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What changed in Sally Beauty Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sally Beauty Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+309 added−279 removedSource: 10-K (2025-11-13) vs 10-K (2024-11-14)

Top changes in Sally Beauty Holdings, Inc.'s 2025 10-K

309 paragraphs added · 279 removed · 238 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeBSG’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2024 2023 2022 Beginning store count 1,338 1,355 1,362 Opened 14 38 54 Closed (1) (20 ) (55 ) (61 ) Franchises opened 1 — 2 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.
Biggest changeOur 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 beauty professionals. - 3 - BSG’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2025 2024 2023 Beginning store count 1,331 1,338 1,355 Opened 22 14 38 Closed (1) (28 ) (20 ) (55 ) Franchises opened 4 1 — Franchises closed (3 ) (2 ) — Ending store count 1,326 1,331 1,338 (1) In fiscal years 2024 and 2023, we closed 2 stores and 26 stores, respectively, in connection with the Plan.
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.
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, serums, 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, and fragrances • 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.
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.
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 Sally merchandise for their DIY beauty, nails, hair and self-expression.
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.
Culture & 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.
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.
Additionally, we offer our Sally 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 Sally purchases.
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.
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 inclusion, belonging and engagement within our teams.
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").
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”).
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.
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.
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.
Sally Beauty Sally 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.
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.
Sally’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.
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").
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”).
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.
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 age, gender, ethnic and cultural diversity.
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.
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 Sally, we offer LCOD to provide our customers with a more engaging shopping experience.
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. - 3 - 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.
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. - 4 - Marketing and Advertising Sally Beauty We target existing and potential customers through an integrated, personalized 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 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.
Sally 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.
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.
We operate two business segments that offer beauty products in key categories, including hair care, hair color, styling tools and nails. Sally Beauty (“Sally”) – 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.
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.
Access to Public Filings - 9 - 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.
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.
Our Compensation & Talent Committee provides hands-on oversight and guidance of our Culture & 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.
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.
Human Capital Management As of September 30, 2025, we had approximately 27,000 global associates, including approximately 11,000 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.
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.
At the Board Level : Our Board’s composition leads the Company’s commitment to Culture 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.
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 .
We will continue to develop and evolve how we enhance Culture & 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 Culture & Belonging can be found at: www.sallybeautyholdings.com/our-company/culture-and-belonging .
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. - 9 -
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. - 10 -
Additionally, our digital strategy of enhancing our customer centricity aims to expand our services ecosystem to - 4 - 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.
Additionally, our digital strategy of enhancing our customer centricity aims to expand our services ecosystem to support professional stylists as well as increase education and expertise to inspire and support all of our customers. For the fiscal years 2025, 2024, and 2023, our global e-commerce sales represented approximately 10.7%, 9.8%, and 9.3%, respectively, of our consolidated sales.
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.
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, salon business consultants (“SBCs”) and digital platforms, including our www.cosmoprofbeauty.com website, a mobile commerce-based app and chain portals.
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.
At SBH, we believe our focus on Culture & Belonging is 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 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 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 culture, belonging, and engagement.
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.
Sally operates primarily through retail stores (generally operating under the Sally Beauty banner) and digital platforms, including our www.sallybeauty.com website, a mobile commerce-based app, and third-party digital marketplaces. Beauty Systems Group (“BSG”) – A leading full-service omni-channel distributor that offers professional beauty supplies exclusively to salons and licensed beauty professionals throughout the U.S. and Canada.
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.
As a result, we were able to optimize the shipping frequency from our distribution centers to a majority of our Sally 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.
(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.
(2) In fiscal year 2023, we closed 294 stores 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.
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.
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 SBCs. As of September 30, 2025, we had a network of 591 SBCs who personally consult, support and sell directly to salons and salon professionals.
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 - 5 - 47% of our consolidated merchandise purchases.
For fiscal year 2025, our five largest suppliers – Henkel AG & Co. KGaA; the Professional Products Division of L'Oreal USA S/D, Inc.; Wella Company; John Paul Mitchell Systems; and Kao Corporation – accounted for approximately 48% of our consolidated merchandise purchases.
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.
Our Sally Beauty Rewards Program is free to join and designed to earn Sally customer loyalty. The program provides our loyalty customers the ability to earn points on their Sally purchases and to convert those points to Sally Beauty Rewards when certain thresholds are met. Through the program, these customers may also receive exclusive savings and personalized marketing offers.
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.
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 Culture & Belonging are a core focus of our associate engagement and the work environment for our teams.
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 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 stores are located. Serving the varied demographics and needs of our customers drives a culture and workforce that embraces and reflects the communities we serve.
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.
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; parcel delivery (from store or distribution centers); 2-hour delivery; and several digital marketplaces, such as Instacart, DoorDash and Uber Eats. Seasonality Our business is generally not seasonal.
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.
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.
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.
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 BOPIS and 2-hour delivery options.
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.
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 more than 15 million active customers (shopped with Sally in the past 12 months), of which a majority are part of our Sally Beauty Rewards Program.
SBS’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2024 2023 2022 Beginning store count 3,148 3,439 3,549 Opened (1) 32 54 47 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.
Sally’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2025 2024 2023 Beginning store count 3,129 3,148 3,439 Opened (1) 52 32 54 Closed (2) (85 ) (51 ) (345 ) Ending store count 3,096 3,129 3,148 (1) In fiscal years 2025, 2024 and 2023, we opened 8, 2 and 10 pilot stores, respectively, for Happy Beauty Co.
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.
In new marketplaces, Sally selects geographic areas and store sites on the basis of demographic information, the quality and nature of neighboring tenants, store visibility and location accessibility. Sally generally seeks to expand in geographically contiguous areas to leverage its expertise and brand recognition.
This commitment is evidenced, in part, by our background check policy for new hires, training and policy implementations related to - 6 - 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.
This commitment is evidenced, in part, by our background check policy for new hires, training and policy implementations related to 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. - 7 - Additionally, we value our partnerships with suppliers and vendors and understand the impact they can have on our 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 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 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.
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 owned brands, driving growth in our top brands; Ion, Salon Care, Beauty Secrets, Bondbar and Inspired by Nature. We continue to focus on mindful products with expansion on Sauce Beauty and Soapbox.
We come together to create a culture for “One & All” - 7 - 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.
