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What changed in Sally Beauty Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sally Beauty Holdings, Inc.'s 2023 and 2024 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 2024 report.

+291 added−301 removedSource: 10-K (2024-11-14) vs 10-K (2023-11-16)

Top changes in Sally Beauty Holdings, Inc.'s 2024 10-K

291 paragraphs added · 301 removed · 250 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

71 edited+8 added−10 removed35 unchanged
Biggest changeOur Purpose: TO INSPIRE A MORE COLORFUL, CONFIDENT AND WELCOMING WORLD Our Values: • BE YOURSELF. Come as you are—everyone is welcome here. • BE AN INSPIRATION. Share your passion and knowledge with your team, your customers, the world. • BE BOLD. Dive in. Move fast. Say yes. • BE AN OWNER. Drive growth.
Biggest changeOur Company Purpose & Values Our Company Purpose & Values are intended to establish our rallying cry and focus our teams on the impact we intend to have in the world. Our Purpose: TO INSPIRE A MORE COLORFUL, CONFIDENT AND WELCOMING WORLD Our Values: • BE YOURSELF. Come as you are—everyone is welcome here. • BE AN INSPIRATION.
Our LCOD is a digital-focused initiative where customers can live chat by text, voice or video with a licensed colorist to learn more about our hair color product offerings and how to use our products to achieve their desired results.
Our LCOD is a digital-focused initiative where customers can live chat with a licensed colorist by text, voice or video to learn more about our hair color product offerings and how to use our products to achieve their desired results.
Starting fiscal year 2023, we began providing six weeks of paid parental leave for mothers, fathers or partners upon the birth or placement of a child; • Provide meaningful, engaging learning and development that grows our associates’ knowledge and capability with respect to our business and skills that will help them in business and life; and • Create an environment and culture where everyone can bring their true self to work, because our differences are what make us beautiful.
Starting fiscal year 2023, we began providing six weeks of paid parental leave for mothers, fathers or partners upon the birth or placement of a child; • Provide meaningful, engaging learning and development that grows our associates’ knowledge of and capability with respect to our business and skills that will help them in business and life; and • Create an environment and culture where everyone can bring their true self to work because our differences are what make us beautiful.
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, with our foreign suppliers, assurances that they too are providing a safe and healthy working environment for their associates.
Additionally, we value our partnerships with suppliers and vendors and understand the impact they can have on our associates. Thus, SBH has included rules governing their conduct, both with respect to expectations while interacting with our associates and, for our foreign suppliers, assurances that they too are providing a safe and healthy working environment for their associates.
Labor Practices We provide competitive wages and benefits in a positive work environment where we focus on doing what is right We are an Equal Opportunity Employer with up-to-date policies, procedures and practices with respect to such important issues as safety, discrimination, harassment and retaliation. We provide focused training on these issues to our associates and managers.
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 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.
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").
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. Our company-operated stores average approximately 2,700 square feet and are located primarily in secondary strip shopping centers, being 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 - 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.
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 annual 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 Diversity, Inclusion & Belonging and our engagement survey.
The Code reflects the core principles of conducting our business as a good corporate citizen in compliance with all laws, rules and regulations applicable to us and the conduct business with regard for the welfare of our associates and providing equal opportunity to all associates and job applicants. You can review this important document at http://investor.sallybeautyholdings.com .
The Code reflects the core principles of conducting our business as a good corporate citizen in compliance with all laws, rules and regulations applicable to us and with regard for the welfare of our associates and providing equal opportunity to all associates and job applicants. You can review this important document at http://investor.sallybeautyholdings.com .
There is also a strong cadence on completing regular cycles of performance management, linked to our Company values and leadership competencies, as well as regular reviews of our talent and succession pipelines. Importantly, we devote significant effort and resources to the development of our associates, including providing almost all of our associates access to state-of-the-art learning management systems.
There is also a strong cadence of completing regular cycles of performance management, linked to our Company values and leadership competencies, as well as regular reviews of our talent and succession pipelines. Importantly, we devote significant effort and resources to the development of our associates, including providing almost all of our associates access to state-of-the-art learning management systems.
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, or SEC, under the Exchange Act.
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.
In return for what they do for us, among many other things, we strive to: • Ensure our associates work in a safe, healthy environment; • Provide competitive compensation and benefits packages that attract and retain talent in every facet of our business – stores, direct sales, distribution centers and corporate headquarters.
In return for what they do for us, we strive to, among other things: • Ensure our associates work in a safe, healthy environment; • Provide competitive compensation and benefits packages that attract and retain talent in every facet of our business – stores, direct sales, distribution centers and corporate headquarters.
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 professional stylist. SBS’s differentiation is to offer a vast array of hair color and care solutions for in-home use, and this is 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 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.
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.
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.
We come together to create a culture for “One & All” 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 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.
ITEM 1. B USINESS Our Company Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty supplies. As experts in hair color and care, we aim to empower our customers to express themselves through their hair and beyond.
ITEM 1. B USINESS Our Company Sally Beauty Holdings, Inc. is a leading international specialty retailer and distributor of professional beauty supplies. As experts in hair color and care, we aim to empower our customers to express themselves through their hair and beyond.
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. To date, these laws and regulations have not had a material effect upon our operations.
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.
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 expire without express rights of renewal.
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.
While 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.
At BSG, we are the largest North American distributor of professional hair color and care, offering stylists and salons the most extensive portfolio of third-party brands in the market.
We have developed long-standing, relationships, some of which are exclusive, with these suppliers and many others, which we believe is core to our competitive advantage.
We have developed long-standing, relationships, some of which are exclusive, with these suppliers and many others, which we believe are core to our competitive advantage.
Sally Beauty Supply SBS carries an extensive selection of leading third-party, owned and exclusive-labeled brand professional beauty supplies across a variety of product 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 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.
(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 - 2 - BSG stores, including franchise-based Armstrong McCall stores, are designed to highlight our extensive product offerings to salons and salon professionals.
(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.
Beauty Systems Group BSG’s marketing programs are designed to promote its extensive selection of brand name products at competitive prices and to educate, motivate and empower existing and potential customers. We work closely with our vendors to provide promotional offers for certain products to target existing and potential customers.
Beauty Systems Group BSG’s marketing programs are designed to promote its extensive selection of brand partners' products at competitive prices and to educate, motivate and empower existing and potential customers. We work closely with our vendors to provide promotional offers for certain products to target existing and potential customers.
The program is free to join, and it provides our loyalty customers the ability to earn points on their SBS purchases, that convert to Sally Beauty Rewards when certain thresholds are attained. Through the program, these customers may also receive exclusive savings and personalized marketing offers.
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 distribution centers service our stores, orders from our DSCs and ship-to-customer orders through various freight carriers. We procure our owned-branded 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.
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.
Additionally, we offer our SBS professional customers and BSG customers the opportunity to apply for the Cosmo Prof Rewards Credit Card, which provides discounts on Cosmo Prof purchases or points through the Sally Beauty Rewards Program on SBS purchases.
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.
As of September 30, 2023, 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, 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.
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 and creams, hair spray • Styling Tools – Hair dryers, irons, curling rods/rollers/pins, brushes/combs, clippers/trimmers/accessories, shears, razors, salon accessories • Nails – Polish, gel, acrylics, dips, nail accessories & supplies • Skin and Cosmetics – Cosmetics, cosmetic accessories, hair removal, skincare, jewelry • Other Beauty Products – Salon chairs, dryers, 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, 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.
For example, in the U.S., most of the products we sell and the content and methods of advertising and marketing utilized are subject to both federal and state regulations administered by a host of federal and state agencies, including, in each case, one or more of the following: the Food and Drug Administration, or 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.
We believe we - 8 - are in material compliance with the laws and regulations we are subject to, although no assurance can be provided that this will remain true going forward or that we will not be required to incur meaningful expenses complying with such laws and regulations.
We believe we are in material compliance with the laws and regulations to which we are subject, although no assurance can be provided that this will remain true going forward or that we will not be required to incur meaningful expenses to comply with such laws and regulations.
We distribute promotional material through multiple channels, including print mail, e-mail, SMS, mobile app push notifications, social media, trade shows, educational events, store personnel and DSCs. As of September 30, 2023, we had a network of 670 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 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.
