

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section discusses management’s view of Sally Beauty’s financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, for a discussion of the financial condition and results of operations for fiscal year 2023 compared to fiscal year 2022. This section should be read in conjunction with the audited consolidated financial statements of Sally Beauty and the related notes included elsewhere in this Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations section may contain forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause results to differ materially from those reflected in such forward-looking statements.
Financial Results Summary of the Fiscal Year Ended September 30, 2024:
•Consolidated net sales for the fiscal year decreased $11.1 million, or 0.3%, to $3,717.0 million and included a positive impact from changes in foreign currency exchange rates of $9.3 million, or 0.2% of consolidated net sales;
•Global e-commerce sales represented 9.8% of our consolidated net sales;
•Consolidated comparable sales for the fiscal year increased 0.3% compared to the prior fiscal year;
•Consolidated gross profit decreased by $7.8 million, or 0.4%, to $1,890.3 million. Gross margin was unchanged at 50.9% compared to the prior fiscal year;
•Consolidated operating earnings for the fiscal year decreased $42.3 million, or 13.0%, to $282.7 million. Operating margin decreased 110 basis points to 7.6% compared to the prior fiscal year;
•Consolidated net earnings for the fiscal year decreased $31.2 million, or 16.9%, to $153.4 million;
•Diluted earnings per share for the fiscal year were $1.43 compared to $1.69 for the prior fiscal year; and
•Cash provided by operations was $246.5 million for the fiscal year compared to $249.3 million for the prior fiscal year.
Trends Impacting Our Business
Recent global inflationary pressures have slowed from the highs experienced in the past few years, but they continue to influence consumer and stylist shopping behavior as well as the cost for products and services. While inflation eased, our customers have inflation fatigue and remain price sensitive. Inflationary pressures have also impacted wages, especially among retail and hourly employees, as we have experienced an increase in our labor costs in order to attract and retain associates Within our SBS business, we adapted our promotional strategy to be more focused on the promotions that matter to the customer, and we saw improvements in customer frequency. Within our BSG business, we saw our stylists respond to big promotional events, but also to newness and innovation in the assortment.
We continue to monitor inflationary challenges and implement measures to help mitigate their impacts, including managing our inventory levels to reduce out-of-stock items, adjusting our promotional activities, optimizing our store base and expanding our partnerships with delivery service providers, including with DoorDash and Instacart marketplaces. Although these initiatives have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation.
Comparable Sales
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full-service sales. Our comparable sales amounts exclude the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers, as the calculation varies across the retail industry.
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Results of Operations
Key Operating Metrics
The following table sets forth, for the periods indicated, information concerning key measures on which we rely to assess our operating performance (dollars in thousands):
2024 vs. 2023
Fiscal Year Ended September 30,
Amount
%
Change
Change
Net sales:
SBS
$
2,107,089
$
2,139,206
$
(32,117
)
(1.5
)%
BSG
1,609,942
1,588,925
21,017
1.3
%
Consolidated
$
3,717,031
$
3,728,131
$
(11,100
)
(0.3
)%
Gross profit:
SBS
$
1,257,935
$
1,265,683
$
(7,748
)
(0.6
)%
BSG
632,397
632,497
(100
)
(0.0
)%
Consolidated
$
1,890,332
$
1,898,180
$
(7,848
)
(0.4
)%
Segment gross margin:
SBS
59.7
%
59.2
%
bps
BSG
39.3
%
39.8
%
(50
)
bps
Consolidated
50.9
%
50.9
%
-
bps
Net earnings:
Segment operating earnings:
SBS
$
334,319
$
358,474
$
(24,155
)
(6.7
)%
BSG
178,420
181,275
(2,855
)
(1.6
)%
Segment operating earnings
512,739
539,749
(27,010
)
(5.0
)%
Unallocated expenses and restructuring (a) (b)
230,006
214,720
15,286
7.1
%
Consolidated operating earnings
282,733
325,029
(42,296
)
(13.0
)%
Interest expense
76,408
72,979
3,429
4.7
%
Earnings before provision for income taxes
206,325
252,050
(45,725
)
(18.1
)%
Provision for income taxes
52,911
67,450
(14,539
)
(21.6
)%
Net earnings
$
153,414
$
184,600
$
(31,186
)
(16.9
)%
Number of stores at end-of-period (including franchises):
SBS
3,129
3,148
(19
)
(0.6
)%
BSG
1,331
1,338
(7
)
(0.5
)%
Consolidated
4,460
4,486
(26
)
(0.6
)%
Comparable sales growth (decline)
SBS
(0.7
)%
3.4
%
(410
)
bps
BSG
1.6
%
(1.3
)%
bps
Consolidated
0.3
%
1.4
%
(110
)
bps
(a)Unallocated expenses represent certain corporate costs, including share-based compensation expense, that have not been charged to our segments and are included in SG&A expenses in our consolidated statements of earnings. Additionally, unallocated includes costs related to our Fuel for Growth initiative.