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. - 8 - We come together to create a culture for “One & All” Culture & 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 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.
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.
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®.
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®, Beyond the Zone®, Generic Value Products®, Salon Care®, Silk Elements®, Bondbar®, Inspired by Nature®, Beauty Secrets®, Strawberry Leopard®, and Texture ID®.
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 - 2 - 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.
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 dedicated to leading third-party brands.
(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.
Store Design and Locations Sally Beauty Sally has retail stores in the U.S. (including Puerto Rico), Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, and Chile. Stores are designed to highlight our extensive product offerings and differentiated position in hair color, hair care, styling tools and nails.
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.
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.
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.
As of September 30, 2025, we supplied franchised stores 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 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.
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.
Sally’s differentiation is to offer a vast array of hair color, hair care, and nail 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.
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 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. - 6 - 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.
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.
This online option is - 5 - available in all 50 states and appears as a chat box when customers are browsing our selection of hair color merchandise on our website. Additionally, our licensed colorists are strengthening their knowledge of the hair care category and beginning to test hair care consultations.
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.
Happy Beauty Co. is a unique new retail store concept that brings to market an engaging beauty experience with thousands of quality products at sharp price points in an accessible, fun and expressive environment.
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. - 1 - 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.
Going into next fiscal year, we are focused on increasing our distribution footprint through expanding high-profile brands, and bringing to market innovation across our key categories of hair care and hair color.
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.
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.
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.
As part of our strategic initiatives, we launched Sally Ignited, an initiative that includes a refresh of our store base to provide a better customer shopping experience. 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.
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.
During fiscal 2025, the work encompassed vendor pricing negotiations, sourcing, supply chain, best cost location and non-trade spend, where we have carried out deep dives and are extracting value. 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.
The following table highlights the size of the Sally Beauty Rewards membership and the percentage of sales for which their membership accounts: Fiscal Year 2024 2023 2022 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.
In the U.S., we also offer our Sally customers the opportunity to apply for the Sally Beauty Rewards Credit Card which provides additional benefits to Sally Beauty Rewards members.
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.
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, Amazon, DoorDash, Uber Eats and Instacart, to help fuel digital sales growth and attract new customers to our Sally brands.
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.
During the fiscal years 2025, 2024, and 2023, our Sally owned brand sales have been approximately 35%, 34%, and 34%, respectively, of total Sally 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.
The applicable laws and - 8 - 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.
To date, these laws and regulations have not had a material effect upon our operations.
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.
Operating and Growth Strategy Our operating and growth strategy is guided by our vision to strengthen our position in our core category of professional hair color and capture growth opportunities across adjacent categories such as care, nails, and styling tools for both do-it-yourself (“DIY”) customers and professional stylists.
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.
We continue to build customer loyalty and appeal to new customers through our value-added services and concepts, including Licensed Colorist on Demand (“LCOD”) and Happy Beauty Co. Additionally, we are using technology to drive growth through personalization and refining our performance marketing tactics to ensure we remain in lockstep with evolving customer needs.
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.
Lastly, we remain focused on nail care with an expanded selection of gel and artificial nails. We believe that many of our owned brands, available only from Sally, offer equal or better quality than leading third-party brands.
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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.
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As we continue to build on our momentum, we are sharpening our focus to further elevate differentiation and enhancing our strategic initiatives to support this, while continuing to drive growth and profitability.
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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.
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Understand and Activate the Customer As part of our strategic focus on deepening our relationships with our current customer base and expanding into new consumer markets, we are placing greater emphasis on personalization and bespoke customer journeys. Our DIY customers and professional stylists value the services, education and innovation we provide.
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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.
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We are focused on expanding our personalization experiences across all customer touchpoints, deepening our customer insights to drive the richness of the personalization decisioning and targeting, and strengthening our omni-channel communication and customer connections.
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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.
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Our current marketing strategy utilizes a variety of media channels to connect directly with customers, including e-mail, text messages, mobile app notifications, and digital and physical advertising, as well as content creators that educate and empower customers to feel confident about DIY hair and nail care.
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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.
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We are focused on elevating our marketing partnerships with brands to enhance reach, relevance, and mutual value creation. Our marketing programs highlight brand partners' products and their competitive promotional offers to excite and empower existing and potential customers.
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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.
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At the same time, we are driving greater marketing effectiveness - 1 - through the application of marketing mix modeling and the continued refinement of our brand messaging, ensuring that our campaigns are both impactful and aligned with our strategic goals.
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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.
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Unlock and Harvest Digital Value We plan to continue leveraging and enhancing our omni-channel business model that allows customers to shop in store, online, or through a hybrid approach such as our “buy online, pick up in store” (“BOPIS”) or 2-hour delivery options.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur 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.
Biggest changeFluctuations 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, generally due to inflation over the past few years, which may impact our ability to maintain or grow our margins.
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.
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, acts of war or terrorism, or pandemics, could materially harm our operations to the extent they affect the production, shipment or receipt of merchandise.
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.
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, or include inadequate warnings concerning flammability or interactions with other substances, or that we knew or should have known of an alleged defect.
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.
A significant data security breach, including misappropriation of our customers’, vendors’, 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.
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.
Despite these and other safeguards, 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, and 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.
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.
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. Insurance costs associated with our business may rise significantly in the event of a large-scale catastrophe or crisis.
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.
Non-compliance with applicable laws and regulations, 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.
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.
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.
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.
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. - 20 - We may be adversely affected by any disruption in our information technology systems.
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.
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 retail and distribution industry is highly competitive and is consolidating.
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.
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.
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.
Relatedly, 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.
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.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition, and results of operations. - 23 - Each of our ABL facility, term loan B, and senior notes contain certain covenants and restrictions with which we are required to comply.
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.
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, - 16 - such as consumer protection, product liability, privacy, intellectual property, securities and defamation.
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.
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. From time to time, our suppliers ship products to us that fail to conform to our quality control standards.
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.
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. Such claims could have an adverse impact on our reputation.
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.
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 new and existing regulations could result in significant fines or damages, in addition to costs and expenses necessary to defend claims related thereto.
Our inability to control our labor costs could affect our results of operations and could result in lower margins in our two segments. - 14 - 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.
Our inability to control our labor costs could affect our results of operations and could result in lower margins in our two segments. 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.
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.