For fiscal year 2023, our five largest suppliers – Henkel AG & Co. KGaA; Wella Company; the Professional Products Division of L'Oreal USA S/D, Inc., or L’Oreal; John Paul Mitchell Systems; and Kao Corporation – accounted for approximately 43% of our consolidated merchandise purchases.
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.
Some of these manufacturers are vertically integrated - 5 - through the acquisition of distributors and stores. We also face competition from authorized and unauthorized retailers as well as internet sites offering professional salon-only products. Our Suppliers We purchase our merchandise directly from manufacturers through supply contracts and purchase orders.
Some of these manufacturers are vertically integrated through the acquisition of distributors and stores. We also face competition from authorized and unauthorized retailers as well as internet sites offering professional salon-only products that are not brand-approved for distribution. Our Suppliers We purchase our branded merchandise directly from manufacturers through supply contracts and purchase orders.
BSG’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2023 2022 2021 Beginning store count 1,355 1,362 1,385 Opened 38 54 59 Closed (1) (55 ) (61 ) (80 ) Franchises opened — 2 1 Franchises closed — (2 ) (3 ) Ending store count 1,338 1,355 1,362 (1) In fiscal years 2023 and 2022, we closed 26 stores and 7 stores, respectively, in connection with the Plan.
BSG’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.
This year, Newsweek 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 workforce diversity, inclusion, belonging and engagement within our teams.
As the largest North American distributor of professional hair color and care, carrying an extensive selection of branded merchandise is critical to maintaining relationships with our professional customers. - 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. - 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.
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 asset acquisition of Goldwell of New York.
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.
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.
Diversity, Inclusion & Belonging At SBH we celebrate differences, inclusivity and self-expression. This fundamental aspect of SBH’s culture is rooted in our belief that beauty is for everyone, and everyone should find their own path to beauty. Our associates and our customers care about celebrating diversity and self-expression.
We also set in motion our Fuel for Growth (“FFG”) initiative. 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 has lowered our transportation costs.
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.
At SBH, we believe our focus on Diversity, Inclusion & Belonging are crucial - 6 - to improving how we interact with and influence our associates, customer environments and broader communities. We are committed to being a force for change.
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.
The transportation and disposal of many of our products are also subject to federal and state regulation. State and local agencies regulate many aspects of our business. We also face comprehensive regulation outside the U.S., focused primarily on product labeling and safety issues.
The transportation and disposal of many of our products are also subject to federal and state regulation. State and local agencies regulate many aspects of our business. We also face comprehensive regulation outside the U.S., focused primarily on product labeling and safety issues, such as cosmetic regulations administered by the EU Commission, Health Canada, Mexico COFEPRIS, and Chile ISP.
As a result, earlier this fiscal year, we started testing a new shipping frequency from our distribution centers to a limited population of SBS and BSG stores by leveraging investments within our supply chain systems. This change has resulted in improved labor productivity, reduced freight costs and has lowered our carbon emissions, while allowing us to maintain healthy in-stock levels.
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.
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.
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").
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, 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.
During the fiscal year, we expanded our owned brand portfolio with the launch of bondbar and brought to market many innovative products from new and key vendors. At BSG, we launched brands like Amika, Wella’s Ultimate Repair and Danger Jones, and expanded our distribution with Color Wow.
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.
SBS’s store count for the last three fiscal years is summarized in the following table: Fiscal Year 2023 2022 2021 Beginning store count 3,439 3,549 3,653 Opened (1) 54 47 71 Closed (2) (345 ) (155 ) (168 ) Franchises closed — (2 ) (7 ) Ending store count 3,148 3,439 3,549 (1) Includes ten pilot stores for Happy Beauty Company opened in fiscal year 2023.
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.
Digital Strategy We continue to grow our digital footprint, not only through our marketing and customer relationship efforts, but also through our digital platforms in each segment.
Outside of the U.S. and Canada, our customer loyalty and marketing programs vary by marketplace. Digital Strategy We continue to grow our digital footprint, not only through our marketing and customer relationship efforts, but also through our digital platforms in each segment.
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: BOPIS; deliver by common carrier (from store or distribution centers); and 2-hour delivery. Introduced in fiscal year 2021, our BOPIS and 2-hour delivery methods have continued to see increased traction.
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.
Fiscal Year 2023 2022 2021 Sally Beauty Reward members 15.6 million 16.3 million 15.9 million % of Sales 76.3% 75.7% 72.5% In the U.S., we also offer our SBS customers the opportunity to apply for the Sally Beauty Rewards Credit Card that provides additional benefits to being a Sally Beauty Rewards member.
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.
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.
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.
Going into next fiscal year, we are focused on expanding on our owned brand offerings to drive higher sales penetration, 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 substantially complete our distribution center consolidation and store optimization plan (the “Plan”), resulting in strong sales recapture rates and cost savings.
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.
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. While still in its initial launch phase, we are gaining valuable insights and customer feedback.
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.
We believe many of these are well recognized and have significant value, including but not limited to: Sally®, Sally Beauty®, Cosmo Prof®, Armstrong McCall®, ION® and Beyond the Zone®. Our Company Purpose & Values Our Company Purpose & Values are intended to establish our rallying cry and focus our teams on the impact we intend to have in the world.
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®.
Furthermore, during the fiscal year, we launched a digital marketplace selling initiative with Walmart.com, and are expanding to other online sites 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.
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.
Associate Health & Safety We strive to create a safe and healthy work environment for all associates We place a high value on the health and safety of our associates, customers, suppliers and vendors.
We place a high value on the health and safety of our associates, customers, suppliers and vendors.
Store Design and Locations Sally Beauty Supply SBS has retail stores in the U.S. (including Puerto Rico), Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain and Chile. Stores are designed to highlight our extensive product offerings and differentiated position in hair color, hair care, styling tools and nails.
(including Puerto Rico), Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain and Chile. Stores are designed to highlight our extensive product offerings and differentiated position in hair color, hair care, styling tools and nails. We apply strong category management processes, including store specific planograms, to maintain consistent merchandise presentation across our store base.
In existing marketplaces, we add stores to provide additional coverage and strategically close or relocate underperforming stores as necessary. In new marketplaces, SBS selects geographic areas and store sites on the basis of demographic information, the quality and nature of neighboring tenants, store visibility and location accessibility. SBS generally seeks to expand in geographically contiguous areas to leverage its expertise.
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 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, our Sally Beauty Rewards Program is designed to earn SBS customer loyalty and was recognized as one of “America’s Best Loyalty Programs” by Newsweek & Statista in 2022 and 2023.
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.
We believe these efficiency and optimization initiatives will help us offset inflationary pressures and continued growth investments in the upcoming fiscal year. 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 attract new customers.
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.
We will continue to monitor and evolve our Sally Beauty Rewards Program in an effort to further enhance the customer experience and promote repeat sales from both retail customers and salon professionals. Outside the U.S. and Canada, our customer loyalty and marketing programs vary by marketplace.
Through these programs, we are able to collect valuable point-of-sale customer data in order to increase our understanding of customers and enhance our ability to personalize our marketing. We will continue to monitor and adjust our Sally Beauty Rewards Program in an effort to further enhance our customer experience and promote repeat sales from both retail customers and salon professionals.
During the fiscal year, we began testing two new store concepts, Happy Beauty Co. and Studio by Sally. 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.
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.
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 customer. We calibrate store renewals, remodels and expansions between new and existing geographies.
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.
We continue to build customer centricity through our value-added services and concepts, including Studio by Sally, Cosmo Prof Direct, Licensed Colorist on Demand (“LCOD”), Happy Beauty Co. and Walmart.com digital marketplace.
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 have exclusive and non-exclusive distribution rights with several key vendors for well-known brands in certain geographies and continue to pursue the acquisition of additional distribution rights.
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.
During the last three fiscal years, our SBS U.S. and Canada-owned and exclusive-labeled brand sales accounted for approximately 48%, 45%, and 45%, respectively. Beauty Systems Group BSG carries an extensive selection of leading, third-party branded products, many of which are under exclusive distributions rights, at competitive prices across a variety of product categories.
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.
We believe this focus helps us attract new customers and keep long-term relationships with existing customers. During the fiscal year, we have invested more into marketing of our owned brands and launched our new owned branded vegan product line – bondbar – that’s SLS/SLES-free, paraben-free, phthalate-free and cruelty-free.
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.
