UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2026
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-33145
SALLY BEAUTY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
36-2257936
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
7900 Windrose Ave
Plano, Texas
75024
(Address of principal executive offices)
(Zip Code)
(800) 777-5706
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.01 par value
SBH
The New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding as of May 6, 2026: 95,408,486
TABLE OF CONTENTS
Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
4
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Earnings
5
Condensed Consolidated Statements of Comprehensive Income
6
Condensed Consolidated Statements of Stockholders’ Equity
7
Condensed Consolidated Statements of Cash Flows
8
Notes to Condensed Consolidated Financial Statements
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3. Quantitative and Qualitative Disclosures About Market Risk
23
Item 4. Controls and Procedures
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
24
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
Item 5. Other Information
Item 6. Exhibits
25
2
In this Quarterly Report, references to the “Company,” “our company,” “Sally Beauty,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.
cautionary notice regarding forward-looking statements
Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” "might" or similar expressions may also identify such forward-looking statements.
Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, and other filings with the U.S. Securities and Exchange Commission ("SEC") which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.
3
Item 1. Financial Statements.
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except par value data)
March 31,2026
September 30,2025
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
157,401
149,162
Trade accounts receivable, net
26,231
31,828
Accounts receivable, other
75,401
84,734
Inventory
986,787
987,575
Other current assets
46,940
48,154
Total current assets
1,292,760
1,301,453
Property and equipment, net of accumulated depreciation of $963,117 at March 31, 2026, and $937,596 at September 30, 2025
285,335
284,284
Operating lease assets
635,406
646,698
Goodwill
539,061
540,674
Intangible assets, excluding goodwill, net of accumulated amortization of $9,052 at March 31, 2026, and $14,686 at September 30, 2025
51,375
53,018
Other assets
49,353
44,969
Total assets
2,853,290
2,871,096
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt
4,000
Accounts payable
222,635
224,507
Accrued liabilities
169,800
184,641
Current operating lease liabilities
157,050
158,566
Income taxes payable
—
4,260
Total current liabilities
553,485
575,974
Long-term debt
823,051
861,974
Long-term operating lease liabilities
531,987
538,426
Other liabilities
21,080
21,026
Deferred income tax liabilities, net
85,815
79,489
Total liabilities
2,015,418
2,076,889
Stockholders’ equity:
Common stock, $0.01 par value. Authorized 500,000 shares; 95,898 and 97,875 shares issued and shares outstanding at March 31, 2026, and September 30, 2025, respectively
959
979
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued
Accumulated earnings
946,455
898,076
Accumulated other comprehensive loss, net of tax
(109,542
)
(104,848
Total stockholders’ equity
837,872
794,207
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
(In thousands, except per share data)
Three Months Ended
Six Months Ended
March 31,
2026
2025
Net sales
903,382
883,146
1,846,550
1,821,041
Cost of goods sold
427,610
424,329
887,519
885,384
Gross profit
475,772
458,817
959,031
935,657
Selling, general and administrative expenses
403,841
389,444
811,165
765,964
Operating earnings
71,931
69,373
147,866
169,693
Interest expense
14,165
16,289
28,785
33,731
Earnings before provision for income taxes
57,766
53,084
119,081
135,962
Provision for income taxes
15,071
13,874
30,829
35,739
Net earnings
42,695
39,210
88,252
100,223
Earnings per share:
Basic
0.44
0.39
0.91
0.98
Diluted
0.43
0.38
0.88
0.96
Weighted-average shares:
96,727
101,614
97,271
101,820
99,721
104,435
100,265
104,682
(In thousands)
Other comprehensive income (loss):
Foreign currency translation adjustments
(9,079
10,791
(4,692
(15,824
Interest rate swap, net of tax
90
(407
(49
744
Foreign exchange contracts, net of tax
163
(581
47
902
Other comprehensive income (loss), net of tax
(8,826
9,803
(4,694
(14,178
Total comprehensive income
33,869
49,013
83,558
86,045
Accumulated
Additional
Other
Total
Common Stock
Paid-in
Comprehensive
Stockholders’
Shares