Manufacturers may try to recover some or all of any - 19 - 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.
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. - 10 - We expect continuously changing fashion-related trends and consumer tastes to influence future demand for beauty products.
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. - 11 - We expect continuously changing fashion-related trends and consumer tastes to influence future demand for beauty products.
If we are unable to repay debt, lenders holding secured obligations, such as the lenders under the ABL - 21 - facility, could proceed against the collateral that secures such unpaid debt.
If we are unable to repay debt, lenders holding secured obligations, such as the lenders under the ABL facility, could proceed against the collateral that secures such unpaid debt.
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 - 17 - and import these products.
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 and import these products.
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.
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 Sally’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.
Some of our suppliers may seek to decrease their reliance on distribution intermediaries, including full-service/exclusive and open-line distributors like Sally and BSG, 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.
ITEM 1A. RI SK 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.
ITEM 1A. RI SK FACTORS Below, we describe important risk factors that could materially affect our business, financial condition or results of operations in future periods. 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.
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.
Although we believe our participation in both e-commerce and in-store sales is a distinct advantage for us due to synergies and the potential for new customers, supporting product offerings through both channels could create issues that have the potential to adversely affect our results of operations.
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.
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 business. Diversion of professional products sold by BSG could have an adverse impact on our revenues.
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.
A reduction in traffic to, or the closing of, other retailers in shopping areas where our Sally 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.
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.
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.
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.
We may also 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.
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.
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 initiatives to significantly advance our digital commerce capabilities and grow our e-commerce businesses.
Furthermore, as our e-commerce businesses successfully grow, they may - 12 - 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.
Furthermore, as our e-commerce businesses successfully grow, they may do so in part by - 13 - 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.
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.
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 comparable sales will suffer and our growth prospects, financial results, profitability, and cash flows will also be adversely impacted.
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.
Because we purchase products from many manufacturers and fillers pursuant to at-will contracts and contracts that can be terminated without cause upon 90 days’ notice or less, or that expire without express rights of renewal, manufacturers and fillers could discontinue sales to us immediately or upon short notice.
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.
We are also dependent on recruiting, training, motivating, managing and retaining our store employees that interact with our customers daily. Many team members are in entry-level or part-time positions with historically high turnover rates.
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.
If key vendors ceased granting us exclusive distribution rights, or decided to utilize other distribution channels for their products, in each case 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.
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. - 13 - We may, from time to time, seek to develop and introduce new store concepts.
If our personnel and systems are unable to - 14 - successfully manage this increased burden, our business, financial condition, and results of operations may be materially affected. We may, from time to time, seek to develop and introduce new store concepts.
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.
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 Sally product sales come from our owned and exclusive-label brand 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.
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 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.
As a result of our real estate strategy, most of our Sally 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.
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.
Any actual defects or allegations of defects in products sold by us could result in adverse publicity and could harm our reputation or the reputation of the manufacturer, which could adversely affect our business, financial condition 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.
General Economic, Market and Foreign Risks The political, social and economic conditions in the locations that 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.
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.
Recently, - 17 - these foreign currencies have strengthened 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.
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.
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 uncertain if 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.
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 may similarly rely on other professional 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.
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.
Because most of our Sally 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.
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.
If products sold by us are found to be defective in labeling or content, the credibility and reputation of our Company and the brands we sell may be harmed, acceptance of our products may decrease, and we may be exposed to liability that exceeds our products liability insurance coverage and manufacturer indemnities.
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 upon suppliers, manufacturers, and fillers that may be unable to provide products of adequate quality or that 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.
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.
In addition, we and our subsidiaries may incur substantial additional indebtedness in the future. As of September 30, 2025, our ABL facility provided us commitments for additional borrowings of up to approximately $482.4 million, subject to borrowing base limitations, outstanding letters of credit and limitations on cash hoarding above certain balances, once utilized.
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.
The diverted products may be old, tainted or damaged and sold through unapproved outlets, all of which could diminish the value of the particular brand.
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.
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 customer base.
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.
Most of the products that BSG sells, including those sold by our Armstrong McCall franchisees, are meant to be used exclusively by salons and salon professionals or sold exclusively to their retail consumers.
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.
We use marketing, advertising and promotional programs to attract customers through various media, including social media ( e.g. , Instagram, TikTok, Facebook), websites, streaming services, 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, 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.
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.
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.
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; and - 22 - • worldwide economic conditions and, in particular, the retail sales environment in North America and Europe.
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.
A number of other U.S. states have enacted consumer privacy laws that have recently taken effect or are expected to take effect in 2026 and beyond or have revived existing state laws with new meaning, potentially subjecting retailers to privacy-based class action lawsuits.
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.
Despite our efforts to prevent it, incidents of product diversion occur, and our products are sold by these purchasers (and possibly by other bulk purchasers such as franchisees) to wholesalers and general merchandise retailers, among others. These retailers, in turn, sell such products to consumers.
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.
A substantial disruption in our information technology systems for any prolonged time period (e.g., exceeding 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.
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.
We are subject to risks related to our international operations. We operate on a global basis, and approximately 18% of our net revenues from continuing operations in fiscal year 2025 were generated outside the U.S.
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.
While we strive to maintain robust succession planning to mitigate the negative impact associated with the loss of a key executive employee, an unplanned loss or unsuccessful transition could significantly disrupt our operations and could have a material adverse effect on our business, financial condition and results of operations.
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. - 11 - 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.
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. - 12 - 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.
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.
Our trademarks, certain of which are material to our business, are registered or legally protected in countries in which we operate. The success of our business depends to a certain extent upon the value associated with our intellectual property rights.
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.
In many cases, we rely on manufacturers ’ 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 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.
Our success depends in part on our ability, and our distributed third-party brands ’ ability, to anticipate, gauge and timely react to changes in consumer spending patterns and preferences for specific beauty products.
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.
As we continue to grow our e-commerce businesses, the impacts 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 operating margin, profit, future growth and comparable sales.
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.
Since we use AI in customer-facing interactions, any inaccuracies in AI responses could affect customer satisfaction, lead to misinformation, and harm our brand. Unintended consequences due to the use of AI may lead to regulatory issues, reputational or financial harm, and operational disruptions.
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 - 16 - 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.
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 downturn, an outbreak of flu or other viruses, a general downturn in the local area where our Sally 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. - 18 - 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.