Create your future. • BE PART OF SOMETHING BIGGER. Take care of each other, our community and our planet. More information on our Purpose & Values can be found at: www.sallybeautyholdings.com/our-company/purpose-and-values . Human Capital Management As of September 30, 2023, we had approximately 27,000 global associates, including approximately 13,000 full-time associates.
Share your passion and knowledge with your team, your customers, the world. • BE BOLD. Dive in. Move fast. Say yes. • BE AN OWNER. Drive growth. Create your future. • BE PART OF SOMETHING BIGGER. Take care of each other, our community and our planet. More information on our Purpose & Values can be found at: www.sallybeautyholdings.com/our-company/purpose-and-values .
During the fiscal year, we further embedded the Company’s Employee Resource Groups (ERGs), with our first four groups that represent our Black, Hispanic, Women and LGBTQ+ associates.
Our first four ERGs represent our Black, Hispanic, Women and LGBTQ+ associates, and this year, we added two additional ERGs focused on Veterans and Associates with Disabilities/Neurodivergent Thinking.
Based on the positive results from the test, we are expanding this program to the majority of our remaining SBS and BSG store fleet throughout the U.S. and Canada. Additionally, customers are looking for more convenient options for receiving merchandise, which is helping drive their purchasing decisions.
Additionally, customers are looking for more convenient options for receiving merchandise, which is helping drive their purchasing decisions.
These initiatives have helped deliver an increase in our owned brands sales penetration, resulting in higher SBS profit margins. We believe that our owned and exclusive-labeled brands, available only at SBS, offer equal or better quality than leading third-party brands.
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.
We apply strong category management processes, including store specific planograms, to maintain consistent merchandise presentation across our store base. In the U.S. and Canada, our average store offers an average of 7,000 beauty products and is approximately 1,650 square feet in size.
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.
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Stores feature both third-party brands and our owned brands encompassing four key categories: cosmetics & facial care, bath & body, nails and hair. The initial pilot stores were opened in the Dallas/Ft. Worth, Texas and Phoenix, Arizona markets. If our pilot stores are successful, we believe there is an opportunity for 500-1,000 locations across the U.S.
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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.
Removed
Studio by Sally is a new pilot store concept that adds an in-person educational salon experience where licensed stylists will train and educate customers, empowering them to personally achieve their desired results. As of September 30, 2023, we have six Studio by Sally pilot stores opened in various markets and have been encouraged with the results.
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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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Looking to fiscal year 2024, we anticipate converting up to 30 additional stores. Longer term, we anticipate a mix of conversions and relocations, and we believe there is an opportunity to scale to over 100 Studio by Sally locations throughout the U.S. in the coming years.
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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.
Removed
Continuing the success of bondbar's initial launch of hair repair products, we expanded the brand's product line to include a full shade range of permanent hair color with built-in bonding technology during the fiscal year and will be expanding our assortment for color and care lines in fiscal year 2024.
Added
We are taking the knowledge from the Studio by Sally stores and applying the learnings to the rest of the SBS fleet, including piloting a store refresh that reflects modernized branding, an expanded assortment, as well as new floor plans and fixtures.
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Through these programs, we are able to collect valuable point-of-sale customer data as a means of increasing our understanding of customers and enhancing our ability to personalize our marketing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA failure in our quality control program may result in diminished inventory levels and product - 11 - 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.
Biggest changeSuppliers' 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.
Some of our competitors have greater financial and other resources than we do and are less leveraged than our business and may therefore be able to spend more aggressively on advertising and promotional activities and respond more effectively to changing business and economic conditions.
Some of our competitors have greater financial and other resources than we do and are less leveraged than our business and may therefore be able to spend more aggressively on advertising and promotional activities and may respond more effectively to changing business and economic conditions.
There can be no assurance that any new owned and 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. - 10 - We expect continuously changing fashion-related trends and consumer tastes to influence future demand for beauty products.
If our access to supplier-provided products were to diminish relative to our competitors or we were not able to purchase products at the same prices as our competitors, our business could be materially and adversely affected.
If our access to supplier-provided products were to diminish relative to our competitors or if we were not able to purchase products at the same prices as our competitors, our business could be materially and adversely affected.
In addition, such diversion may result in lower net sales for BSG should consumers choose to purchase diverted products from retailers rather than purchasing from our customers or choose other products altogether because of the perceived loss of brand prestige.
In addition, such diversion may result in lower net sales for BSG should consumers choose to purchase diverted products from retailers rather than purchasing from our customers or choose to purchase other products altogether because of the perceived loss of brand prestige.
Negative commentary regarding us or the products we sell may be also posted on social media platforms or other electronic means at any time and may be adverse to our reputation or business. Customers value readily available information and often act on such information without further investigation and without regard to its accuracy.
Negative commentary regarding us or the products we sell may also be posted on social media platforms or other electronic means at any time and may be adverse to our reputation or business. Customers value readily available information and often act on such information without further investigation and without regard to its accuracy.
Any actual defects or allegations of defects in products sold by us could result in adverse publicity and 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 credibility or the credibility of the manufacturer, which could adversely affect our business, financial condition and results of operations.
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 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 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.
These weather events could also lead to an increased rate of temporary store closures and reduced customer traffic at our stores. In addition, concern over climate change may result in new or increased regional, federal or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases.
These weather events could also lead to an increased rate of temporary store closures and reduced customer traffic at our stores. In addition, concern over climate change may result in new or increased regional, federal or global legal and regulatory requirements to reduce or mitigate the effects of climate change and greenhouse gases.
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 adversely affect our customer service and relationships.
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.
While we carry insurance that would mitigate losses in connection with security breaches and cyber incidents, insurance may be insufficient to compensate us fully for potentially significant losses.
While we carry insurance that would mitigate losses in connection with security breaches and cyber incidents, insurance may be insufficient to fully compensate us for potentially significant losses.
We also expect to see rapid changes and corresponding regulator action and private rights of action related to the use of text messaging to communicate with customers, the collection and use of biometric data and dark patterns.
We also expect to see rapid changes and corresponding regulator and private rights of action related to the use of text messaging to communicate with customers, the collection and use of biometric data and dark patterns.
We are currently party to, and in the future, we may enter into additional, derivative instruments, such as interest rate caps and swaps, to reduce our exposure to changes in interest rates on our term loan B.
We are currently party to, and may enter into in the future, additional, derivative instruments, such as interest rate caps and swaps, to reduce our exposure to changes in interest rates on our term loan B.
However, we may not maintain derivative instruments with respect to all of our variable rate indebtedness, and any instruments we enter into may not fully mitigate our interest rate risk.
We may not maintain derivative instruments with respect to all of our variable rate indebtedness, however, and any instruments we enter into may not fully mitigate our interest rate risk.
As we continue to grow our e-commerce businesses, the impact of attracting existing rather than new customers, of 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 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.
Factors that could affect consumers’ willingness to make such discretionary purchases include: inflation, general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit and consumer confidence in future economic conditions. A prolonged economic downturn or acute recession can adversely affect consumer spending habits and result in lower than expected net sales.
Factors that could affect consumers’ willingness to make such discretionary purchases include the following: inflation, general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit and consumer confidence in future economic conditions. A prolonged economic downturn or acute recession can adversely affect consumer spending habits and result in lower than expected net sales.
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 our products violate such party’s intellectual property rights.
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.
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. A portion of our indebtedness is subject to floating interest rates.
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.
Additional risks not currently known to us, or 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 distribution industry is highly competitive and is consolidating.
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 recently 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 a number of initiatives to significantly advance our digital commerce capabilities and grow our e-commerce businesses.
Climatologists predict the long-term effects of climate change and global warming will result in the increased frequency, intensity and duration of weather events, which could significantly disrupt supply chains, potentially impacting our vendors’ raw material costs and the production of products we sell.
Climatologists predict that the long-term effects of climate change and global warming will result in the increased frequency, intensity and duration of weather events, which could significantly disrupt supply chains, potentially impacting our vendors’ raw material costs and the production of products we sell.
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, system conversions, security breaches, cyberattacks, phishing attacks, viruses and/or human error.
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.
We continuously need to improve and upgrade our systems and infrastructure while maintaining their reliability and integrity. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of our business increases, with no assurance the volume of business will increase.
We continuously need to improve and upgrade our systems and infrastructure while maintaining their reliability and integrity. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of our business increases, with no assurance that the volume of business will increase.