Amount
Capital
Earnings
Loss
Equity
Balance at September 30, 2025
97,875
45,557
Other comprehensive income
4,132
Share-based compensation
7,555
Stock issued for equity awards
1,493
15
192
207
Employee withholding taxes paid related to net share settlement
(517
(5
(7,331
(7,336
Repurchases and cancellations of common stock
(1,359
(14
(416
(20,327
(20,757
Balance at December 31, 2025
97,492
975
923,306
(100,716
823,565
Other comprehensive loss
5,969
68
1
70
71
(1
(9
(1,661
(17
(6,030
(19,546
(25,593
Balance at March 31, 2026
95,898
Balance at September 30, 2024
101,854
1,019
740,685
(113,169
628,535
61,013
(23,981
6,053
1,162
12
69
81
(392
(4
(5,260
(5,264
(753
(8
(862
(9,078
(9,948
Balance at December 31, 2024
101,871
792,620
(137,150
656,489
4,238
112
321
322
(7
(1,088
(11
(4,552
(5,676
(10,239
Balance at March 31, 2025
100,894
1,009
826,154
(127,347
699,816
Six Months Ended March 31,
Cash Flows from Operating Activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
48,912
50,924
Share-based compensation expense
13,524
10,291
Amortization of deferred financing costs
965
1,092
Loss on early extinguishment of debt
296
759
Impairment of long-lived assets
1,779
Loss (gain) on disposal of equipment and other property
11
(26,641
Deferred income taxes
6,208
(4,581
Changes in (exclusive of effects of acquisitions):
Trade accounts receivable
5,517
5,779
8,910
(9,751
(1,750
20,759
1,148
6,138
(4,548
666
Operating leases, net
3,411
(509
Accounts payable and accrued liabilities
(57,761
(4,400
(13,583
56
(1,063
Net cash provided by operating activities
166,519
84,521
Cash Flows from Investing Activities:
Payments for property and equipment
(64,946
(38,971
Proceeds from sale of property and equipment, net
43,574
Acquisitions, net of cash acquired
(371
Net cash (used) provided by investing activities
4,232
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt and ABL Facility
351,000
Repayments of long-term debt and ABL Facility
(40,000
(428,079
Debt issuance costs
(1,525
Proceeds from equity awards
278
403
Payments for common stock repurchased
(46,349
(20,187
Employee withholding taxes paid related to net share settlement of equity awards
(7,345
(5,271
Net cash used by financing activities
(93,416
(103,659
Effect of foreign exchange rate changes on cash and cash equivalents
82
(881
Net increase (decrease) in cash and cash equivalents
8,239
(15,787
Cash and cash equivalents, beginning of period
107,961
Cash and cash equivalents, end of period
92,174
Supplemental Cash Flow Information:
Interest paid
28,529
33,344
Income taxes paid
33,752
55,815
Capital expenditures incurred but not paid
8,129
6,999
Sally Beauty Holdings, Inc. and Subsidiaries
1. Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated interim financial statements of Sally Beauty Holdings, Inc. and its subsidiaries included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures included herein are adequate for the interim period presented. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and that are necessary to present fairly our consolidated financial position as of March 31, 2026, and September 30, 2025, our consolidated results of operations, consolidated comprehensive income, consolidated statements of stockholders’ equity for the three and six months ended March 31, 2026 and 2025, and consolidated cash flows for the six months ended March 31, 2026 and 2025.
Principles of Consolidation
The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All amounts are presented in U.S. Dollars.
Accounting Policies
We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon our estimated annual effective income tax.
Use of Estimates
In order to present our unaudited condensed consolidated interim financial statements in conformity with GAAP, we are required to make certain estimates and assumptions that impact our interim financial statements and supplementary disclosures. These estimates may use forecasted financial information based on reasonable assumptions available at the time of preparation, however, actual results could differ due to changes in facts and circumstances. Significant estimates and assumptions are involved in the accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangible assets and goodwill, and other reserves. We believe these estimates and assumptions are reasonable based on management’s knowledge of current events and anticipated further actions, and changes in facts and circumstances may result in revised estimates and impact actual results. Revisions to estimates are recognized in the period in which the facts that give rise to the change become known.