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.
The primary competitive factors in the beauty products retail and distribution industry are: price; quality; perceived value; consumer brand name recognition, packaging, and variety; availability; customer service; desirable and convenient store locations; in-stock inventory; and, with respect to e-commerce, the look and feel of our digital platforms, ease and security of the checkout process, and delivery times and costs.
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.
While the capital requirements to open a Sally or BSG store (excluding inventory) vary attributable to geography, such capital requirements have historically been relatively low in the U.S. and Canada.
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.
As of September 30, 2025, certain of our subsidiaries, including Sally Holdings LLC (“Sally Holdings”), had an aggregate principal amount of approximately $875.0 million of outstanding debt. Our substantial debt could have significant consequences.
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.
Unauthorized access to confidential information and data on our information technology systems, security, and data breaches could have a material adverse effect on our business and results of operation. 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.
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.
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.
In addition, the laws of certain - 18 - 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.
While we intend to vigorously protect our intellectual property rights against infringement, we may not be successful. In addition, the laws of certain 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 are expected to continue to be substantial.
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.
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. - 21 - Failure to comply with rapidly evolving data privacy laws could materially adversely affect our business, financial condition and operating results.
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.
We are continuing the implementation of a significant number of strategic initiatives designed to acquire and retain customers, strengthen our digital foundation, 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.
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 addition, our information technology systems may be vulnerable to fire, natural disasters, power outages, systems disruptions, systems conversions, security breaches, cyberattacks, phishing attacks, computer viruses and/or human error.
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.
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.
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.
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.
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.
Our comparable sales and quarterly results of operations have fluctuated in the past and we expect them to continue to fluctuate in the future.
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.
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 for any other quarter, and may even decrease, which could have a material adverse effect on our business, financial condition, and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+1 added−3 removed7 unchanged
Biggest changeFeet 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. - 25 -
Biggest changeFeet Business Segment Company-Owned Properties: Reno, Nevada Warehouse 253,000 Sally Columbus, Ohio Warehouse 246,000 Sally Jacksonville, Florida Warehouse 237,000 Sally Ronse, Belgium Office, Warehouse (1) 91,000 Sally Leased Properties: Denton, Texas Corporate Headquarters (2) 200,000 N/A Plano, Texas Corporate Headquarters (2) 145,000 N/A Fort Worth, Texas Warehouse 494,000 Sally & BSG Greenville, Ohio Warehouse 245,000 BSG Fresno, California Warehouse 200,000 BSG Blackburn, Lancashire, England Warehouse 195,000 Sally Spartanburg, South Carolina Warehouse 190,000 BSG Ghent, Belgium Office, Warehouse 94,000 Sally Guadalupe, Nuevo Leon, Mexico Warehouse 78,000 Sally Ghent, Belgium Warehouse 67,000 Sally Calgary, Alberta, Canada Warehouse 60,000 BSG Mississauga, Ontario, Canada Warehouse 60,000 BSG Saint-Jerome, Quebec, Canada Warehouse 50,000 BSG (1) The Company took ownership of the facility in Ronse, Belgium during fiscal year 2025 upon the expiration of the related lease.
The Cybersecurity Program is part of our integrated risk management process and includes, but is not limited to, the following features: • Regularly simulated phishing attacks and comprehensive cybersecurity training for all employees, with special focus on high-risk individuals using a new security awareness platform. • Cybersecurity insurance coverage to mitigate financial impacts from potential cyber incidents. • Endpoint detection and response technologies (EDR) to monitor systems continuously for malicious activity. • Behavior analytics tools that help track normal behavior patterns and quickly detect any anomalies. • Cloud security measures, offering comprehensive protection and vulnerability management for our cloud environments. • Digital risk protection that includes brand protection, social media monitoring, dark web surveillance, and proactive response to phishing, fraud, and account takeovers. • Zero-day vulnerability management, with third-party monitoring to prioritize critical vulnerabilities based on real-time risk assessments and active exploitation. • Comprehensive vendor risk management program, including penetration tests, Service Organization Control ("SOC") reports, and security architecture reviews, especially for third parties managing sensitive data or accessing internal systems.
The Cybersecurity Program is part of our integrated risk management process and includes, but is not limited to, the following features: • Regularly simulated phishing attacks and comprehensive cybersecurity training for all employees, with special focus on high-risk individuals using a new security awareness platform. • Cybersecurity insurance coverage to mitigate financial impacts from potential cyber incidents. • Endpoint detection and response technologies (EDR) to monitor systems continuously for malicious activity. • Behavior analytics tools that help track normal behavior patterns and quickly detect any anomalies. • Cloud security measures, offering comprehensive protection and vulnerability management for our cloud environments. • Digital risk protection that includes brand protection, social media monitoring, dark web surveillance, and proactive response to phishing, fraud, and account takeovers. • Zero-day vulnerability management, with third-party monitoring to prioritize critical vulnerabilities based on real-time risk assessments and active exploitation. • Comprehensive vendor risk management program, including penetration tests, Service Organization Control (“SOC”) reports, and security architecture reviews, especially for third parties managing sensitive data or accessing internal systems.
These - 22 - assessments are supplemented by red team exercises and real-world incident response simulations to continually improve our security posture. From time to time, we experience cybersecurity threats and incidents.
These assessments are supplemented by red team exercises and real-world incident response simulations to continually improve our security posture. From time to time, we experience cybersecurity threats and incidents.
As of the date of this Annual Report, we have not identified any instances that have occurred in the current year, or in prior years, that would have a material impact on our Company or on our results of operation, or financial position. For more information related to our cybersecurity risks, see Item 1A.
As of the date of this Annual Report, we have not identified any instances that have occurred in the current year, or in prior years, that would have a material impact on our Company or on our results of operations, or financial position. For more information related to our cybersecurity risks, see Item 1A.
Findings are reported to the Chief Executive Officer (“CEO”), Chief Financial Officer ("CFO"), our Board and the Disclosure Committee, the latter of which is comprised of senior representatives from our finance, accounting, internal audit and legal departments under the supervision of the CEO and CFO.
Findings are reported to the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), our - 24 - Board and the Disclosure Committee, the latter of which is comprised of senior representatives from our finance, accounting, internal audit and legal departments under the supervision of the CEO and CFO.