(b)Restructuring expenses primarily relate to the Plan, as discussed in Note 17 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
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The Fiscal Year Ended September 30, 2024, compared to the Fiscal Year Ended September 30, 2023
Net Sales
SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):
Comparable sales
$
(14,084
)
Sales outside comparable sales (a)
(28,511
)
Foreign currency exchange
10,478
Total
$
(32,117
)
(a)Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months.
SBS's net sales decrease was primarily driven by lower comparable sales and the impact of store closures pursuant to the Plan. Comparable sales decreased $23.8 million resulting from store closures under the Plan; however, a significant portion of those lost sales were recaptured at other SBS locations. These decreases were partially offset by a favorable impact from foreign currency exchange rates. SBS’s comparable sales decline was a result of fewer transactions, partially offset by growth in our average unit retail, driven by inflationary impacts and pricing leverage.
BSG. The increase in net sales for BSG was driven by the following (in thousands):
Comparable sales
$
25,788
Sales outside comparable sales (a)
(3,557
)
Foreign currency exchange
(1,214
)
Total
$
21,017
(a)Includes closed stores, including stores closed under the Plan, net of stores opened (or acquired) for less than 14 months.
BSG's net sales increase was primarily driven by an increase in comparable sales, reflecting expanded distribution, new brand innovation and improving salon demand trends, partially offset by the impact of store closures and the unfavorable impact from foreign currency exchange rates.
Gross Profit
SBS. SBS’s gross profit decrease was driven by lower net sales, partially offset by a higher gross margin. SBS’s gross margin improvement was primarily due to lower distribution and freight costs from supply chain efficiencies and higher product margins, partially offset by unfavorable fixed cost absorption.
BSG. BSG’s gross profit decreased slightly as a result of lower gross margin, partially offset by higher net sales. BSG's gross margin decline was driven primarily by lower product margins and favorable adjustments to our expected obsolescence reserve related to the Plan in the prior year.
Selling, General and Administrative Expenses
SBS. SBS’s SG&A expenses increased $16.4 million, or 1.8%, to $923.6 million for fiscal year 2024, which includes the unfavorable impact from foreign exchange rates of $3.8 million due to the weakening of the U.S. Dollar compared to currencies in our foreign operations. As a percentage of SBS net sales, SG&A for fiscal year 2024 was 43.8% compared to 42.4% for fiscal year 2023. This increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, rent expense, depreciation expense and advertising expense.
BSG. BSG’s SG&A expenses increased $2.8 million, or 0.6%, to $454.0 million for fiscal year 2024 and includes a favorable impact from foreign exchange rates of $2.5 million. As a percentage of BSG net sales, SG&A for fiscal year 2024 was 28.2% compared to 28.4% for fiscal year 2023. This decrease was driven primarily by higher net sales and lower delivery expense.
Unallocated. Unallocated SG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $32.6 million, or 16.5%, to $230.1 million, primarily due to expenses in connection with our Fuel for Growth initiative in the current year.
- 31 -
Restructuring
The decrease in restructuring expenses was primarily due to the lapping of expenses that were incurred in connection with the Plan in the prior year totaling $17.2 million. See Note 17 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for more information on our restructuring plans.
Interest Expense
The increase in interest expense was primarily due to the impacts of higher interest rates and debt extinguishment costs, partially offset by lower average outstanding borrowings on our ABL facility during the current year. Additionally, our interest rate swap helped mitigate some of the impacts from higher interest rates on a portion of our term loan B.
Provision for Income Taxes
For fiscal years 2024 and 2023, our effective tax rate was 25.6% and 26.8%, respectively. The decrease in our effective tax rate was primarily due to additional taxes and interest recorded in the prior fiscal year in connection with the one-time transition tax on unrepatriated foreign earnings ("Repatriation Tax") related to fiscal year 2018. See Note 15, Income Taxes, for more information on our effective tax rate.
Our effective tax rate may fluctuate on a quarterly and/or annual basis due to various factors, including, but not limited to, total earnings and the mix of earnings by jurisdiction, new tax laws, as well as changes in valuation allowances and uncertain tax positions.