2. Recent Accounting Pronouncements
In December 2023, the FASB issued accounting standards update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to expand disclosures in an entity’s income tax rate reconciliation table and the disaggregation of taxes paid in U.S. and foreign jurisdictions. The amendments in this update are effective for annual periods beginning after December 15, 2024. The new standard is not expected to have a material impact on our consolidated financial statements; however, we expect to provide additional detail and disclosures upon adoption.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40), which requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of goods sold and selling, general and administrative expenses. The update is intended to improve disclosures by providing amounts related to inventory purchases, employee compensation, depreciation, and amortization. The amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, but we currently do not expect to early adopt this standard. We are currently evaluating the impact of this update to our consolidated financial statements and disclosures.
3. Revenue Recognition
Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale in our stores or when products are shipped for e-commerce orders. Revenue is recognized net of estimated sales returns and sales taxes, when control of the merchandise is transferred to the customer. We estimate sales returns based on historical data.
Changes to our contract liabilities, which are included in accrued liabilities in our condensed consolidated balance sheets, were as follows (in thousands):
Beginning Balance
10,027
11,493
Loyalty points and gift cards issued but not redeemed, net of estimated breakage
5,071
4,545
Revenue recognized from beginning liability
(5,594
(4,618
Ending Balance
9,504
11,420
See Note 12, Segment Reporting, for additional information regarding the disaggregation of our sales revenue.
4. Fair Value Measurements
We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation hierarchy is based upon the transparency of inputs used in the valuation of an asset or liability on the measurement date.
The three levels of that hierarchy are defined as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities;
Level 2 - Pricing inputs are other than quoted prices in active markets, included in Level 1, that are either directly or indirectly observable; and
Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own model with estimates and assumptions.
Financial instruments measured at fair value on recurring basis
Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follows:
(in thousands)
Classification
Fair Value Hierarchy Level
Financial Assets:
Foreign exchange contracts
Designated cash flow hedges
Level 2
64
87
Non-designated cash flow hedges
735
570
Interest rate swap
59
799
716
.
Financial Liabilities:
351
57
379
225
Other Liabilities
736
282
The fair value of each asset and liability was determined using widely accepted valuation techniques, including discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates.
10
Other fair value disclosures
The carrying amounts, if any, of cash equivalents, trade and other accounts receivable, accounts payable, and borrowings under our $500 million asset-based senior secured loan facility (the “ABL Facility”) approximate their respective fair values due to the short-term nature of these financial instruments. The carrying amounts and corresponding estimated fair values of our long-term debt, excluding debt issuance costs and original issue discounts, are as follows:
Fair Value
March 31, 2026
September 30, 2025
Hierarchy Level
Carrying Value
Senior notes due 2032
600,000
612,000
622,500
Term loan B due 2030
235,000
234,413
275,000
276,375
Total long-term debt
835,000
846,413
875,000
898,875
The fair value of our senior notes was determined using unadjusted quoted market prices. The fair value of our Term Loan B agreement was determined using unadjusted quoted market prices for similar debt securities in active markets.
5. Stockholders’ Equity
Share Repurchases
In August 2017, our Board of Directors (the “Board”) approved a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock, subject to certain limitations governed by our debt agreements. In May 2025, our Board approved a term extension of our share repurchase program to September 30, 2029. Under this extension the Company is authorized to purchase its common stock up to the amount remaining under the Board’s 2017 authorization. As of March 31, 2026, we had approximately $421.3 million of additional share repurchase authorizations remaining under our share repurchase program. For the three and six months ended March 31, 2026, we repurchased 1.7 million shares and 3.0 million shares of our common stock at a total cost of $25.4 million and $46.0 million, respectively, excluding the impact of excise taxes. For the three and six months ended March 31, 2025, we repurchased 1.1 million shares and 1.8 million shares of our common stock at a total cost of $10.0 million and $20.0 million, respectively, excluding the impact of excise taxes.
Accumulated Other Comprehensive Loss
The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):
Foreign Currency Translation Adjustments
Interest Rate Swap
Foreign Exchange Contracts
(104,329
84
(603
Other comprehensive income (loss) before reclassification, net of tax
55
(5,008
Reclassification to net earnings, net of tax
(104
418
314
(109,021
35
(556
The tax impacts for the changes in other comprehensive income (loss) and the reclassifications to net earnings were not material.