Topics covered by these reports include, but are not limited to, risk identification and management strategies, cybersecurity strategy and governance structure, consumer data protection, the Company’s ongoing risk mitigation activities, learnings from data security incidents of peer companies, results of third-party assessments and testing, updates on annual associate training and other specific training initiatives. Ms.
Topics covered by these reports include , but are not limited to, risk identification and management strategies, cybersecurity strategy and governance structure, consumer data protection, the Company’s ongoing risk mitigation activities, learnings from data security incidents of peer companies, results of third-party assessments and testing, updates on annual associate training and other specific training initiatives. - 25 - I TEM 2.
With a diverse background in both industry and consulting, our CISO has led major security programs, implementing practical strategies to protect critical data and systems. On at least a quarterly basis, the CISO delivers a detailed report to the full Board — including Board member Erin Nealy Cox — on data protection and cybersecurity matters.
With a diverse background in both industry and consulting, our CISO has led major security programs, implementing practical strategies to protect critical data and systems. On at least a quarterly basis, the CISO delivers a detailed report to the full Board on data protection and cybersecurity matters.
Our CISO reports directly to the Chief Information Officer and is responsible for the operation of our Cybersecurity Program. Our CISO brings over 26 years of experience in information security, including the last 12 years as a Chief Information Security Officer in the retail industry.
Our CISO reports directly to the Chief Information Officer and is responsible for the operation of our Cybersecurity Program. Our CISO brings over 25 years of experience in information security, including more than 10 years as a Chief Information Security Officer in the retail industry.
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 39 11 2 Alaska 4 3 — Arizona 75 32 3 Arkansas 23 11 — California 244 154 — Colorado 45 19 — Connecticut 24 20 — Delaware 6 2 — Florida 167 79 2 Georgia 73 29 — Hawaii 6 5 — Idaho 14 11 — Illinois 73 49 — Indiana 49 32 — Iowa 23 11 — Kansas 18 8 — Kentucky 41 21 — Louisiana 37 — 16 Maine 7 4 — Maryland 24 22 — Massachusetts 38 28 — Michigan 63 35 — Minnesota 33 20 — Mississippi 24 2 6 Missouri 40 15 — Montana 8 7 — Nebraska 17 8 — Nevada 31 15 — New Hampshire 14 8 — New Jersey 37 13 — New Mexico 22 4 3 New York 67 45 — North Carolina 85 38 — North Dakota 4 5 — Ohio 107 56 — Oklahoma 39 2 5 Oregon 32 14 — Pennsylvania 75 57 — Puerto Rico 37 8 — Rhode Island 6 4 — South Carolina 35 14 — South Dakota 5 4 — - 24 - SBS BSG Location Company- Operated Company- Operated Franchise United States (including Puerto Rico) Tennessee 59 30 — Texas 266 6 94 Utah 31 23 — Vermont 2 1 — Virginia 47 33 — Washington 47 29 — West Virginia 11 7 — Wisconsin 32 27 — Wyoming 4 — — Total United States (including Puerto Rico) 2,310 1,081 131 International: Mexico 254 — — United Kingdom 235 — — Canada 110 119 — France 73 — — Belgium 52 — — Chile 34 — — Netherlands 27 — — Spain 19 — — Germany 15 — — Total International 819 119 — Total Store Count 3,129 1,200 131 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.
The following table provides the number of stores per state in the U.S. and certain international locations, as of September 30, 2025: Sally BSG Location Company- Operated Company- Operated Franchise United States (including Puerto Rico) Alabama 39 11 2 Alaska 4 3 — Arizona 78 32 3 Arkansas 23 11 — California 243 153 — Colorado 45 19 — Connecticut 23 20 — Delaware 6 2 — Florida 166 78 2 Georgia 72 29 — Hawaii 6 5 — Idaho 14 11 — Illinois 73 48 — Indiana 49 32 — Iowa 23 11 — Kansas 18 8 — Kentucky 41 21 — Louisiana 34 — 16 Maine 7 4 — Maryland 24 22 — Massachusetts 37 27 — Michigan 63 35 — Minnesota 32 19 — Mississippi 24 2 6 Missouri 40 15 — Montana 8 7 — Nebraska 17 8 — Nevada 31 15 — New Hampshire 14 8 — New Jersey 36 13 — New Mexico 22 4 3 New York 67 43 — North Carolina 85 38 — North Dakota 4 5 — Ohio 107 56 — Oklahoma 38 2 5 Oregon 32 14 — Pennsylvania 75 57 — Puerto Rico 37 10 — Rhode Island 5 4 — South Carolina 35 14 — South Dakota 5 4 — - 26 - Sally BSG Location Company- Operated Company- Operated Franchise United States (including Puerto Rico) Tennessee 58 31 — Texas 268 6 95 Utah 31 22 — Vermont 1 1 — Virginia 47 33 — Washington 47 29 — West Virginia 11 7 — Wisconsin 31 27 — Wyoming 4 — — Total United States (including Puerto Rico) 2,300 1,076 132 International: Mexico 265 — — United Kingdom 218 — — Canada 110 118 — France 69 — — Belgium 52 — — Chile 33 — — Netherlands 23 — — Germany 14 — — Ireland 12 — — Total International 796 118 — Total Store Count 3,096 1,194 132 The following table provides locations for our significant offices and warehouses and our corporate headquarters, as of September 30, 2025: Location Type of Facility Approximate Sq.
P ROPERTIES 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.
P ROPERTIES All of our retail stores, as well as several distribution centers and office locations, are leased. We own four of our warehouse/distribution centers. The average store lease is for a term of five to ten years with customary renewal options.
Removed
Nealy Cox is an independent member of our Board, a cybersecurity expert and a former federal prosecutor with deep expertise in information security issues and board governance.
Added
(2) The Denton, Texas location was sold to Denton County, Texas on October 24, 2024. As part of the sale, the Company leased the building until our new office in Plano is ready. - 27 -
Removed
She is a partner at Kirkland & Ellis LLP in its Government, Regulatory and Internal Investigations Group, and was executive managing director at Stroz Friedberg, a cybersecurity and investigation consulting firm, where she ultimately led the firm’s incident response business, from 2003-2016.
Removed
In 2017, she served briefly as senior advisor to McKinsey & Company in the firm’s cybersecurity and risk practice. - 23 - I TEM 2.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, 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.
