Sally Beauty (SBH 3.52%), a major distributor and retailer of professional beauty supplies, reported Q3 FY2025 earnings on August 5, 2025. The most notable news was that delivered a solid earnings beat, with adjusted earnings per share (EPS) reaching $0.51, outpacing the analyst estimate of $0.42 (non-GAAP). Revenue (GAAP) was $933 million, just above the $929.13 million GAAP consensus but down 1.0% from the same quarter last year. Overall, the quarter showed the company's continued discipline on cost control, operational efficiencies, and a growing digital presence, but topline growth remained under pressure amid softer sales in its main segments and ongoing store count reductions.
| Metric | Q3 2025(Ended June 30, 2025) | Q3 2025 Estimate | Q3 2024(Ended June 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (Adjusted, Non-GAAP) | $0.51 | $0.42 | $0.45 | 13 % |
| Revenue | $933 million | $929.12 million | $942 million | (1.0 %) |
| Adjusted Gross Margin | 52.0 % | 51.0 % | 1.0 pp | |
| Adjusted Operating Margin | 9.2 % | 8.9 % | 0.3 pp | |
| Adjusted EBITDA | $115 million | N/A | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
Company Overview and Key Success Factors
Sally Beauty operates as a specialty retailer and distributor of professional beauty products globally, catering to both salon professionals and retail customers. Its business is divided into two main units: Sally Beauty Supply (SBS), which serves do-it-yourself (DIY) and retail consumers via over 3,000 stores, and Beauty Systems Group (BSG), which targets licensed salon professionals through exclusive product lines and dedicated sales consultants.
The company’s recent focus has been on its omni-channel approach, offering beauty products through both physical stores and a growing suite of digital platforms. The expansion into e-commerce and online services, further investment into its own brands, and a drive for operational efficiency through programs like “Fuel for Growth” are central to its strategy. Key to success are strong ownership of brand innovation, deepening customer engagement via digital channels and loyalty programs, and tight cost controls to protect margins as the traditional store base contracts.
Third Quarter Performance: Highlights and Shifts
Results were shaped by modest sales declines offset by improvements in profitability. Adjusted EPS came in above expectations, benefiting from reduced costs, better product mix, and a disciplined approach to operating expenses. The revenue figure (GAAP), while above analyst consensus by nearly $4 million, declined 1.0% year over year, reflecting ongoing negative comparable sales and a net reduction in store counts—down 35 locations from last year.
The Sally Beauty Supply segment saw sales drop 1.8% year over year to $526.8 million, with comparable sales falling 1.1%. GAAP gross margin for SBS improved by 1.1 percentage points, driven by lower distribution and freight costs, reduced shrink expenses, and improved promotional strategies. GAAP operating earnings from this segment declined 4.2% compared to a year earlier.
Beauty Systems Group reported a small 0.2% increase in GAAP net sales to $406.5 million. Gross margin (GAAP) remained flat at 39.4%. Notably, GAAP operating earnings in BSG rose by 8.4%, as the segment benefited from expanded distribution, the launch of new professional haircare products, and brand innovation such as the addition of K18 and other care items. E-commerce sales made up 13.7% of BSG’s mix, compared to 8.2% for SBS, underlining greater digital adoption among salon professionals.
The company continued to execute on its digital and customer engagement initiatives, with global e-commerce sales reaching $99 million. This accounted for 10.6% of consolidated net sales and marked a year-over-year increase in digital penetration. New online services include Licensed Colorist on Demand (LCOD), which offers professional color consultations for retail customers. These services, along with ongoing loyalty program engagement—prior quarter membership was 15.0 million, accounting for 76.7% of sales in FY2024—helped partially offset declining in-store traffic.
Operationally, “Fuel for Growth” cost-saving measures contributed $6.4 million in savings and a 1.0 percentage point increase in adjusted gross margin. Inventory was managed down by 1.7%, reaching $1.01 billion. Cash flow remained strong, with $49 million in operating free cash flow (non-GAAP). The company paid down $21 million on term debt and repurchased $13 million in stock, extending its share repurchase authorization.
Looking Ahead: Guidance and Trends
Management now expects full-year comparable sales to be approximately flat, tightening its earlier range of “flat to down 1%.” Adjusted operating margin guidance has been raised to 8.6–8.7%, up from 8.0–8.5%. This change reflects optimism about continued cost efficiencies and gross margin performance, rather than topline improvement. Consolidated net sales are expected to be approximately 75 basis points lower than comparable sales due to the combined impact of foreign exchange rates and operating fewer stores than the prior year.
Areas to monitor for upcoming quarters include sustained momentum in digital and owned brands, continued progress in operational efficiency, and the ongoing impact of physical store reductions on overall revenue. Management noted that while digital programs, store refresh pilots, and initiatives like Happy Beauty show promise, topline trends remain uncertain and are closely linked to shifts in consumer behavior. No new or special dividends were announced. SBH does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