6. Weighted-Average Shares
The following table presents a reconciliation of basic and diluted weighted-average shares (in thousands):
Three Months EndedMarch 31,
Six Months EndedMarch 31,
Weighted-average basic shares
Dilutive securities:
Stock option and stock award programs
2,994
2,821
2,862
Weighted-average diluted shares
Anti-dilutive options excluded from our computation of diluted shares
1,251
1,528
7. Property and Equipment, Net
In October 2024, we sold our corporate headquarters located in Denton, Texas to Denton County, Texas for $45.5 million, excluding $1.5 million in closing costs. As a result of the sale, we recognized a gain of approximately $26.6 million within selling, general and administrative expenses in our condensed consolidated statements of earnings for the six months ended March 31, 2025.
8. Goodwill and Intangible Assets
As of January 31, 2026, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. For our goodwill testing, we performed a qualitative analysis and determined that there was no indication of impairment. For our indefinite-lived intangible asset assessment, we performed a quantitative analysis and determined that there was no impairment. No impairment losses were recognized in the current or prior periods presented in connection with our goodwill. In the prior year, we recognized a $1.8 million impairment loss in selling, general, and administrative expenses related to a trade name within the Sally reporting segment.
Goodwill allocated to our Sally and BSG reporting units, which are also defined as our Sally and BSG segments, was $89.8 million and $449.2 million, respectively, as of March 31, 2026. For the six months ended March 31, 2026, changes in goodwill reflect the effects of foreign currency exchange rates of $1.6 million.
The following table presents our amortization expense for the period (in thousands):
Intangible assets amortization expense
653
841
1,305
1,699
9. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
Compensation and benefits
73,927
85,058
Deferred revenue
14,443
14,195
Rental obligations
11,700
10,286
Accrued freight
7,733
8,761
Insurance reserves
7,153
7,331
Interest payable
3,780
3,819
Operating accruals and other
51,064
55,191
Total accrued liabilities
10. Short-term and Long-term Debt
At March 31, 2026, there were no outstanding borrowings under our ABL Facility, and we had $482.3 million available for borrowing, including under our Canadian sub-facility, subject to a borrowing base limitation, as reduced by outstanding letters of credit.
During the three and six months ended March 31, 2026, we voluntarily repaid $19.0 million and $38.0 million, respectively, of outstanding Term Loan B principal in addition to our mandatory quarterly payment. In connection with the voluntary repayments, we recognized a $0.1 million loss and a $0.3 million loss on debt extinguishment within interest expense related to unamortized debt issuance costs for the three and six months ended March 31, 2026, respectively.
11. Derivative Instruments and Hedging Activities
During the six months ended March 31, 2026, we did not purchase or hold any derivative instruments for trading or speculative purposes. See Note 4, Fair Value Measurements, for the classification and fair value of our derivative instruments.
Designated Cash Flow Hedges
Foreign Currency Forwards
We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. At March 31, 2026, we held forwards, which expire ratably through September 30, 2026, with a notional amount, based upon exchange rates at March 31, 2026, as follows (in thousands):
Notional Currency
Notional Amount
Mexican Peso
9,548
Canadian Dollar
4,469
14,017
The changes in fair value related to these foreign currency forwards are recorded quarterly into AOCL. As the forwards are exercised, the realized gains or losses are recognized into cost of goods sold (“COGS”), based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended March 31, 2026 and 2025, we recognized a net loss of $0.2 million and a net gain of $0.3 million, respectively. For the six months ended March 31, 2026 and 2025, we recognized a net loss of $0.5 million and a net gain of $0.1 million, respectively. Based on March 31, 2026, valuations and exchange rates, we expect to reclassify a net gain of approximately $0.4 million out of AOCL and into COGS over the next 12 months.
In April 2023, we entered into a three-year interest rate swap agreement with an initial notional amount of $200 million (the “Interest Rate Swap”) to mitigate the exposure to higher interest rates in connection with our Term Loan B due in 2030. The Interest Rate Swap involves fixed monthly payments at the contract rate of 3.705%, and in return, we will receive a floating interest payment based on the 1-month Adjusted Term SOFR Rate. The Interest Rate Swap will mature in April 2026 and is designated as a cash flow hedge. Changes in the fair value of the Interest Rate Swap are recorded quarterly, net of income tax, and included in AOCL.