Liquidity and Capital Resources
Our principal sources of liquidity are cash from operations, cash and cash equivalents, and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures and debt-servicing. Additionally, under our share repurchase program (see below for more details) we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At September 30, 2024, we had $590.5 million in our liquidity pool, which includes amounts available for borrowings under our ABL facility of $482.5 million and cash and cash equivalents of $108.0 million. Based upon the current level of operations and anticipated growth, we anticipate existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), as well as cash expected to be generated by operations and funds available under the ABL facility, will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures (including information technology investments and store projects) and service our debt obligations over the next 12 months and beyond.
Our working capital (current assets less current liabilities) increased $63.9 million to $712.6 million at September 30, 2024, compared to $648.7 million at September 30, 2023. The increase in our working capital was driven by higher inventory balances, as a result of expanded distribution rights in BSG and vendor price increases, the impacts of assets held for sale, and the timing of account payables, income tax payables, and vendor receivables, included in accounts receivable, other. These impacts were partially offset by a decrease in cash and cash equivalents and timing of lease renewals. The ratio of current assets to current liabilities was 2.20 to 1.00 at September 30, 2024, compared to 2.12 to 1.00 at September 30, 2023.
Share Repurchase Programs
During the fiscal years 2024 and 2023, we repurchased and subsequently retired approximately 5.1 million shares and 1.5 million shares of our common stock under our share repurchase program at a cost of $60.0 million and $15.0 million, respectively, excluding the impact of excise taxes on share repurchases. Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility. As of September 30, 2024, we had approximately $520.8 million of additional share repurchase authorization remaining under our Share Repurchase Program, which expires September 30, 2025.
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Historical Cash Flows
The following table shows our sources and uses of cash for the periods presented (in thousands):
Fiscal Year Ended September 30,
Change
Net cash provided by operating activities
$
246,528
$
249,311
$
(2,783
)
Net cash used by investing activities
(108,910
)
(99,776
)
(9,134
)
Net cash used by financing activities
(153,734
)
(100,824
)
(52,910
)
Effect of foreign currency exchange rate changes on cash and cash equivalents
1,076
3,732
(2,656
)
Net increase (decrease) in cash and cash equivalents
$
(15,040
)
$
52,443
$
(67,483
)
Operating Activities
The slight decrease in net cash provided by operating activities for fiscal year 2024, compared to fiscal year 2023, was primarily driven by higher inventory purchases, fewer cash receipts from customers, and the timing of vendor and manufacturing allowances, partially offset by the timing of tax and interest payments and the impact of lease contract termination and severance payments in connection with the Plan in the prior year.
Investing Activities
The increase in net cash used by investing activities for fiscal year 2024, compared to fiscal year 2023, was primarily due to higher capital expenditures, partially offset by lower cash used for acquisitions. During fiscal year 2024, we had total capital expenditures of approximately $94.7 million, excluding amounts paid in connection with the prior year, primarily in connection with investments in technology and store leasehold improvements.
Financing Activities
Net cash used by financing activities increased as a result of increased shares repurchased under our share repurchase program and higher costs related to the issuance of debt compared to the prior year.
Debt and Guarantor Financial Information
During the current fiscal year, we issued $600.0 million in 2032 Senior Notes and used the proceeds, together with cash on hand and borrowings under our ABL facility, to redeem in full our 2025 Senior Notes.
At September 30, 2024, we had $994.0 million in outstanding debt, excluding finance lease obligations, unamortized debt issuance costs and discounts, in the aggregate, of $8.7 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding and $394.0 million remaining on our term loan B. At September 30, 2024, there were no outstanding borrowings under our ABL facility. We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes, including funding of capital expenditures, acquisitions, debt servicing and, occasionally, share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During fiscal year 2024, the weighted average interest rate on our borrowings under the ABL facility was 7.25%.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.
See Note 11 of the Notes to Consolidated Financial Statements in Item 8 contained in this Annual Report for additional information about our debt.
Guarantor Financial Information
Our 2032 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.