Manufacturers may try to recover some or all of any increased costs 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 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.
If new debt is added to our current debt levels, the related risks we face would increase, and we may not be able to meet all our debt obligations. ITEM 1B. UNRESOLV ED STAFF COMMENTS Not applicable. - 21 -
If new debt is added to our current debt levels, the related risks we face would increase, and we may not be able to meet all our debt obligations. ITEM 1B. UNRESOLV ED STAFF COMMENTS Not applicable.
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 and trademarks are expected to continue to be substantial.
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.
Our sale of certain products exposes us to potential product liability claims, recalls or other regulatory or enforcement actions initiated by federal, state or foreign regulatory authorities or through private - 16 - causes of action.
Our sale of certain products exposes us to potential product liability claims, recalls or other regulatory or enforcement actions initiated by federal, state or foreign regulatory authorities or through private causes of action.
Non-U.S. operations are subject to many risks and uncertainties, including ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts, labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriers or other restrictions on foreign businesses, our failure to effectively and timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions.
Our non-U.S. operations are subject to many risks and uncertainties, including those resulting from ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts, labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriers or other restrictions on foreign businesses, our failure to effectively and timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions.
Although we may have 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 if 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 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.
There can be no assurance the time and resources our management will need to devote to operations and upgrades, any delays due to the installation of any upgrade (and customer issues therewith), any resulting service outages, or the impact on the reliability of our data from any upgrade - 18 - or any legacy system, will not have a material adverse effect on our business, financial condition, control environment or results of operations.
There can be no assurance that the time and resources our management will need to devote to operations and upgrades, any delays due to the installation of any upgrade (and customer issues therewith), any resulting service outages, or the impact on the reliability of our data from any upgrade or any legacy system will not have a material adverse effect on our business, financial condition, control environment or results of operations.
In addition, the disruption to the global economy and to our business, along with any sustained decline in our stock price, could lead to triggering events that may indicate that the carrying value of certain assets – including inventories, accounts receivables, long-lived assets, intangibles and goodwill – may not be recoverable, which could lead to impairment or other asset write-downs in the future.
In addition, the disruption to the global economy and to our business, along with any sustained decline in our stock price, could lead to triggering events that may indicate that the carrying value of certain assets – including inventories, accounts receivable, long-lived assets, intangibles and goodwill – may not be recoverable, which could lead to impairment or other asset write-downs in the future.
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 efficiency and optimize our capabilities, including through closure of underperforming stores and 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 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.
Additionally, manufacturers have and may continue to have increases in other manufacturing costs, such as transportation, labor and benefit costs. These increases in production costs result in higher merchandise costs to us.
Additionally, manufacturers have and may continue to experience increases in other manufacturing costs, such as transportation, labor and benefit costs. These increases in production costs result in higher merchandise costs to us.
The development and implementation of new systems and any other future upgrades to our systems and information technology may require significant costs and divert our management’s attention and other resources from our core business. There are also no assurances these new systems and upgrades will provide us with the anticipated benefits and efficiencies.
The development and implementation of new systems and any other future upgrades to our systems and information technology may require significant costs and could divert our management’s attention and other resources from our core business. There are also no assurances that these new systems and upgrades will provide us with the anticipated benefits and efficiencies.
If our third-party suppliers of 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, - 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.
In particular, we understand that the techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures.
We understand that the techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures.
For instance, we may lose customers if those competitors which have broad geographic reach attract additional salons (individual and chain) that are currently BSG customers, or if professional beauty supply manufacturers align themselves with our competitors or begin selling direct to customers.
For instance, we may lose customers if those competitors which have broad geographic reach attract additional salons (individual and chain) that are currently BSG customers, or if professional beauty supply manufacturers align themselves with our competitors or begin selling directly to customers.
BSG’s financial results are affected by the financial results of BSG’s franchised-based business (Armstrong McCall). BSG receives revenue from its sale of products to Armstrong McCall franchisees. Accordingly, a portion of BSG’s financial results is dependent upon the operational and financial success of these franchisees, including their implementation of BSG’s strategic plans.
BSG’s financial results are affected by the financial results of BSG’s franchise-based Armstrong McCall business. BSG receives revenue from its sale of products to Armstrong McCall franchisees. Accordingly, a portion of BSG’s financial results is dependent upon the operational and financial success of these franchisees, including their implementation of BSG’s strategic plans.
In addition, a number of 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 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.
Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials as well as transportation and freight, more expensive and more difficult to finance. Foreign currency fluctuations could have an adverse effect on our results of operations and financial condition.
Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials, transportation and freight more expensive and more difficult to finance. Foreign currency fluctuations could similarly have an adverse effect on our results of operations and financial condition.
In addition, from time to time, key executive personnel leave our Company, and we may not be successful in attracting, integrating and retaining the personnel required to grow and operate our business profitably.
In addition, from time to time, key executive personnel leave our Company, and we may not be successful in attracting, integrating and retaining the replacement personnel required to continue to grow and operate our business profitably.
Several governments, as well as the EU, have regulations dealing with the collection and use of personal information obtained from their citizens, and regulators globally are also imposing greater monetary fines for privacy violations, and there is an increase in allowing 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, our e-commerce businesses face significant competition from larger retailers with more established e-commerce platforms as well as online retailers, including Amazon, and on-line store e-commerce platforms such as Shopify.
Furthermore, our e-commerce businesses face significant competition from larger retailers with more established e-commerce platforms, as well as online retailers, including Amazon, and online store e-commerce platforms, such as Shopify.
Furthermore, if our e-commerce businesses successfully grow, they may 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 - 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.
Concerns over inflation, rising interest rates, labor shortages, energy costs, geopolitical issues, uncertainty with respect to elections, terrorism, civil unrest, the availability and cost of credit, the mortgage market, and the real estate and other financial markets in the U.S. and Europe have contributed to increased volatility and diminished expectations for the U.S. and certain foreign economies.
Concerns over inflation, rising interest rates, labor shortages, energy costs, geopolitical issues, and conflicts and wars, as well as uncertainty with respect to elections, terrorism, civil unrest, the availability and cost of credit, the mortgage market, and the real estate and other financial markets in the U.S. and Europe have contributed to increased volatility and diminished expectations for the U.S. and certain foreign economies.
In addition, sudden disruptions in business conditions as a consequence of events such as terrorist attacks, war or other military action or the threat of further attacks, including the wars in Ukraine and in the Middle East, pandemics or other crises or vulnerabilities or as a result of adverse weather conditions or climate changes, may have an impact on consumer spending, which could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows as well as the trading price of our securities.
In addition, sudden disruptions in business conditions as a consequence of the occurrence, or threat of, large-scale international events such as terrorist attacks, war or other military action, including the wars in Ukraine and in the Middle East, pandemics or other crises or vulnerabilities or as a result of adverse weather conditions or climate changes, may have an impact on consumer spending, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows, as well as the trading price of our securities.
In addition, we and our subsidiaries may incur substantial additional indebtedness in the future. As of September 30, 2023, our ABL facility provided us commitments for additional borrowings of up to approximately $482.6 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, 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.
Many of our systems are proprietary and, as a result, our options are limited in seeking third-party help with the operation and upgrade of those systems.
Some of our systems are proprietary and, as a result, our options are limited in seeking third-party help with the operation and upgrade of those systems.
In addition, offering products through our - 12 - e-commerce channels (particularly directly to consumers through our professional business) could cause some of our current or potential vendors to consider competing internet offerings of their products either directly or through competing distributors.
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.
Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment. - 17 - Failure to meet evolving expectations for reporting on environmental, social, and governance ("ESG") matters could adversely affect our sales and results of operations.
Our reputation could be damaged if we or others in our industry do not act, or are perceived not to act, responsibly with respect to our impact on the environment. Failure to meet evolving expectations concerning environmental, social, and governance ("ESG") reporting could adversely affect our sales and results of operations.
In any such case, our subsidiaries may be unable to borrow under the ABL facility and may not be able to repay the amounts due under the senior notes and the institutional term loan. This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.
In any such case, our subsidiaries may be unable to borrow under the ABL facility and may not be able to repay the amounts due under the senior notes and the term loan B. This could result in serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.
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, institutional term loan and senior notes contain certain covenants and restrictions that we are required to comply with.
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.