Each month, we recognize either income or expense, based on the position of the interest rates, into interest expense on our condensed consolidated statements of earnings related to the Interest Rate Swap. For the three months ended March 31, 2026 and 2025, we recognized expense of $0.1 million and income of $0.4 million, respectively. For the six months ended March 31, 2026 and 2025, we recognized income of $0.1 million and $0.9 million, respectively. At March 31, 2026, we expect to reclassify a net loss of approximately $0.1 million out of AOCL and into interest expense over the next 12 months.
Non-Designated Derivative Instruments
We also use foreign exchange forward contracts to mitigate our exposure to exchange rate fluctuations related to certain intercompany balances that are not considered permanently invested. At March 31, 2026, we held forward contracts, which mature at various dates during the first month of each of the next two fiscal quarters, with a notional amount, based upon exchange rates at March 31, 2026, as follows (in thousands):
British Pound
48,308
Euro
18,024
11,643
1,715
79,690
Changes in the fair value of the forward contracts, as well as realized gains or losses upon settlement, are recorded in selling, general and administrative expenses. For the three months ended March 31, 2026 and 2025, the effects of these foreign exchange contracts on our condensed consolidated financial statements were a net gain of $0.4 million and a loss of $0.7 million, respectively. For the six months ended March 31, 2026 and 2025, the effects of these foreign exchange contracts on our condensed consolidated financial statements were net gains of $0.1 million and $1.0 million, respectively.
12. Segment Reporting
Our business is organized into two reportable segments: (i) Sally, a domestic and international chain of retail stores and digital platforms that offers professional beauty supplies to both salon professionals and retail customers primarily in North America, including Puerto Rico, and parts of Europe and South America and, (ii) BSG, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, its own sales force, and digital platforms in partially exclusive geographical territories in the U.S., including Puerto Rico, and Canada.
Our Chief Operating Decision Maker ("CODM"), whom we have determined to be our Chief Executive Officer, regularly evaluates
13
the performance of our reportable segments by comparing current segment operating earnings to comparable prior periods and forecasted amounts. Included within segment operating earnings, the significant expense categories below are regularly provided to the CODM.
Segment Operating Performance
The following tables summarize our results for the three and six months ended March 31, 2026 and 2025 (in thousands):
`
Three Months Ended March 31, 2026
Three Months Ended March 31, 2025
Sally
BSG
Net sales (a)
521,236
382,146
500,575
382,571
Less: (b)
201,904
225,706
194,178
230,151
Selling, general, and administrative expenses
241,183
109,072
350,255
229,092
108,486
337,578
Segment operating earnings
78,149
47,368
125,517
77,305
43,934
121,239
Unallocated expenses (c)
53,586
51,866
Six Months Ended March 31, 2026
Six Months Ended March 31, 2025
1,052,837
793,713
1,026,021
795,020
415,563
471,956
406,368
479,016
481,228
220,482
701,710
462,474
221,601
684,075
156,046
101,275
257,321
157,179
94,403
251,582
109,455
81,889
Other Segment Disclosures
Three Months Ended March 31,
Depreciation and amortization:
14,306
14,074
27,738
28,732
9,006
9,765
17,680
18,252
Unallocated
1,968
1,520
3,494
3,940
25,280
25,359
14
Disaggregation of net sales by segment
The following tables disaggregate our segment revenues by merchandise category.
Hair color
45.1
%
42.3
44.0
41.3
Hair care
21.5
23.6
21.8
23.7
Styling tools and supplies
16.1
16.2
16.7
16.8
Nail
9.9
10.0
Skin and cosmetics
7.1
7.4
7.3
7.6
Other beauty items
0.3
0.5
0.6
100.0
43.8
42.8
42.7
41.4
40.8
40.9
41.8
41.9
10.1
10.5
10.6
2.9
3.4
3.2
3.6
2.1
2.2
2.0
2.3
0.2
The following tables disaggregate our segment revenue by sales channels:
Company-operated stores
90.3
91.8
90.4
92.0
E-commerce
9.7
8.2
9.6
8.0
69.3
69.4
14.9
13.9
14.8
14.0
Salon business consultants
8.4
9.3
8.5
9.5
Franchise stores
7.5
This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.