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The following summarized consolidated financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities have been eliminated.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of September 30, 2024 and 2023 (in thousands):
(in thousands)
September 30, 2024
September 30, 2023
Cash and cash equivalents
$
32,817
$
66,148
Inventory
$
781,512
$
735,853
Intercompany receivable
$
-
$
1,658
Current assets
$
914,686
$
890,462
Total assets
$
2,085,179
$
2,076,413
Intercompany payable
$
6,939
$
-
Current liabilities
$
479,052
$
468,202
Total liabilities
$
1,951,874
$
2,011,075
The following table presents the summarized statement of earnings information for fiscal year 2024 (in thousands):
Net sales
$
2,988,889
Gross profit
$
1,540,140
Earnings before provision for income taxes
$
168,476
Net Earnings
$
125,969
Contractual Obligations
The following table summarizes our contractual obligations at September 30, 2024 (in thousands):
Payments Due by Period
Less than
1 year
1-3 years
3-5 years
More than
5 years
Total
Long-term debt obligations, including interest(a)
$
70,387
$
139,982
$
138,928
$
1,082,142
$
1,431,439
Obligations under operating leases(b)
175,266
270,805
148,465
109,101
703,637
Obligations under finance leases
-
-
-
Purchase obligations(c)
33,459
30,094
16,006
-
79,559
Other long-term obligations(d)(e)
8,821
6,028
1,667
1,841
18,357
Total
$
288,070
$
446,909
$
305,066
$
1,193,084
$
2,233,129
(a)Long-term debt obligations include future interest payments on our debt outstanding as of September 30, 2024. The amounts shown above do not include deferred debt issuance costs reflected in our consolidated balance sheets, nor do they include the impact of any interest received from the impact of our interest rate swap.
(b)The amounts reported for operating leases do not include common area maintenance (CAM), property taxes or other executory costs. The amounts shown above do not include immaterial contingent liabilities for operating leases for which we are liable in the event of default by a franchisee.
(c)Purchase obligations reflect legally binding agreements that are entered into by us to purchase goods or services, that specify minimum quantities to be purchased and with fixed or variable price provisions. Amounts shown do not reflect open purchase orders, mainly for merchandise, to be fulfilled within one year, which are generally cancellable or contracts that tend to be reoccurring in nature and similar in amount year over year.
(d)Other long-term obligations, including current portion, principally represent obligations under our insurance and self-insurance programs. These obligations are included in accrued liabilities and other liabilities, as appropriate, in our consolidated balance sheets.
(e)The table above does not include an estimated $8.4 million of unrecognized tax benefits due to uncertainty regarding the realization and timing of the related future cash flows, if any.
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The information contained in the table above with regards to our long-term debt obligations is based on the current terms of such debt obligations and does not reflect any assumptions about our ability or intent to refinance any of our debt either on or before their maturity. In the event we refinance some or all of the debt either on or before maturity, actual payments for some of the periods shown may differ materially from the amounts reported herein. In addition, other future events, including potential increases in interest rates, could cause actual payments to differ materially from these amounts.
Off-Balance Sheet Financing Arrangements
At September 30, 2024, we did not have any off-balance sheet financing arrangements other than obligations under letters of credit, as discussed above.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures. Actual results could differ from the estimates and assumptions used, which could have a material impact on financial statements. We believe the following are our most critical accounting estimates that require subjective judgments, estimates and assumptions:
Vendor Rebates and Concessions
We deem cash consideration received from a vendor to be a reduction of the cost of goods sold unless it is in exchange for an asset or service, or a reimbursement of a specific, incremental, identifiable cost incurred by us in selling the vendor’s products. The majority of cash consideration we receive is considered to be a reduction of the cost of inventory and a subsequent reduction in cost of goods sold as the related products are sold. We consider the facts and circumstances of the various contractual agreements with vendors in order to determine the appropriate classification of amounts received in our consolidated statements of earnings. We record cash consideration expected to be received from vendors in accounts receivables, other when earned and at the amount we believe will be collected. These receivables could be significantly affected if the actual amounts subsequently collected differ from our expectations. Historically, adjustments between the amount recorded and the amount collected have not had a material impact on our results of operations.
Income Taxes
We record income tax provisions in our consolidated financial statements based on an estimate of current income tax liabilities. The development of these provisions requires judgments about tax positions, potential outcomes and timing. If we prevail in tax matters for which provisions have been established or are required to settle matters in excess of established provisions, our effective tax rate for a particular period could be significantly affected.
Additionally, deferred income taxes are recognized for the future tax consequences attributable to differences between our financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are estimated to be recovered or settled. We believe it is more-likely-than-not that our results of operations in the future will generate sufficient taxable income to realize our deferred tax assets, net of the valuation allowance currently recorded. We have recorded a valuation allowance to account for uncertainties regarding the recoverability of certain deferred tax assets, primarily foreign loss carryforwards and tax credit carryforwards. In the future, if we determine certain deferred tax assets will not be realizable, the related adjustments could significantly affect our effective tax rate at that time. An estimated tax benefit related to an uncertain tax position is recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.
Assessment of Long-Lived Assets for Impairment and Restructuring
We review long-lived assets, including operating lease assets, for impairment whenever events or circumstances indicate the carrying amount of an asset may not be fully recoverable based on estimated undiscounted future cash flows. Long-lived assets are reviewed at the lowest level of identifiable cash flows, which typically is at the store level. In assessing for impairment, we determine the fair value of each individual store by discounting projected future cash flows. There are certain estimates and assumptions used to arrive at estimated future cash flows, including projected earnings and growth rates. The carrying amount of a long-lived asset or asset group is considered impaired
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when the carrying value of the asset or asset group exceeds the expected future cash flows from the asset or asset group. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value.