For example, it could: • make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes; • require us to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of such cash flows to fund working capital, capital expenditures, share repurchases and other general corporate purposes; • restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us, which could limit our ability to conduct repurchases of our own equity securities or pay dividends to our stockholders, thereby limiting our ability to enhance stockholder value through such transactions; - 20 - • increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations (because a portion of our borrowings are at variable rates of interest), including borrowings under our $500 million asset-based senior secured loan facility, which we refer to as the “ABL facility” and our term loan B; • place us at a competitive disadvantage compared to our competitors with proportionately less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns; • require us to comply with restrictive covenants that may restrict our ability to, among other things, pay dividends, conduct share repurchases, make acquisitions, dispose of assets or prepay debt; • limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; and • limit our flexibility to adjust to changing market conditions and ability to withstand competitive pressures, or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.
For example, it could have the following impact: • make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes; • require us to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of such cash flows to fund working capital, capital expenditures, share repurchases and other general corporate purposes; • restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us, which could limit our ability to conduct repurchases of our own equity securities or pay dividends to our stockholders, thereby limiting our ability to enhance stockholder value through such transactions; • increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations (because a portion of our borrowings are at variable rates of interest), including borrowings under our ABL facility and our term loan B; • place us at a competitive disadvantage compared to our competitors who have proportionately less debt or comparable debt at more favorable interest rates and who, as a result, may be better positioned to withstand economic downturns; • require us to comply with restrictive covenants that may restrict our ability to, among other things, pay dividends, conduct share repurchases, make acquisitions, dispose of assets or prepay debt; • limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; and • limit our flexibility to adjust to changing market conditions and ability to withstand competitive pressures, or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.
We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches as well as fraudulent transactions and other activities. We believe that our security safeguards follow appropriate practices in the prevention of security and data breaches and the mitigation of cybersecurity risks.
We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches, fraudulent transactions and other disruptive activities. We believe that our security safeguards follow appropriate practices for prevention of security and data breaches and the mitigation of cybersecurity risks.
Non-U.S. operations also increase the risk of non-compliance with U.S. laws and regulations applicable to such non-U.S. operations, such as those relating to sanctions, boycotts and improper payments.
The presence of non-U.S. operations also increases the risk of non-compliance with U.S. laws and regulations applicable to such non-U.S. operations, such as those laws and regulations relating to sanctions, boycotts and improper payments.
While inflation is stabilizing, we may not be able to continue to pass through inflationary cost increases and, if inflationary pressures are sustained, we may only be able to recoup a portion of our increased costs in future periods.
While inflation is stabilizing, we may not be able to continue - 15 - to pass through inflationary cost increases and, if inflationary pressures return, we may only be able to recoup a portion of our increased costs in future periods.
The occurrence of natural disasters (the severity and frequency of which may be exacerbated by climate change) or acts of violence, terrorism or civil unrest could result in physical damage to our properties, the temporary closure of stores or distribution centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods to our distribution centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
The occurrence of natural disasters (the severity and frequency of which may be exacerbated by climate change), acts of violence, conflicts, wars, terrorism or civil unrest or global health crises, including epidemics and pandemics, could result in physical damage to our properties, the temporary closure of stores or distribution centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods to our distribution centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers.
If we are forced to expend significant resources and time to resolve such claims or to pay material amounts to satisfy such claims, it could have an adverse effect on our business, financial condition and results of operations.
If we are forced to expend significant resources and time to resolve such claims or to pay material amounts to satisfy such claims, there could be an adverse effect on our business, financial condition and results of operations.
If interest rates were to increase, our debt service obligations on the variable rate indebtedness referred to above would increase even if the principal amount borrowed remained the same, and our net earnings and cash flows will correspondingly decrease.
If interest rates were to increase, our debt service obligations on any variable rate indebtedness would increase, even if the principal amount borrowed remained the same, and our net earnings and cash flows would correspondingly decrease.
Additionally, since we purchase products from many manufacturers and fillers under 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 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.
For example, recently numerous cases have been filed against beauty product manufacturers and distributors alleging harm from chemical hair straighteners and hair relaxer products, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.
For example, numerous cases continue to be filed against beauty product manufacturers and distributors, alleging harm from chemical hair straighteners and hair relaxer products, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.
A variety of factors affect our comparable sales and quarterly financial performance, including: • changes in our merchandising strategy or mix; • a portion of a typical new store’s sales coming 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 the North America and Europe Fluctuations in foreign currency exchange rates may also affect our quarterly financial performance.
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.
Also, consolidation among suppliers may increase their 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.
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.
Regulatory, Legal and Cybersecurity Risks 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 in excess of our products liability insurance coverage and manufacturer indemnities.
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.
Our international revenues and expenses generally are 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, 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.
Any potential inability to comply with such laws, rules, regulations, guidelines and principles or to quickly adapt our practices to reflect them as they develop, could potentially subject us to significant fines, damages, liabilities and reputational harm, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows. - 19 - Financial Risks Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons.
Any potential inability to comply with such laws, rules, regulations, guidelines and principles, or to quickly adapt our practices to reflect them as they develop, could potentially subject us to significant fines, damages, liabilities and reputational harm, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Furthermore, we may have to spend a significant amount on the advertising and marketing of our owned and exclusive-label brands to drive customer awareness of these brands.
Furthermore, we may have to invest significant amounts on the advertising and marketing of our owned and exclusive-label brands to drive customer awareness of these brands.
Furthermore, social media advertising and marketing continues to increase in importance as consumers are paying less attention to more traditional media. As a result, the success of our marketing and advertising programs are increasingly dependent on the effectiveness of industry influencers that we engage to promote our products. Furthermore, actions taken by these individuals could harm our brand image.
Furthermore, social media advertising and marketing continues to increase in importance as consumers are paying less attention to more traditional media. As a result, the success of our marketing and advertising programs are increasingly dependent on the effectiveness of industry influencers that we engage to promote our products.
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 to defend claims related thereto. Legal compliance could also lead to considerably higher internal regulatory costs.
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.
Our ability to raise prices to reflect increased costs may also be limited by competitive conditions in the market for our products. The occurrence of natural disasters or acts of violence or terrorism could adversely affect our operations and financial performance.
Our ability to raise prices to reflect increased costs may also be limited by competitive conditions in the market for our products. The occurrence of large-scale catastrophes or crises, including natural disasters, acts of violence, conflicts, wars or terrorism and global health crises, could adversely affect our operations and financial performance.
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. 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.
Despite these relatively low opening costs, we may not be able to open all the new stores we plan to open and we may be unable to optimize our store base by closing stores that are underperforming or open stores that are profitable, any of which could have a material - 13 - adverse impact on our business, financial condition and results of operations.
Despite these relatively low opening costs, we may not be able to open all the new stores we plan to open, and we may be unable to optimize our store base, either of which could have a material adverse impact on our business, financial condition and results of operations.
We rely upon trade secrets and know-how to develop and maintain our competitive position. Our trademarks, certain of which are material to our business, are registered or legally protected in the U.S., Canada and other countries in which we operate. The success of our business depends to a certain extent upon the value associated with our intellectual property rights.
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.
As of September 30, 2023, certain of our subsidiaries, including Sally Holdings LLC, which we refer to as Sally Holdings, had an aggregate principal amount of approximately $1.1 billion of outstanding debt. Our substantial debt could have significant consequences.
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.
These laws and regulations govern the composition, packaging, labeling and safety of the products we sell as well as the methods we use to sell and import these products and other aspects of our business.
These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell as well as the methods we use to sell - 17 - and import these products.
The risks associated with climate change and other environmental impacts and increased focus by stakeholders on environmental issues, including those associated with climate change, could adversely affect our business, financial condition and operating results.
Climate change and other environmental impacts, and increased focus by stakeholders on environmental issues, could adversely affect our business, financial condition and operating results.
Therefore, there can be no assurance that the impact of these developments, if they were to occur, will not adversely impact revenue or margins or that our efforts to mitigate the impact of these developments will be successful. Furthermore, from time to time, we receive shipments of product from our suppliers 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. Furthermore, from time to time, our suppliers ship products to us that fail to conform to our quality control standards.
We are subject to risks related to our international operations. We operate on a global basis, and approximately 10% of our net revenues from continuing operations in fiscal year 2023, were generated outside North America.
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.