Biggest changeHowever, there can be no assurance 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 SAF ETY DISCLOSURES Not applicable - 26 - PART II
MINE SAF ETY DISCLOSURES Not applicable - 28 - PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases 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.
Biggest changePurchases 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, 2025: 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 - July 31, 2025 613,593 $ 9.97 613,593 $ 481,656,154 August 1 - August 31, 2025 701,231 12.64 701,231 472,793,957 September 1 - September 30, 2025 370,033 14.81 370,033 467,313,243 Total this quarter 1,684,857 $ 12.14 1,684,857 $ 467,313,243 (1) The table above does not include 767 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.
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.
Specialty Retailers Index (“DJ US Specialty Retailers”) assuming $100 was invested on September 30, 2020, 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.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER 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.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER 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 7, 2025, there were 377 stockholders of record of our common stock.
(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. - 27 - 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.
(3) In May 2025, our Board approved a term extension through September 30, 2029, of our share repurchase program to repurchase up to $1.0 billion of our common stock, which was originally approved in August 2017. - 29 - 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.
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 . [RESERVED] - 28 -
Fiscal year ended September 30, 2020 September 30, 2021 September 30, 2022 September 30, 2023 September 30, 2024 September 30, 2025 Sally Beauty Holdings, Inc. $ 100.00 $ 193.90 $ 144.99 $ 96.43 $ 156.16 $ 187.34 S&P 500 100.00 130.01 109.89 133.65 182.23 214.30 DJ US Specialty Retailers 100.00 127.45 83.56 94.96 141.12 203.26 ITEM 6 . [RESERVED] - 30 -

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+16 added−14 removed26 unchanged
Biggest changeOur calculation of comparable sales might not be the same as other retailers, as the calculation varies across the retail industry. - 29 - 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 % 2024 2023 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 % 50 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 )% 290 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.
Biggest changeResults 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): 2025 vs. 2024 Fiscal Year Ended September 30, Amount % 2025 2024 Change Change Net sales: Sally $ 2,094,363 $ 2,107,089 $ (12,726 ) (0.6 )% BSG 1,607,061 1,609,942 (2,881 ) (0.2 )% Consolidated $ 3,701,424 $ 3,717,031 $ (15,607 ) (0.4 )% Gross profit: Sally $ 1,272,559 $ 1,257,936 $ 14,623 1.2 % BSG 638,189 632,396 5,793 0.9 % Consolidated $ 1,910,748 $ 1,890,332 $ 20,416 1.1 % Segment gross margin: Sally 60.8 % 59.7 % 110 bps BSG 39.7 % 39.3 % 40 bps Consolidated 51.6 % 50.9 % 70 bps Net earnings: Segment operating earnings: Sally $ 326,667 $ 334,319 $ (7,652 ) (2.3 )% BSG 196,361 178,420 17,941 10.1 % Segment operating earnings 523,028 512,739 10,289 2.0 % Unallocated expenses and restructuring (a) 195,218 230,006 (34,788 ) (15.1 )% Consolidated operating earnings 327,810 282,733 45,077 15.9 % Interest expense 64,393 76,408 (12,015 ) (15.7 )% Earnings before provision for income taxes 263,417 206,325 57,092 27.7 % Provision for income taxes 67,539 52,911 14,628 27.6 % Net earnings $ 195,878 $ 153,414 $ 42,464 27.7 % Number of stores at end-of-period (including franchises): Sally 3,096 3,129 (33 ) (1.1 )% BSG 1,326 1,331 (5 ) (0.4 )% Consolidated 4,422 4,460 (38 ) (0.9 )% Comparable sales growth (decline) Sally 0.4 % (0.7 )% 110 bps BSG 0.2 % 1.6 % (140 ) bps Consolidated 0.3 % 0.3 % — 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.
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.
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 assets, 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.
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 deferred debt issuance costs reflected in our consolidated balance sheets, nor do they include the impact of any interest paid or 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.
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 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 - 31 - comparable sales calculation until 14 months after the acquisition.
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 a result, we conducted a quantitative assessment at September 30, 2023 and determined that no impairment existed for our Sally 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.
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.
Assessment of Long-Lived Assets for Impairment 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.
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.
As of September 30, 2025, 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.
“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.
“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, 2024, for a discussion of the financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023.
The carrying amount of a long-lived asset or asset group is considered impaired - 35 - 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.
The carrying amount of a long-lived asset or asset group is considered impaired - 37 - 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.
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.
Recent Accounting Pronouncements See Note 2 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.
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.
Off-Balance Sheet Financing Arrangements At September 30, 2025, we did not have any off-balance sheet financing arrangements other than obligations under letters of credit, as discussed above.
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.
This section should be read in conjunction with the audited consolidated financial statements of the Company 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.
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 Repurchase Programs During the fiscal years 2025 and 2024, we repurchased and subsequently retired approximately 5.0 million shares and 5.1 million shares of our common stock under our share repurchase program at a cost of $53.5 million and $60.0 million, respectively, excluding the impact of excise taxes on share repurchases.
(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. - 34 - 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.
(e) The table above does not include an estimated $9.5 million of unrecognized tax benefits due to uncertainty regarding the realization and timing of the related future cash flows, if any. - 36 - 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.
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.
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 or otherwise transfer assets to us. The guarantees are joint and several, and full and unconditional.
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.
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.
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.
During fiscal year 2025, we determined that no triggering events had occurred, as both internal and external facts and circumstances, including revenues in fiscal year 2025 versus prior projections and prior weighted-average cost of capital, continued to see improvement from the end of September 2023, the last time we performed a quantitative 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following section discusses management’s view of the Company’s financial condition and results of operations for fiscal year 2025 compared to fiscal year 2024. See Item 7.
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.
Financial Summary for the Fiscal Year Ended September 30, 2025: • Consolidated net sales for the fiscal year decreased $15.6 million, or 0.4%, to $3,701.4 million and included a negative impact from changes in foreign currency exchange rates of $11.4 million, or 0.3% of consolidated net sales; • Global e-commerce sales represented 10.7% of our consolidated net sales; • Consolidated comparable sales for the fiscal year increased 0.3% compared to the prior fiscal year; • Consolidated gross profit increased by $20.4 million, or 1.1%, to $1,910.7 million.
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.