When we commit to an exit plan of scale that we believe will result in the disposal of long-lived assets prior to the end of their useful lives, the approval of such plan may be considered a triggering event and therefore require a reassessment of asset carrying values for recoverability, based on projected cash flows. If the carrying values are not recoverable, write-downs or impairment charges may be required to bring carrying values of certain long-lived assets, including operating lease asset, to fair value. In connection with facility and store closures, we typically will also incur charges for employee severance, disposal costs and other expenses incurred with closures. These charges are accrued and estimated based on facts and circumstances at the time. Actual cash flows and expected payments could be significantly different from our estimates.
For fiscal years 2024 and 2023, no material impairment losses were recognized. For fiscal year 2022, we recognized an impairment loss of $24.8 million within restructuring in connection with the Plan.
Assessment of Goodwill and Intangible Assets for Impairment
We review goodwill and intangible assets for impairment annually, or when events or circumstances indicate it is more-likely-than-not that the value of the asset may be impaired. In assessing these types of assets for impairment, there are significant estimates and assumptions used to determine the fair value, including relevant market and economic conditions, anticipated future revenues and cash flows, royalty rates and discount rates.
When assessing goodwill for impairment, we may perform a qualitative assessment which evaluates macro-economic conditions, current and projected cash flows, and other events or changes in circumstances to determine if a quantitative assessment is necessary. During quantitative assessment, we use a discounted cash flow model to determine an estimated fair value. If it is determined that the fair value of a reporting unit is less than its carrying value, an impairment charge will be recorded to bring the carrying value down to its fair value.
During fiscal year 2024, we determined that no triggering events had occurred, as both internal and external facts and circumstances, including revenues in fiscal year 2024 versus prior projections and prior weighted-average cost of capital, continued to see improvement from the end of September 2023. At the end of September 2023, we determined that a triggering event had occurred, due to the decline in the Company's share price and market capitalization at the end of fiscal year 2023, among other factors. As a result, we conducted a quantitative assessment at September 30, 2023 and determined that no impairment existed for our SBS or BSG reporting units.
Like goodwill, our indefinite-lived intangible assets are tested for impairment by comparing the fair value of each asset to its carrying value, but only if a triggering event exists. As of September 30, 2024, our indefinite-lived assets were comprised of only trade names. To determine the fair value of each trade name, we use the relief-from-royalty method, which estimates what a third-party would be willing to pay in royalties to receive a benefit from the use of the asset. If it is determined the asset’s fair value is less than its carrying value, then an impairment charge is recorded to reduce the carrying value down to its fair value. No impairment losses were recognized in fiscal years 2024, 2023, or 2022.
Recent Accounting Pronouncements
See Note 3 of the Notes to Consolidated Financial Statements in Item 8 - “Financial Statements and Supplementary Data” contained elsewhere in this Annual Report for information about recent accounting pronouncements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational corporation, we are subject to certain market risks, including risks resulting from our exposure to foreign currency fluctuations, changes in interest rates and government actions. We consider a variety of practices to manage these market risks, including, when deemed appropriate, the use of derivative financial instruments. Currently, we do not purchase or hold, and are restricted by our debt and credit agreements from engaging in, any derivative instruments for speculative or trading purposes.
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Foreign currency exchange rate risk
We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments in subsidiaries (including intercompany balances not permanently invested) and earnings denominated in foreign currencies as well as exposure resulting from the purchase of merchandise by certain of our subsidiaries in a currency other than their functional currency and from the sale of products and services among the parent company and subsidiaries with a functional currency different from the parent or among subsidiaries with different functional currencies. Our primary exposures are to changes in exchange rates for the U.S. dollar versus the Euro, the British pound sterling, the Canadian dollar and the Mexican peso. In addition, we currently have exposure to the currencies of certain countries located in South America and from time to time we may have exposure to changes in the exchange rate for the British pound sterling versus the Euro in connection with the sale of products and services among certain of our European subsidiaries. For each of the fiscal years 2024, 2023 and 2022, less than 20% of our consolidated net sales were made in currencies other than the U.S. dollar.
A 10% increase or decrease in the exchange rates for the U.S. dollar versus the foreign currencies to which we have exposure would have impacted our consolidated net sales by approximately 1.8% in the fiscal year 2024, and it would have impacted our consolidated net assets by approximately 2.2% at September 30, 2024.