The breach of any of these covenants and restrictions could result in a default under either the ABL facility, the institutional term loan or the indentures that would permit the applicable lenders or senior note holders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest.
The breach of any of these covenants and restrictions could result in a default under the relevant governing instruments, which could permit the applicable lenders or senior note holders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest.
If we are unable to repay debt, lenders having secured obligations, such as the lenders under the ABL facility, could proceed against the collateral securing the debt.
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.

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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. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable - 24 - PART II
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.
ITEM 3. LEGAL PROCEEDINGS We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business.
ITEM 3. LEGAL PROCEEDINGS We are involved, from time to time, in various claims, administrative proceedings and lawsuits incidental or related to the conduct of our business, which may range from single-plaintiff to class action litigation.
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MINE SAF ETY DISCLOSURES Not applicable - 26 - 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 during the three months ended September 30, 2023: Fiscal Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs July 1 through July 31, 2023 — $ — — $ 595,792,425 August 1 through August 31, 2023 1,511,427 9.92 1,511,427 580,792,429 September 1 through September 30, 2023 — — — 580,792,429 Total this quarter 1,511,427 $ 9.92 1,511,427 $ 580,792,429 (1) The Board approved a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock through September 30, 2025. - 25 - Performance Graph The following performance graph and related information shall not be deemed “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
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.
Any determination to pay dividends will be made at the discretion of our Board of Directors and will depend on our financial condition, results of operations, contractual restrictions, including under our debt agreements and instruments, cash requirements and other factors our Board of Directors deem relevant.
Any determination to pay dividends will be made at the discretion of our Board and will depend on our financial condition, results of operations, contractual restrictions, including under our debt agreements and instruments, cash requirements and other factors our Board deems relevant.
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 10, 2023, there were 432 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 8, 2024, there were 409 stockholders of record of our common stock.
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, 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.
The following graph illustrates the five-year comparative total return among Sally Beauty Holdings, Inc., the S&P 500 Index (“S&P 500”) and the Dow Jones U.S. Specialty Retailers Index (“DJ US Specialty Retailers”) assuming $100 was invested on September 30, 2018, and dividends, if any, were reinvested.
(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.
Fiscal year ended September 30, 2018 September 30, 2019 September 30, 2020 September 30, 2021 September 30, 2022 September 30, 2023 Sally Beauty Holdings, Inc. $ 100.00 $ 80.97 $ 47.25 $ 91.63 $ 68.52 $ 45.57 S&P 500 100.00 104.25 120.05 156.07 131.92 160.44 DJ US Specialty Retailers 100.00 94.71 135.93 173.25 113.59 129.08 ITEM 6 . [RESERVED] - 26 -
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 -
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(2) The calculation of the average price paid per share includes the impact of commissions paid in connection with the shares repurchased.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry. - 28 - Results of Operations Key Operating Metrics The following table sets forth, for the periods indicated, information concerning key measures we rely on to assess our operating performance (dollars in thousands): 2023 vs. 2022 Fiscal Year Ended September 30, Amount % 2023 2022 Change Change Net sales: SBS $ 2,139,206 $ 2,193,044 $ (53,838 ) (2.5 )% BSG 1,588,925 1,622,521 (33,596 ) (2.1 )% Consolidated $ 3,728,131 $ 3,815,565 $ (87,434 ) (2.3 )% Gross profit: SBS $ 1,265,683 $ 1,273,882 $ (8,199 ) (0.6 )% BSG 632,497 645,283 (12,786 ) (2.0 )% Consolidated $ 1,898,180 $ 1,919,165 $ (20,985 ) (1.1 )% Segment gross margin: SBS 59.2 % 58.1 % 110 bps BSG 39.8 % 39.8 % — bps Consolidated 50.9 % 50.3 % 60 bps Net earnings: Segment operating earnings: SBS $ 358,474 $ 350,884 $ 7,590 2.2 % BSG 181,275 193,407 (12,132 ) (6.3 )% Segment operating earnings 539,749 544,291 (4,542 ) (0.8 )% Unallocated expenses and restructuring (a) (b) 214,720 206,651 8,069 3.9 % Consolidated operating earnings 325,029 337,640 (12,611 ) (3.7 )% Interest expense 72,979 93,543 (20,564 ) (22.0 )% Earnings before provision for income taxes 252,050 244,097 7,953 3.3 % Provision for income taxes 67,450 60,544 6,906 11.4 % Net earnings $ 184,600 $ 183,553 $ 1,047 0.6 % Number of stores at end-of-period (including franchises): SBS 3,148 3,439 (291 ) (8.5 )% BSG 1,338 1,355 (17 ) (1.3 )% Consolidated 4,486 4,794 (308 ) (6.4 )% Comparable sales growth (decline) SBS 3.4 % (0.6 )% 400 bps BSG (1.3 )% 2.3 % (360 ) bps Consolidated 1.4 % 0.6 % 80 bps (a) Unallocated expenses represent certain corporate costs (such as payroll, share-based compensation, employee benefits and travel expense for corporate staff, certain professional fees and corporate governance expenses) that have not been charged to our segments and are included in SG&A expenses in our consolidated statements of earnings.
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.
When we commit to an exit plan of scale that we believe will result in the disposal of long-lived assets prior to the end their useful lives, the approval of such plan may be considered a triggering event and therefore require a reassessment of asset carrying values for recoverability, based on projected cash flows.
When we commit to an exit plan of scale that we believe will result in the disposal of long-lived assets prior to the end of their useful lives, the approval of such plan may be considered a triggering event and therefore require a reassessment of asset carrying values for recoverability, based on projected cash flows.
Based upon the current level of operations and anticipated growth, we anticipate existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), as well as cash expected to be generated by operations and funds available under the ABL facility, will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures (including information technology investments and store projects) and service our debt obligations over the next 12 months.
Based upon the current level of operations and anticipated growth, we anticipate existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), as well as cash expected to be generated by operations and funds available under the ABL facility, will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures (including information technology investments and store projects) and service our debt obligations over the next 12 months and beyond.
Amounts shown do not reflect open purchase orders, mainly for merchandise, to be fulfilled within one year, which are generally cancellable or contracts that tend to be reoccurring in nature and similar in amount year over year. - 33 - (d) Other long-term obligations, including current portion, principally represent obligations under our insurance and self-insurance programs.
Amounts shown do not reflect open purchase orders, mainly for merchandise, to be fulfilled within one year, which are generally cancellable or contracts that tend to be reoccurring in nature and similar in amount year over year. (d) Other long-term obligations, including current portion, principally represent obligations under our insurance and self-insurance programs.
The carrying amount of a long-lived asset or asset group is considered impaired 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 - 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.
See Note 14, 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.
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.
Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure.
Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures.
“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, 2022, for a discussion of the financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021.
“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.
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 2023 compared to fiscal year 2022. 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 Sally Beauty’s financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023. See Item 7.
Off-Balance Sheet Financing Arrangements At September 30, 2023, 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, 2024, we did not have any off-balance sheet financing arrangements other than obligations under letters of credit, as discussed above.
O ur comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and e-commerce revenue. Additionally, comparable sales include sales to franchisees and full-service sales.
Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full-service sales.
Our comparable sales metric excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores are 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 comparable sales calculation until 14 months after the acquisition.
During the fiscal year ended 2023, we had total capital expenditures of approximately $97.8 million, excluding amounts paid in connection with the prior year, primarily in connection with investments in technology and store leasehold improvements.
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.
At September 30, 2023, we had $605.6 million in our liquidity pool, which includes amounts available for borrowings under our ABL facility of $482.6 million and cash and cash equivalents of $123.0 million.
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.
The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors. The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.
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.
Vendor Rebates and Concessions We deem cash consideration received from a vendor to be a reduction of the cost of goods sold unless it is in exchange for an asset or service or a reimbursement of a specific, incremental, identifiable cost incurred by us in selling the vendor’s products.
We believe the following are our most critical accounting estimates that require subjective judgments, estimates and assumptions: Vendor Rebates and Concessions We deem cash consideration received from a vendor to be a reduction of the cost of goods sold unless it is in exchange for an asset or service, or a reimbursement of a specific, incremental, identifiable cost incurred by us in selling the vendor’s products.
At the end of September 2023, we determined that a triggering event had occurred, due to the recent decline in the Company's share price and market capitalization, among other factors. As a result, we conducted a quantitative assessment at September 30, 2023.