Financial Summary for the Three Months Ended March 31, 2026
Comparable Sales
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.
Overview
Key Operating Metrics
The following table sets forth, for the periods indicated, information concerning key measures on which we rely to evaluate our operating performance (dollars in thousands):
Increase (Decrease)
Net sales:
20,661
4.1
26,816
2.6
(425
(0.1
)%
(1,307
(0.2
Consolidated
20,236
25,509
1.4
Gross profit:
319,332
306,397
12,935
4.2
637,274
619,653
17,621
2.8
156,440
152,420
4,020
321,757
316,004
5,753
1.8
16,955
3.7
23,374
2.5
Segment gross margin:
61.3
61.2
bps
60.5
60.4
39.8
110
40.5
39.7
80
52.7
52.0
51.9
51.4
50
Net earnings:
Segment operating earnings:
844
1.1
(1,133
(0.7
3,434
7.8
6,872
4,278
3.5
5,739
Unallocated expenses (a)
1,720
3.3
27,566
33.7
Consolidated operating earnings
2,558
(21,827
(12.9
(2,124
(13.0
(4,946
(14.7
4,682
8.8
(16,881
(12.4
1,197
8.6
(4,910
(13.7
3,485
8.9
(11,971
(11.9
Comparable sales growth (decline):
(0.3
280
1.3
0.8
(2.7
240
(0.6
40
(1.3
260
Number of stores at end-of-period (including franchises):
3,079
3,117
(38
(1.2
1,320
1,329
4,399
4,446
(47
(1.1
17
Results of Operations
The Three Months Ended March 31, 2026, compared to the Three Months Ended March 31, 2025
Net Sales
Sally. The increase in net sales for Sally was primarily driven by the following (in thousands):
Comparable sales
12,498
Sales outside comparable sales (a)
(3,323
Foreign currency exchange
11,486
Sally's net sales increase was primarily driven by an increase in comparable sales and positive impacts from foreign exchange rates, partially offset by net stores closed during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by softness in our hair care category and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in our number of transactions and average unit retail.
BSG. The decrease in net sales for BSG was primarily driven by the following (in thousands):
(1,118
(660
1,353
BSG's net sales decrease was primarily from a decrease in comparable sales, partially offset by positive impacts from foreign exchange rates. The decrease in comparable sales was driven by external factors that impacted stylist purchasing behavior, partially offset by strong performance in our color category. BSG's comparable sales were slightly down with a decrease in the average number of units per transaction, offset by a higher average unit retail.
Gross Profit
Sally. Sally’s gross profit increased for the three months ended March 31, 2026, as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins, resulting from benefits from our Fuel for Growth initiative, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of all our low-margin full service operations in Europe in connection with our Fuel for Growth initiative.
BSG. BSG’s gross profit increased for the three months ended March 31, 2026, as a result of a higher gross margin on units sold, partially offset by a decrease in net sales. BSG’s gross margin improvement was driven by higher product margins, resulting from benefits from our Fuel for Growth initiative.
Selling, General and Administrative Expenses
Sally. Sally’s selling, general and administrative expenses increased $12.1 million, or 5.3%, for the three months ended March 31, 2026, and included an unfavorable impact from foreign exchange rates of $5.5 million. As a percentage of Sally net sales, selling, general and administrative expenses for the three months ended March 31, 2026, were 46.3%, compared to 45.8% for the three months ended March 31, 2025. The increase as a percentage of sales was primarily due to increased labor and other compensation-related expenses, higher commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impacts of an impairment charge related to a trade name (non-cash expense of $1.8 million) in the prior year, and Fuel for Growth benefits.
BSG. BSG’s selling, general and administrative expenses increased $0.6 million, or 0.5%, for the three months ended March 31, 2026. As a percentage of BSG net sales, selling, general and administrative expenses for the three months ended March 31, 2026, were 28.5% compared to 28.4% for the three months ended March 31, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses and rent expense, partially offset by lower depreciation and amortization expenses.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $1.7 million, or 3.3%, for the three months ended March 31, 2026, primarily due to an increased labor and other compensation-related expenses, higher information technology expense, and higher facility expenses related to our new corporate headquarters, partially offset by lower expenses related to our Fuel for Growth initiative.