BSG’s SG&A expenses decreased $12.2 million, or 2.7%, to $441.9 million for fiscal year 2025 and includes a favorable impact from foreign exchange rates of $0.8 million. As a percentage of BSG net sales, SG&A for fiscal year 2025 was 27.5% compared to 28.2% for fiscal year 2024.
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.
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.
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.
The decrease in net sales for BSG was driven by the following (in thousands): Comparable sales $ 2,716 Sales outside comparable sales (a) (2,035 ) Foreign currency exchange (3,562 ) Total $ (2,881 ) (a) Includes closed stores, including stores closed under the Plan, net of stores opened (or acquired) for less than 14 months.
Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors. - 33 - 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.
Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors. The following summarized consolidated financial information represents financial information for the Issuers and the Guarantors on a combined basis.
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.
Our working capital (current assets less current liabilities) increased $12.9 million to $725.5 million at September 30, 2025, compared to $712.6 million at September 30, 2024.
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.
At September 30, 2025, we had $631.6 million in our liquidity pool, which includes amounts available for borrowings under our ABL facility of $482.4 million and cash and cash equivalents of $149.2 million.
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.
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. No material impairment losses were recognized for fiscal year 2025, 2024 or 2023.
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.
Sally’s SG&A expenses increased $22.3 million, or 2.4%, to $945.9 million for fiscal year 2025, which includes the favorable impact from foreign exchange rates of $12.9 million due to the weakening of the U.S. Dollar compared to currencies in our foreign operations.
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.
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.
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.
Debt and Guarantor Financial Information At September 30, 2025, we had $875.0 million in outstanding debt, excluding finance lease obligations, unamortized debt issuance costs and discounts, in the aggregate, of $9.0 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding and $275.0 million remaining on our term loan B.
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.
Financing Activities Net cash used by financing activities increased primarily due to the higher net paydown of our long-term debt in the current year compared to the prior year, partially offset by lower costs for debt issuance and fewer shares repurchased in the current year under our share repurchase program.
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.
The decrease in net sales for Sally was primarily driven by the following (in thousands): Comparable sales $ 7,908 Sales outside comparable sales (a) (12,770 ) Foreign currency exchange (7,864 ) Total $ (12,726 ) (a) Includes closed stores, including the divesture of Spain, net of stores opened for less than 14 months.
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.
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.
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 .
Sally’s comparable sales increase was a result of growth in our average unit retail, driven by inflationary impacts and pricing leverage, partially offset by fewer average number of units per transaction and a decrease in the number of transactions. BSG .
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”).
Guarantor Financial Information Our 2032 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings and Sally Capital Inc. (the “Issuers”).
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 increased as a result of a higher gross margin, partially offset by lower net sales. BSG’s gross margin improvement was driven by lower distribution and freight costs from supply chain efficiencies. Selling, General and Administrative Expenses Sally .
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.
Operating margin increased 130 basis points to 8.9% compared to the prior fiscal year; • Consolidated net earnings for the fiscal year increased $42.5 million, or 27.7%, to $195.9 million; • Diluted earnings per share for the fiscal year were $1.89 compared to $1.43 for the prior fiscal year; • Cash provided by operations was $274.8 million for the fiscal year compared to $246.5 million for the prior fiscal year; and • Total debt reduction of $119.0 million and the repurchase of 5.0 million shares under our share repurchase program through the use of excess cash.
Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility.
Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility. As of September 30, 2025, we had approximately $467.3 million of additional share repurchase authorization remaining under our Share Repurchase Program.
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.
During fiscal year 2025, the weighted average interest rate on our borrowings under the ABL facility was 5.7%. 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.
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.
Unallocated SG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $34.9 million, or 15.2%, to $195.2 million, primarily due to a $26.6 million gain on the sale of our corporate headquarters and lower costs in connection to our Fuel for Growth initiative, partially offset by increased compensation-related expenses.
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. - 32 - Historical Cash Flows The following table shows our sources and uses of cash for the periods presented (in thousands): Fiscal Year Ended September 30, 2024 2023 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.
See Note 4, Accumulated Stockholders’ Equity , for more information about our share repurchase program. - 34 - Historical Cash Flows The following table shows our sources and uses of cash for the periods presented (in thousands): Fiscal Year Ended September 30, 2025 2024 Change Net cash provided by operating activities $ 274,831 $ 246,528 $ 28,303 Net cash used by investing activities (58,284 ) (108,910 ) 50,626 Net cash used by financing activities (178,423 ) (153,734 ) (24,689 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 3,077 1,076 2,001 Net increase (decrease) in cash and cash equivalents $ 41,201 $ (15,040 ) $ 56,241 Operating Activities The increase in net cash provided by operating activities for fiscal year 2025, compared to fiscal year 2024, was primarily driven by increased net earnings, lower inventory purchases and lower interest paid on our debt, partially offset by the timing of accounts payable and income tax payments, and lower cash receipts from customers.
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.
The ratio of current assets to current liabilities was 2.26 to 1.00 at September 30, 2025, compared to 2.20 to 1.00 at September 30, 2024.
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 .
BSG's net sales decrease was primarily from the negative impacts from foreign exchange rates and the impacts of net store closures over the past 12 months, partially offset by an increase in comparable sales.
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.
Interest Expense The decrease in interest expense was driven by a lower outstanding principle balance and interest rate on our term loan B, a lower average outstanding balance on our ABL facility, and lower losses on debt extinguishment compared to the prior year.
Additionally, unallocated includes costs related to our Fuel for Growth initiative.
Additionally, unallocated includes certain costs related to our Fuel for Growth initiative. - 32 - The Fiscal Year Ended September 30, 2025, compared to the Fiscal Year Ended September 30, 2024 Net Sales Sally .
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.
Gross margin increased 70 basis points to 51.6% compared to the prior fiscal year; • Consolidated operating earnings for the fiscal year increased $45.1 million, or 15.9%, to $327.8 million.
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 137 — — — 137 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.