At the end of September 2023, we determined that a triggering event had occurred, due to the decline in the Company's share price and market capitalization at the end of fiscal year 2023, among other factors.
BSG’s SG&A expenses decreased $0.7 million, or 0.1%, to $451.2 million for fiscal year 2023 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 2023 was 28.4% compared to 27.9% for fiscal year 2022.
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.
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, 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.
Financing Activities Net cash used by financing activities decreased as a result of fewer debt repayments during the fiscal year, compared to prior fiscal year, and fewer shares repurchased under our share repurchase program.
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.
Financial Results Summary of the Fiscal Year Ended September 30, 2023: • Consolidated net sales for the fiscal year decreased $87.4 million, or 2.3%, to $3,728.1 million and included a negative impact from changes in foreign currency exchange rates of $9.2 million, or 0.2% of consolidated net sales; • Consolidated comparable sales for the fiscal year increased 1.4%, compared to the prior fiscal year; • Consolidated gross profit decreased by $21.0 million, or 1.1%, to $1,898.2 million.
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.
Operating margin decreased 10 basis points to 8.7% compared to the prior fiscal year; • Consolidated net earnings for the fiscal year decreased $1.0 million, or 0.6%, to $184.6 million; • Diluted earnings per share for the fiscal year were $1.69 compared to $1.66 for the prior fiscal year; and • Cash provided by operations was $249.3 million for the fiscal year compared to $156.5 million for the prior fiscal year.
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.
Investing Activities The decrease in net cash used by investing activities for fiscal year 2023, compared to fiscal year 2022, was primarily due to fewer capital expenditures, partially offset by cash paid for acquisitions this fiscal year compared to last fiscal year.
Investing Activities The increase in net cash used by investing activities for fiscal year 2024, compared to fiscal year 2023, was primarily due to higher capital expenditures, partially offset by lower cash used for acquisitions.
The decrease in net sales for SBS was primarily driven by the following (in thousands): Comparable sales $ 69,253 Sales outside comparable sales (a) (121,284 ) Foreign currency exchange (1,807 ) Total $ (53,838 ) (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 SBS was primarily driven by the following (in thousands): Comparable sales $ (14,084 ) Sales outside comparable sales (a) (28,511 ) Foreign currency exchange 10,478 Total $ (32,117 ) (a) Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months.
SBS’s SG&A expenses decreased $15.8 million, or 1.7%, to $907.2 million for fiscal year 2023, which includes the favorable impact from foreign exchange rates of $0.6 million due to the weakening of the U.S. Dollar compared to currencies in our foreign operations.
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.
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 2023 and 2021, no material impairment losses were recognized.
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.
For fiscal year 2022, we recognized an impairment loss of $24.8 million in connection with the Plan within restructuring. - 35 - Assessment of Goodwill and Intangible Assets for Impairment We review goodwill and intangible assets for impairment annually, or when events or circumstances indicate it is more-likely-than-not that the value of the asset may be impaired.
Assessment of Goodwill and Intangible Assets for Impairment We review goodwill and intangible assets for impairment annually, or when events or circumstances indicate it is more-likely-than-not that the value of the asset may be impaired.
The decrease in net sales for BSG was driven by the following (in thousands): Comparable sales $ (20,117 ) Sales outside comparable sales (a) (6,086 ) Foreign currency exchange (7,393 ) Total $ (33,596 ) (a) Includes closed stores, including stores closed under the Plan, net of stores opened (or acquired) for less than 14 months.
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 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 $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.
Guarantor Financial Information Our 2025 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty.
The 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.
Our working capital (current assets less current liabilities) increased $184.2 million to $648.7 million at September 30, 2023, compared to $464.5 million at September 30, 2022.
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.
We continue to monitor these 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. Although these initiatives - 27 - have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation.
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.
Gross margin increased 60 basis points to 50.9% compared to the prior fiscal year; • Consolidated operating earnings for the fiscal year decreased $12.6 million, or 3.7%, to $325.0 million.
Gross margin was unchanged at 50.9% compared to the prior fiscal year; • Consolidated operating earnings for the fiscal year decreased $42.3 million, or 13.0%, to $282.7 million.
The ratio of current assets to current liabilities was 2.12 to 1.00 at September 30, 2023, compared to 1.70 to 1.00 at September 30, 2022. - 31 - Share Repurchase Programs During the fiscal years 2023 and 2022, we repurchased and subsequently retired approximately 1.5 million shares and 6.8 million shares of our common stock under our share repurchase program at a cost of $15.0 million and $130.3 million, respectively, excluding the impact of excess taxes on share repurchases.
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.
As such, no impairment was recorded for the fiscal years 2023, 2022 or 2021. Like goodwill, our indefinite-lived intangible assets are tested for impairment by comparing the fair value of each asset to its carrying value, but only if a triggering event exists. As of September 30, 2023, our indefinite-lived assets were comprised of only trade names.
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.
The majority of cash consideration we receive is considered to be a reduction of inventory and a subsequent reduction in cost of goods sold as the related products are sold. We consider the facts and circumstances of the various contractual agreements with vendors in order to determine the appropriate classification of amounts received in our consolidated statements of earnings.
The majority of cash consideration we receive is considered to be a reduction of the cost of inventory and a subsequent reduction in cost of goods sold as the related products are sold.
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.
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.
The increase in SBS's comparable sales was a result of growth in our average unit retail, primarily from inflationary impacts and pricing leverage, partially offset by a decrease in our average units per transaction. BSG .
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 .
Interest Expense The decrease in interest expense was primarily due to the lapping of debt extinguishment costs related to the repayment of our 8.75% Senior Notes due 2025 in fiscal year 2022, partially offset by debt extinguishment costs related to the repricing of our Term Loan B, higher interest rates on our variable rate debt and an increase in our average borrowings outstanding under our ABL facility.
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.
We record cash consideration expected to be received from vendors in accounts receivables, other when earned and at the amount we believe will be collected. These receivables could be significantly affected if the actual amounts subsequently collected differ from our expectations.
We consider the facts and circumstances of the various contractual agreements with vendors in order to determine the appropriate classification of amounts received in our consolidated statements of earnings. We record cash consideration expected to be received from vendors in accounts receivables, other when earned and at the amount we believe will be collected.
These 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. During the fiscal year, these headwinds have resulted in lower traffic and conversion in our business and increases in certain operating costs.
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.
Subsequently during the fiscal year, we were successfully able to negotiate a reduction in the fixed interest rate spreads on borrowings under the term loan facility. At September 30, 2023, we had $1,078.0 million in outstanding debt, excluding finance lease obligations, unamortized debt issuance costs and discounts, in the aggregate, of $8.0 million.
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.
For fiscal year 2022, we incurred $27.6 million in restructuring charges, which includes $24.8 million in asset impairments related to the Plan and other expenses in connection with a prior restructuring plan. See Note 16 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for more information on our restructuring plans.
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.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants. - 32 - See Note 10 of the Notes to Consolidated Financial Statements in Item 8 contained in this Annual Report for additional information about our debt.
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.
The increase in our effective tax rate was primarily due to additional taxes and interest recorded in the current fiscal year in connection with the one-time transition tax on unrepatriated foreign earnings ("Repatriation Tax") related to fiscal year 2018, and the net benefit recognized in the prior fiscal year from the release of $19.9 million of valuation allowances against foreign subsidiary net operating losses in the prior year for which a tax benefit was recognized, offset by $7.0 million in expense arising from uncertain tax positions.
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.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of September 30, 2023 and 2022 (in thousands): (in thousands) September 30, 2023 September 30, 2022 Cash and cash equivalents $ 66,148 $ 23,325 Inventory $ 735,853 $ 714,477 Intercompany receivable $ 1,658 $ — Current assets $ 890,462 $ 827,155 Total assets $ 2,076,413 $ 1,982,982 Current liabilities $ 468,202 $ 549,415 Intercompany payable $ — $ 4,431 Total liabilities $ 2,011,075 $ 2,085,169 The following table presents the summarized statement of earnings information for fiscal year 2023 (in thousands): Net sales $ 3,011,054 Gross profit $ 1,551,214 Earnings before provision for income taxes $ 209,632 Net Earnings $ 154,584 Contractual Obligations The following table summarizes our contractual obligations at September 30, 2023 (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) $ 72,247 $ 791,675 $ 65,881 $ 413,561 $ 1,343,364 Obligations under operating leases (b) 175,327 262,059 147,651 105,786 690,823 Obligations under finance leases 174 144 — — 318 Purchase obligations (c) 23,345 21,824 — — 45,169 Other long-term obligations (d)(e) 7,716 8,142 1,630 1,532 19,020 Total $ 278,809 $ 1,083,844 $ 215,162 $ 520,879 $ 2,098,694 (a) Long-term debt obligations include future interest payments on our debt outstanding as of September 30, 2023.