18
Interest Expense
The decrease in interest expense was primarily a result of a lower average outstanding principal balance on our Term Loan B. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.
Provision for Income Taxes
The effective tax rate was 26.1% for the three months ended March 31, 2026 and 2025. The effective tax rate remained unchanged, primarily due to a decrease related to foreign operations in the current quarter, offset by the unfavorable tax impact of executive compensation.
The Six Months Ended March 31, 2026, compared to the Six Months Ended March 31, 2025
13,077
(6,118
19,857
Sally's net sales increase was primarily driven by positive impacts from foreign exchange rates and an increase in comparable sales, partially offset by net stores closed during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by external factors that impacted consumer spending, including the U.S. government shutdown during the beginning of our fiscal year, softness in our hair care category, and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in our average unit retail and number of transactions, partially offset by fewer average number of units per transaction.
(1,870
(932
1,495
BSG's net sales decrease was primarily from a decrease in comparable sales. The decrease in comparable sales was driven by external factors that impacted stylist purchasing behavior, including the U.S. government shutdown during the beginning of our fiscal year, partially offset by strong performance in our color category. BSG's comparable sales decrease was primarily a result of a decrease in the number of transactions and average number of units per transaction, partially offset by an increase in average unit retail.
Sally. Sally’s gross profit increased for the six months ended March 31, 2026, as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins, resulting from benefits from our Fuel for Growth initiative, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of our low-margin full service operations in Europe in connection with our Fuel for Growth initiative.
BSG. BSG’s gross profit increased for the six months ended March 31, 2026, as a result of a higher gross margin on units sold, partially offset by a decrease in net sales. BSG’s gross margin improvement was driven by higher product margins, resulting from benefits from our Fuel for Growth initiative.
Sally. Sally’s selling, general and administrative expenses increased $18.8 million, or 4.1%, for the six months ended March 31, 2026, and included an unfavorable impact from foreign exchange rates of $3.5 million. As a percentage of Sally net sales, selling, general and administrative expenses for the six months ended March 31, 2026, were 45.7%, compared to 45.1% for the six months ended March 31, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, higher commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impacts of an impairment charge related to a trade name (non-cash expense of $1.8 million) in the prior year, and Fuel for Growth benefits.
19
BSG. BSG’s selling, general and administrative expenses decreased $1.1 million, or 0.5%, for the six months ended March 31, 2026. As a percentage of BSG net sales, selling, general and administrative expenses for the six months ended March 31, 2026, were 27.8% compared to 27.9% for the six months ended March 31, 2025. The decrease as a percentage of sales was primarily due to lower depreciation and amortization expenses, partially offset by higher labor and other compensation-related expenses and rent expense.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $27.6 million or 33.7%, for the six months ended March 31, 2026, primarily due to a $26.6 million gain on the sale of our corporate headquarters in the prior year, higher facility expenses related to our new corporate headquarters, higher labor and other compensation-related expenses, and an increase in information technology expenses, partially offset by lower costs in connection with our Fuel for Growth initiative.
The effective tax rates were 25.9% and 26.3% for the six months ended March 31, 2026 and 2025, respectively. The decrease in the effective tax rate was primarily attributable to foreign operations and a more favorable tax impact of share‑based compensation in the current year, offset by higher federal tax credits in the prior year.
Liquidity and Capital Resources
Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL Facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payments. Additionally, under our share repurchase program (see below for more details) we will from time to time repurchase shares of our common stock on the open market to return value to our shareholders. At March 31, 2026, we had $639.7 million of available liquidity, which includes $482.3 million available for borrowing under our ABL Facility and cash and cash equivalents of $157.4 million.
Our working capital (current assets less current liabilities) increased $13.8 million, to $739.3 million at March 31, 2026, compared to $725.5 million at September 30, 2025. The increase was primarily driven by the timing of accrued compensation and benefit expenses within accrued expenses and an increase in cash and cash equivalents, partially offset by the timing of landlord receivables related to our new corporate headquarters within accounts receivable, other.
We anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), cash expected to be generated by operations, and funds available under our ABL Facility will be sufficient to fund our working capital and capital expenditure requirements over the next twelve months.