All transactions and intercompany balances between these combined entities have been eliminated. - 35 - The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of September 30, 2025 and 2024 (in thousands): (in thousands) September 30, 2025 September 30, 2024 Cash and cash equivalents $ 85,360 $ 32,817 Inventory $ 721,975 $ 781,512 Current assets $ 927,667 $ 914,686 Total assets $ 2,177,968 $ 2,085,179 Intercompany payable $ 15,117 $ 6,939 Current liabilities $ 474,079 $ 479,052 Total liabilities $ 1,883,754 $ 1,951,874 The following table presents the summarized statement of earnings information for fiscal year 2025 (in thousands): Net sales $ 2,991,244 Gross profit $ 1,568,101 Earnings before provision for income taxes $ 242,194 Net Earnings $ 180,555 Contractual Obligations The following table summarizes our contractual obligations at September 30, 2025 (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) $ 60,673 $ 120,637 $ 365,836 $ 657,375 $ 1,204,521 Obligations under operating leases (b) 181,034 287,847 161,952 253,220 884,053 Purchase obligations (c) 37,504 48,067 12,841 — 98,412 Other long-term obligations (d)(e) 7,010 6,488 1,979 2,293 17,770 Total $ 286,221 $ 463,039 $ 542,608 $ 912,888 $ 2,204,756 (a) Long-term debt obligations include future interest payments on our debt outstanding as of September 30, 2025.
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 .
As a percentage of Sally net sales, SG&A for fiscal year 2025 was 45.2% compared to 43.8% for fiscal year 2024.
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.
Trends Impacting Our Business The macroeconomic environment remains uncertain, continuing to influence global inflationary pressures driven by shifting trade policies and recent tariff volatility. These factors are affecting both consumer and stylist shopping behaviors, as well as the cost of products and services. Although inflation has moderated, our customers are still experiencing inflation fatigue and heightened price sensitivity.
Removed
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.
Added
In response to this evolving economic climate, we are deepening our focus on personalization and refining our performance marketing strategies to stay closely aligned with changing customer needs and purchasing patterns. In addition, innovation in our product assortment and expansion of our distribution rights is benefiting our BSG business.
Removed
Within our BSG business, we saw our stylists respond to big promotional events, but also to newness and innovation in the assortment.
Added
We remain vigilant in monitoring inflationary challenges and are actively implementing measures to mitigate their impact. These include driving operational efficiencies through our Fuel for Growth program, optimizing promotional strategies, and expanding partnerships with delivery service providers. While these initiatives have helped offset some macroeconomic headwinds, the long-term effects of inflation remain difficult to predict.
Removed
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.
Added
Our calculation of comparable sales might not be the same as other retailers, as the calculation varies across the retail industry.
Removed
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.
Added
Sally's net sales decrease was primarily driven by net stores closed during the fiscal year and negative impacts from foreign exchange rates, partially offset by an increase in comparable sales.
Removed
(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. - 30 - The Fiscal Year Ended September 30, 2024, compared to the Fiscal Year Ended September 30, 2023 Net Sales SBS .
Added
The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by external factors that impacted consumer spending, including weather, an unusually harsh flu season and macro uncertainty.
Removed
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.
Added
The increase in comparable sales was driven by continued momentum from expanded distribution and new brand innovation, partially offset by external factors during the fiscal year that impacted stylist purchasing behavior, including weather, an unusually harsh flu season and macro uncertainty.
Removed
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 .
Added
BSG's comparable sales increase was a result of an increase in number of transactions and a higher average unit retail, partially offset by fewer average number of units per transaction. Gross Profit Sally . Sally’s gross profit increase was a result of a higher gross margin, partially offset by lower net sales.
Removed
This decrease was driven primarily by higher net sales and lower delivery expense. Unallocated.
Added
Sally’s gross margin improvement was primarily driven by higher product margins, resulting from enhanced promotional strategies and benefits from our Fuel for Growth initiative, lower distribution and freight costs and lower shrink, partially offset by an inventory write-off in our European operations in connection with our Fuel for Growth initiative. BSG .
Removed
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.
Added
This increase as a percentage of sales was primarily due to increased labor and other compensation-related expenses, deleveraging resulting from lower net sales, and impairment charges related to certain trade names (non-cash expense of $4.5 million), partially offset by cost savings from our Fuel for Growth initiative. BSG .
Removed
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.
Added
This decrease was primarily due to lower depreciation and delivery expenses, and savings generated from our Fuel for Growth initiative. - 33 - Unallocated.
Removed
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.
Added
Provision for Income Taxes For fiscal years 2025 and 2024, our effective tax rate was unchanged at 25.6%. See Note 15, Income Taxes , for more information on our effective tax rate.
Removed
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.
Added
The increase in our working capital was driven by a higher cash and cash equivalents balance, and the timing of account payable and receivable, including contingent lease incentives recognized in connection with our new headquarters.
Removed
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.
Added
These impacts were partially offset by lower inventory, as a result of a strategic focus on inventory optimization and productivity, the disposal of assets held for sale previously included in other current assets as a result of the sale of our corporate headquarters, and the timing of lease renewals and new leases.
Removed
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.
Added
Investing Activities The decrease in net cash used by investing activities for fiscal year 2025, compared to fiscal year 2024, was primarily the result of receiving $43.6 million from the sale of our corporate headquarters, a decrease in cash used for acquisitions by $4.9 million, and receiving $3.1 million related to the divesture of our operations in Spain.
Added
At September 30, 2025, 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.
Added
During fiscal year 2025, certain trade names within Sally were fully impaired due to the decrease in projected revenues from a specific product line and we recognized an impairment loss of $4.5 million. No impairment losses were recognized in fiscal years 2024 or 2023.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed5 unchanged
Biggest changeHowever, at the present time, no such losses are deemed probable. ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA See “Index to Financial Statements” which is located on page 47 of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 37 -
Biggest changeHowever, at the present time, no such losses are deemed probable. ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA See “Index to Financial Statements” which is located on page 50 of this Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
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. - 36 - 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.
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. - 38 - 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.
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.
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, 2025.
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.
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 2025, and it would have impacted our consolidated net assets by approximately 2.2% at September 30, 2025.
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.
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, 2025. In the event a counterparty defaults in its obligation under our derivative instruments, we could incur substantial financial losses.
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.
For each of the fiscal years 2025, 2024 and 2023, less than 20% of our consolidated net sales were made in currencies other than the U.S. dollar.
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.
Additionally, at September 30, 2025, 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, 2025, a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $0.8 million.
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.
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, 2025, there were no outstanding borrowings under the ABL facility, and the term loan B had $275.0 million in outstanding principal balance.

Other SBH 10-K year-over-year comparisons