As more fully discussed in Note 12 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, foreign exchange forward contracts to mitigate exposure to changes in foreign currency exchange rates.
Interest rate risk
We are sensitive to interest rate fluctuations as a result of borrowings under our ABL facility and term loan B. At September 30, 2024, there were no outstanding borrowings under the ABL facility, and the term loan B had $394.0 million in outstanding principal balance. Additionally, at September 30, 2024, we held $200 million of SOFR denominated interest hedged under an interest rate swap agreement to help mitigate a portion of our interest rate risk. At September 30, 2024, a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $1.9 million.
As more fully discussed in Note 12 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, derivative instruments in order to manage risk relating to cash flows and interest rate exposure.
Credit risk
We are exposed to credit risk in connection with certain assets, primarily accounts receivable. We provide credit to customers in the ordinary course of business and perform ongoing credit evaluations. We believe our exposure of credit risk with respect to trade receivables is largely mitigated by our broad customer base and that our allowance for doubtful accounts is sufficient to cover customer credit risks at September 30, 2024.
Our derivative instruments expose us to credit risk in the event of default by a counterparty. We believe such exposure is mitigated by the substantial resources and strong creditworthiness of the counterparties to our derivative instruments at September 30, 2024. In the event a counterparty defaults in its obligation under our derivative instruments, we could incur substantial financial losses. However, at the present time, no such losses are deemed probable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See “Index to Financial Statements” which is located on page 47 of this Annual Report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
- 37 -

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Background. Attached as exhibits to this Annual Report on Form 10-K are certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications. Part II, Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K sets forth the attestation report of KPMG LLP, our independent registered public accounting firm, regarding its audit of our internal control over financial reporting. This section should be read in conjunction with the certifications and the KPMG attestation report for a more complete understanding of the topics presented.
Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, IT security, internal audit and legal departments under the supervision of our CEO and CFO.
Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Annual Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Limitations on the Effectiveness of Controls. We do not expect our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and may not be detected.
Scope of the Controls Evaluation. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Annual Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.
Conclusions regarding Disclosure Controls. Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of September 30, 2024, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting.
Management of the Company, including the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance to management and our Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. A system of internal controls may become inadequate over time because of changes in conditions or deterioration in the degree of compliance with
- 38 -
the policies or procedures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2024. using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management has concluded that, as of September 30, 2024, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles based on such criteria.
Report of Independent Registered Public Accounting Firm. Please refer to KPMG’s Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting on page of the financial statements, which begin on page 48 of this Annual Report.
Changes in Internal Control over Financial Reporting. During our last fiscal quarter, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
During the quarter ended September 30, 2024, no director or officer (as defined in 16a-1(f) of the Exchange Act) of the Company adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as such terms are defined in Item 408(a) of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Board of Directors has adopted: (i) Corporate Governance Guidelines and (ii) a Code of Business Conduct and Ethics that apply to directors, officers and employees. Copies of these documents and the committee charters are available on our website at www.sallybeautyholdings.com and are available in print to any person, without charge, upon written request to our Vice President of Investor Relations. We intend to disclose on our website at www.sallybeautyholdings.com any substantive amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to these individuals or persons performing similar functions.
The additional information required by Item 10 of this Annual Report on Form 10-K is incorporated herein by reference from our Proxy Statement related to the 2025 Annual Meeting of Stockholders under the headings “Proposal 1 - Election of Directors,” “Executive Officers,” “Corporate Governance, the Board, and Its Committees” and “Report of the Audit Committee.”

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of this Annual Report on Form 10-K is incorporated herein by reference from our Proxy Statement related to the 2025 Annual Meeting of Stockholders under the headings “Directors’ Compensation and Benefits,” “Narrative Discussion of Director Compensation Table,” “Compensation Discussion and Analysis,” “Compensation and Talent Committee Report,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation.”

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 of this Annual Report on Form 10-K is incorporated herein by reference from our Proxy Statement related to the 2025 Annual Meeting of Stockholders under the heading “Beneficial Ownership of Company’s Stock."
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information as of September 30, 2024, about our common stock that may be issued under all of our existing equity compensation plans:
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
(a)
Weighted average exercise price of outstanding options, warrants and rights (2)
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (3)
(c)
Equity compensation plans
approved by security holders
6,198,322
$
17.84
4,678,311
Equity compensation plans not
approved by security holders
N/A
N/A
N/A
Total
6,198,322
$
17.84
4,678,311
1.Includes 2,032,982 shares issuable upon exercise of stock options and 4,165,340 shares that may be issued upon settlement of restricted stock units ("RSUs"), including shares that may be issued pursuant to outstanding performance-based and market-based awards, assuming the target is met.