Cash Flows
Net Cash Provided by Operating Activities
The increase in cash provided by operating activities was primarily driven by the timing of accounts payable, an increase in cash receipts from customers, lower income taxes paid, and the receipt of landlord receivables related to our new corporate headquarters, partially offset by strategic reduction in slower moving inventory in the prior year while maintaining consistent inventory levels this year.
Net Cash (Used) Provided by Investing Activities
The change in our investing activities was a result of lapping the cash received of $44 million from the sale of our corporate headquarters in the prior year and higher capital expenditures in the current year, which includes the build out of our new corporate headquarters.
Net Cash Used by Financing Activities
The decrease in cash used by financing activities was primarily driven by lower debt repayments in the current year, partially offset by higher share repurchases under our share repurchase program.
20
Debt and Guarantor Financial Information
At March 31, 2026, we had $835.0 million in outstanding debt principal, excluding unamortized debt issuance costs and debt discounts, in the aggregate, of $7.9 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $235.0 million remaining on our Term Loan B.
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, paying down other debt and share repurchases. Amounts drawn on our ABL Facility are generally paid down with cash provided by our operating activities. During the six months ended March 31, 2026, there were no borrowings under the ABL Facility.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.
Guarantor Financial Information
Our 2032 Senior Notes were issued by our wholly owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (together, the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.
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 have been eliminated.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of March 31, 2026, and September 30, 2025:
94,276
85,360
729,427
721,975
Current assets
927,458
927,667
2,176,114
2,177,968
Intercompany payable
17,941
15,117
Current liabilities
467,406
474,079
1,839,552
1,883,754
The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the six months ended March 31, 2026 (in thousands):
1,492,172
789,221
107,642
Net Earnings
80,021
Share Repurchase Programs
Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the six months ended March 31, 2026 and 2025, we repurchased 3.0 million shares and 1.8 million shares of our common stock for $46.0 million and $20.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.
Contractual Obligations
Other than our debt, as discussed above, there have been no material changes outside the ordinary course of our business to our contractual obligations since September 30, 2025.
Off-Balance Sheet Financing Arrangements
At March 31, 2026, and September 30, 2025, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates or assumptions since September 30, 2025.
21
Recent Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements in Item 1 – “Financial Statements” in Part I – Financial Information.
22
As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. There have been no material changes to our market risks from September 30, 2025. See our disclosures about market risks contained in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2026. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.
Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.
Scope of the Controls Evaluation. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.
Conclusions regarding Disclosure Controls. Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of March 31, 2026, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.
We are subject to a number of U.S., federal, state and local laws and regulations, as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products. We believe that we are in material compliance with such laws and regulations, although no assurance can be provided that this will remain true going forward.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Information regarding shares of common stock we repurchased during the quarter ended March 31, 2026, excluding the impact of excise taxes, is as follows:
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
Jan 1 - Jan 31, 2026
541,565
15.38
438,301,556
Feb 1 - Feb 28, 2026
500,967
15.95
430,310,537
Mar 1 - Mar 31, 2026
618,465
14.61
421,276,242
Total this quarter
1,660,997
15.26
During the quarter ended March 31, 2026, no director or officer of the Company adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.
Exhibit No.
Description
3.1
Third Restated Certificate of Incorporation of Sally Beauty Holdings, Inc., dated January 30, 2014, which is incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on January 30, 2014
Amended and Restated By-Laws of Sally Beauty Holdings, Inc., dated July 2, 2025, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 9, 2025
10.1*
Separation Agreement between Marlo Cormier and Sally Beauty Supply LLC, dated March 31, 2026
22*
List of Subsidiary Guarantors
31.1*
Rule 13a-14(a)/15d-14(a) Certification of Denise Paulonis
31.2*
Rule 13a-14(a)/15d-14(a) Certification of Adrianne Lee
32.1*
Section 1350 Certification of Denise Paulonis
32.2*
Section 1350 Certification of Adrianne Lee
101
The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements.
104
The cover page from our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, formatted in iXBRL (contained in Exhibit 101).
* Included herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date: May 11, 2026
By:
/s/ Adrianne Lee
Adrianne Lee
Senior Vice President, Chief Financial Officer
For the Registrant and as its Principal Financial Officer
26