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.
Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility. As of September 30, 2023, we had approximately $580.8 million of additional share repurchase authorization remaining under our Share Repurchase Program, that expires September 30, 2025.
Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility.
Historical Cash Flows The following table shows our sources and uses of cash for the periods presented (in thousands): Fiscal Year Ended September 30, 2023 2022 Change Net cash provided by operating activities $ 249,311 $ 156,500 $ 92,811 Net cash used by investing activities (99,776 ) (102,419 ) 2,643 Net cash used by financing activities (100,824 ) (373,679 ) 272,855 Effect of foreign currency exchange rate changes on cash and cash equivalents 3,732 (10,803 ) 14,535 Net increase (decrease) in cash and cash equivalents $ 52,443 $ (330,401 ) $ 382,844 Operating Activities The increase in net cash provided by operating activities for fiscal year 2023, compared to fiscal year 2022, was primarily driven by fewer inventory purchases in the current year as a result of the Plan and the additional inventory purchases related to BSG's growth through distribution partnerships in the prior fiscal year.
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.
SBS’s gross margin grew as a result of pricing leverage, increased penetration of our owned-brand products and adjustments to our expected obsolescence reserve related to the Plan. BSG . BSG’s gross profit decreased as a result of lower net sales, while BSG’s gross margin was unchanged.
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 .
Trends Impacting Our Business Global inflationary pressures continued to influence consumer and stylist shopping behavior along with the cost for products and services.
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.
(b) Restructuring primarily relates to the Plan. - 29 - The Fiscal Year Ended September 30, 2023, compared to the Fiscal Year Ended September 30, 2022 Net Sales SBS .
(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 .
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. Due to the aforementioned goodwill triggering event, during the three months ended September 30, 2023, the Company determined that a triggering event had occurred for its intangible assets.
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.
As a percentage of SBS net sales, SG&A for fiscal year 2023 was 42.4% compared to 42.1% for fiscal year 2022. The increase as a percentage of sales was driven by higher wage and bonus expenses, partially offset by cost savings from the closure of stores in connection with the Plan and lower advertising expenses. BSG .
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 .
SBS's sales decrease was primarily driven by the impact of store closures in connection with the Plan in an amount of approximately $112.0 million, partially offset by a significant portion of these sales being recaptured in other locations including within comparable sales.
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.
Actual results could differ from the estimates and assumptions used, which could have a material impact to financial statements. We believe the following are our most critical accounting estimates that require subjective judgments, estimates and assumptions: Valuation of Inventory Our inventory is stated at the lower of weighted average cost or net realizable value.
Actual results could differ from the estimates and assumptions used, which could have a material impact on financial statements.
Unallocated SG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $18.4 million, or 10.3%, to $197.5 million, primarily due to higher wage and bonus - 30 - expenses, insurance costs and information technology expenses.
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.
Removed
Distribution Center Consolidation and Store Optimization Plan Last fiscal year, we announced our Distribution Center Consolidation and Store Optimization Plan (the "Plan"). The Plan was designed to improve overall profitability by optimizing our store base and distribution network through the planned closing of 330 SBS stores, 35 BSG stores and two BSG distribution centers.
Added
Within our BSG business, we saw our stylists respond to big promotional events, but also to newness and innovation in the assortment.
Removed
This fiscal year, we were able to complete the majority of our planned closures and further optimized our store supply chain network based on our new store fleet, while meeting our sales recapture and cost savings expectations.
Added
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.
Removed
As of September 30, 2023, we have two BSG stores left to be closed as part of the Plan and expect additional immaterial costs to be incurred in the first half of fiscal year 2024. See Note 16 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for more information on the Plan.
Added
Additionally, unallocated includes costs related to our Fuel for Growth initiative.
Removed
In the U.S. and Canada, we saw our SBS retail customers color their hair less frequently and reduce the size of their basket when they shop with us, while at BSG we saw a continuation of stylist demand trends of buying closer to needs we’ve seen over the last several quarters.
Added
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 .
Removed
Furthermore, in a measure to curb inflation, the U.S. Federal Reserve has increased the federal funds effective rate. In turn, these increases have raised the interest expense of some of our customers’ outstanding borrowings which has reduced their discretionary spending.
Added
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 .
Removed
Comparable Sales The Company’s initiative to invest in our digital platforms support our omni-channel strategy to provide customers an enhanced shopping experience. As such, we believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period.
Added
This decrease was driven primarily by higher net sales and lower delivery expense. Unallocated.
Removed
BSG's sales decrease was primarily driven by the impact of store closures in connection with the Plan in an amount of approximately $8.8 million and the negative impacts of exchanges rates, partially offset by a significant portion of these sales being recaptured in other locations, including within comparable sales.
Added
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.
Removed
Additionally, BSG’s comparable sales were impacted by the continuation of stylist demand trends seen over the last several quarters, which resulted in fewer transactions and units per transaction, partially offset by an increase in our average unit retail. Gross Profit SBS . SBS’s gross profit decrease was driven by lower net sales, partially offset by a higher gross margin.
Added
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.
Removed
Gross margin included lower product margin resulting from an unfavorable sales channel mix between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin, offset by adjustments to our expected obsolescence reserve related to the Plan. Selling, General and Administrative Expenses SBS .
Added
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.
Removed
The increase was primarily driven by higher labor and bonus expenses, partially offset by a shift in some distribution center costs from selling, general and administrative expense into gross margin. Unallocated.
Added
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.
Removed
These increases were partially offset by prudent cost control and the lapping of disposal costs for obsolete personal-protective equipment inventory. Restructuring For fiscal year 2023, we substantially completed the planned closures under the Plan and incurred $17.2 million in restructuring charges, primarily from lease termination costs.
Added
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”).
Removed
Additionally, our interest rate derivatives have helped mitigate some of the impacts from higher interest rates on a portion of our variable rate debt. Provision for Income Taxes For fiscal year 2023 and 2022, our effective tax rate was 26.8% and 24.8%, respectively.
Added
These obligations are included in accrued liabilities and other liabilities, as appropriate, in our consolidated balance sheets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCurrently, we do not purchase or hold any derivative instruments for speculative or trading purposes, and are restricted from engaging in, by our debt and credit agreements. - 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.
Biggest changeCurrently, 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.
As more fully discussed in Note 11 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, derivative instruments in order to manage risk relating to cash flows and interest rate exposure. Credit risk We are exposed to credit risk in connection with certain assets, primarily accounts receivable.
As more fully discussed in Note 12 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, derivative instruments in order to manage risk relating to cash flows and interest rate exposure. Credit risk We are exposed to credit risk in connection with certain assets, primarily accounts receivable.
We provide credit to customers in the ordinary course of business and perform ongoing credit evaluations. We believe our exposure of credit risk with respect to trade receivables is largely mitigated by our broad customer base and that our allowance for doubtful accounts is sufficient to cover customer credit risks at September 30, 2023.
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.
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 2023, and it would have impacted our consolidated net assets by approximately 2.2% at September 30, 2023.
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.
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, 2023. 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, 2024. In the event a counterparty defaults in its obligation under our derivative instruments, we could incur substantial financial losses.
As more fully discussed in Note 11 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, foreign exchange forward contracts to mitigate exposure to changes in foreign currency exchange rates.
As more fully discussed in Note 12 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report, we use, from time to time, foreign exchange forward contracts to mitigate exposure to changes in foreign currency exchange rates.
For each of the fiscal years 2023, 2022 and 2021, less than 20% of our consolidated net sales were made in currencies other than the U.S. dollar.
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.
Additionally, at September 30, 2023, we held a $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, 2023, a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $2.2 million.
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.
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, 2023, there were no outstanding borrowings under the ABL facility, and the term loan B had $398.0 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, 2024, there were no outstanding borrowings under the ABL facility, and the term loan B had $394.0 million in outstanding principal balance.

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