2.Calculation of weighted-average exercise price of outstanding awards includes stock options but does not include RSUs, performance-based awards or market-based awards.
3.Represents shares that are available for issuance pursuant to the 2019 Omnibus Plan, all of which are available as full value awards. No further awards may be granted under the 2010 Omnibus Plan following the effective date of the 2019 Omnibus Plan.
- 40 -

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 of this Annual Report on Form 10-K is incorporated herein by reference from our Proxy Statement related to the 2025 Annual Meeting of Stockholders under the headings “Corporate Governance, the Board, and Its Committees,” “Compensation Committee Interlocks and Insider Participation” and “Related Party Transactions.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 of this Annual Report on Form 10-K is incorporated herein by reference from our Proxy Statement related to the 2025 Annual Meeting of Stockholders under the heading “Proposal 4 - Ratification of Selection of Auditors.”
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PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Documents filed as part of this Annual Report:
(a) List of Financial Statements and Financial Statement Schedules
See “Index to Financial Statements” which is located on page 48 of this Annual Report.
(b) Exhibits
The following exhibits are filed as part of this Annual Report or are incorporated herein by reference:
Exhibit No.
Description
3.1
Third Restated Certificate of Incorporation of Sally Beauty Holdings, Inc., dated January 30, 2014, which is incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on January 30, 2014
3.2
Amended and Restated Bylaws of Sally Beauty Holdings, Inc., dated April 26, 2017, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 28, 2017
4.1
Amended and Restated Credit Agreement dated July 6, 2017, among the Borrowers, the Guarantors, the Lenders party thereto, the Administrative Agent, the Collateral Agent, the Syndication Agent and the Documentation Agent (as such terms are defined therein), which is incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 6, 2017 
4.2
First Amendment to Amended and Restated Credit Agreement dated April 15, 2020 among the Borrowers, the Parent Guarantors, the Administrative Agent, the Syndication Agent, the Documentation Agent, and the Lenders party thereto (as such terms are defined therein), which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 16, 2020
4.3
Second Amendment to Amended and Restated Credit Agreement dated September 2, 2020, among the Borrowers, the Guarantors, the Administrative Agent, the Collateral Agent, the Canadian Agent and the Lenders party thereto (as such terms are defined therein), which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 3, 2020
4.4
Third Amendment to Amended and Restated Credit Agreement dated May 11, 2021, among the Borrowers, the Guarantors, the Administrative Agent, the Collateral Agent, the Canadian Agent and the Lenders party thereto (as such terms are defined therein), which is incorporated herein by reference from Exhibit 4.13 to the Company’s Annual Report on Form 10-K/A filed on December 8, 2021
4.5
Fourth Amendment to Amended and Restated Credit Agreement dated April 19, 2023, among the Borrowers, the Parent Guarantors, the Administrative Agent, the Syndication Agent, the Documentation Agent, and the Lenders party thereto (as such terms are defined therein), which is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 3, 2023
4.6
Indenture, dated as of May 18, 2012, by and among Sally Holdings LLC, Sally Capital Inc., the guarantors listed therein and Wells Fargo Bank, National Association, which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 18, 2012
4.7
Credit Agreement, dated as of February 28, 2023, by and among Sally Holdings LLC, Sally Capital, Inc., Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties, which is incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 1, 2023
4.8
First Refinancing Amendment to Credit Agreement, dated as of September 13, 2023, by and among Sally Holdings LLC, Sally Capital, Inc., Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties, which is incorporated herein by reference from Exhibit 4.9 to the Company's Annual Report on Form 10-K filed on November 16, 2023
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Exhibit No.
Description
4.9
Fifth Supplemental Indenture, dated as of February 27, 2024, by and among Sally Holdings LLC, Sally Capital Inc., the guarantors listed therein and Computershare Trust Company, N.A., which is incorporated herein by reference from Exhibit 4.2 from the Company’s Current Report on Form 8-K filed on February 27, 2024
4.10
Second Refinancing Amendment to Credit Agreement, dated as of June 14, 2024, by and among Sally Holdings LLC, Sally Capital Inc., Sally Beauty Holdings, Inc., Sally Investment Holdings LLC, Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties thereto, which is incorporated by reference from Exhibit 4.2 from the Company’s Quarterly Report on Form 10-Q filed on August 8, 2024
10.1
Tax Sharing Agreement, dated as of November 16, 2006, made and entered into by and among Sally Beauty Holdings, Inc., Sally Investment Holdings LLC and Sally Holdings LLC, which is incorporated herein by reference from Exhibit 10.14 of the Quarterly Report on Form 10-Q of Sally Holdings LLC and Sally Capital Inc. filed on August 29, 2007
10.2
Form of Amended and Restated Indemnification Agreement with Directors, which is incorporated herein by reference from Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed on November 19, 2009
10.3
Sally Beauty Holdings, Inc. Amended and Restated 2010 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed on November 15, 2012
10.4
Sally Beauty Holdings, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on December 19, 2018
10.5
Sally Beauty Holdings, Inc. Second Amended and Restated 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.20 from the Company’s Annual report on Form 10-K filed on November 22, 2021
10.6
2019 Form of Restricted Stock Unit Agreement for Independent Directors pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 5, 2019
10.7
2019 Form of Stock Option Agreement pursuant to the Sally Beauty Holdings, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.20 from the Company’s Annual Report on Form 10-K filed on November 25, 2019
10.8
2019 Form of Restricted Stock Agreement pursuant to the Sally Beauty Holdings, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.21 from the Company’s Annual Report on Form 10-K filed on November 25, 2019
10.9
Form of Severance Agreement between each of Mark G. Spinks and the Company effective July 31, 2015, Scott C. Sherman and the Company effective October 1, 2017, Marlo Cormier and the Company effective April 9, 2020, and Denise Paulonis and the Company effective October 1, 2021, which is incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 5, 2012
10.10
Sally Beauty Holdings, Inc. Fourth Amended and Restated Independent Director Compensation Policy, which is incorporated herein by reference from Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on November 14, 2018
10.11
2022 Form of Restricted Stock Unit Agreement for Independent Directors pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
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Exhibit No.
Description
10.12
2022 Form of Restricted Stock Unit Agreement pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
10.13
2022 Form of Performance Unit Award Agreement in connection to Relative Total Shareholder Return pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
10.14
2022 Form of Performance Unit Award Agreement in connection to FY2023 Adjusted Operating Income pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.24 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
10.15
2022 Form of Performance Unit Award Agreement in connection to FY2024 Adjusted Operating Income pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
10.16
2022 Form of Performance Unit Award Agreement in connection to FY2025 Adjusted Operating Income pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.26 to the Company’s Annual Report on Form 10-K filed on November 17, 2022
10.17
Sally Beauty Holdings, Inc. Third Amended and Restated 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.17 to the Company's Annual Report on Form 10-K filed on November 16, 2023
10.18
Sally Beauty Holdings, Inc. Fifth Amended and Restated Independent Director Compensation Policy, which is incorporated herein by reference from Exhibit 10.19 to the Company's Annual Report on Form 10-K filed on November 16, 2023
10.19
2023 Form of Performance Unit Award Agreement in connection to FY24, FY25 and FY26 Adjusted Operating Income pursuant to the Sally Beauty Holdings, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.20 to the Company's Annual Report on Form 10-K filed on November 16, 2023
10.20
2023 Form of Performance Unit Award Agreement in connection to Relative Total Shareholder Return pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan, which is incorporated herein by reference from Exhibit 10.21 to the Company's Annual Report on Form 10-K filed on November 16, 2023
10.21
2024 Form of Restricted Stock Unit Agreement pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan*
10.22
2024 Form of Performance Unit Award Agreement in connection to FY25, FY26 and FY27 Adjusted Operating Income pursuant to the Sally Beauty Holdings, Inc. 2019 Omnibus Incentive Plan*
10.23
2024 Form of Performance Unit Award Agreement in connection to Relative Total Shareholder Return pursuant to the Sally Beauty Holding, Inc. 2019 Omnibus Incentive Plan*
Insider Trading Policy*
21.1
List of Subsidiaries of Sally Beauty Holdings, Inc.*
List of Subsidiary Guarantors*
23.1
Consent of KPMG*
31.1
Rule 13(a)-14(a)/15(d)-14(a) Certification of Denise Paulonis*
31.2
Rule 13(a)-14(a)/15(d)-14(a) Certification of Marlo M. Cormier*
- 44 -
Exhibit No.
Description
32.1
Section 1350 Certification of Denise Paulonis*
32.2
Section 1350 Certification of Marlo M. Cormier*
Sally Beauty Holdings, Inc. Compensation Recoupment Policy *
The following financial information from our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) Consolidated Statements of Stockholders’ Equity and (vi) the Notes to Consolidated Financial Statements*
Cover Page Interactive Data File (formatted as Inline XBRL) and contained in Exhibit 101
* Included herewith
 Certain schedules and exhibits have been omitted pursuant to Item 601(b) (2) of Regulation S-K. The Registrant agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request.
(c) Financial Statement Schedules
None