Beauty supply retailer Sally Beauty (NYSE: SBH) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 1.3% year on year to $947.1 million. The company expects the full year’s revenue to be around $3.74 billion, close to analysts’ estimates. Its non-GAAP profit of $0.55 per share was 16% above analysts’ consensus estimates.

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StockStory’s Take

Sally Beauty’s third quarter saw positive market reception, with management attributing the company’s performance to strength in the color category, digital marketplace expansion, and ongoing customer engagement initiatives. CEO Denise Paulonis highlighted the importance of color products, noting 7% growth in color during the quarter, as well as significant momentum in the company’s “Licensed Colors on Demand” consultation service. Management also pointed to the effectiveness of digital channels and marketplace partnerships, such as with Uber Eats and DoorDash, in driving e-commerce sales and customer acquisition.

Looking forward, Sally Beauty’s guidance is shaped by continued focus on customer activation, digital innovation, and expansion of higher-margin product categories. Management emphasized the upcoming rollout of the Sally Ignited store refresh, targeted app enhancements for stylists, and strategic category expansion into areas like skin, spa, and fragrance. CFO Marlo Cormier indicated that the company expects its Fuel for Growth cost optimization program and increased own-brand penetration to support margin stability, while Denise Paulonis highlighted the potential for new digital experiences and expanded product assortments to drive long-term growth.

Key Insights from Management’s Remarks

Management attributed Q3 performance to strong color category growth, digital channel momentum, and customer-centric offerings, while highlighting strategic investments that contributed to above-consensus results.

• Color category leadership: Sally Beauty’s color products saw robust demand, with both Sally and BSG segments reporting strong year-on-year growth. Management credited new product innovation and the Licensed Colors on Demand (LCOD) consultation service for attracting and retaining customers, and highlighted that these initiatives drove higher customer frequency and engagement.

• Digital marketplace expansion: The company’s partnerships with delivery platforms such as Uber Eats, DoorDash, Amazon, and Walmart have accelerated e-commerce sales, especially in the U.S. and Canada. Digital channels now account for an increasing portion of overall sales, with e-commerce revenue up significantly in both segments, reflecting changing consumer shopping preferences.

• Store refresh and experiential retail: The Sally Ignited initiative, which involves modernizing both the physical and digital store experience, was launched in 30 locations. Early data showed higher cross-category shopping, longer dwell times, and elevated transaction values in refreshed stores, indicating potential for broader rollout.

• Own-brand and product innovation: Management is investing in refreshing and expanding Sally’s own-brand offerings, including relaunches of key lines and introductions of new products in high-margin categories like hair care and styling tools. These moves are intended to boost retention and profitability.

• Operational efficiency gains: The Fuel for Growth program continues to deliver cost savings, with cumulative benefits reinvested into strategic initiatives. Management expects further efficiencies from supply chain, vendor partnerships, and SKU optimization, contributing to gross margin improvement and supporting future investments.

Drivers of Future Performance

Management anticipates that growth will be driven by continued innovation in products, digital and store experience upgrades, and disciplined cost management, while monitoring external consumer pressures.

• Digital and omnichannel acceleration: Sally Beauty plans to further invest in digital platforms, including a major update to the BSG stylist app and enhancements to online shopping experiences. Management expects these efforts to drive higher engagement, increased conversion, and stronger customer loyalty by integrating education, community, and seamless ordering for both professionals and retail customers.

• Category and market expansion: The company is testing new categories such as skin, spa, cosmetics, and men’s grooming, particularly within Sally Ignited and BSG stores. Management believes entering adjacent markets and refreshing product assortments will provide incremental revenue streams and attract new customer segments over the next year.

• Cost discipline and margin focus: The Fuel for Growth program is expected to yield additional savings through further optimization of supply chain and SG&A (selling, general, and administrative expenses). Management highlighted that these efficiencies, along with increased own-brand penetration, should help offset inflationary pressures and support margin targets, but noted that consumer sentiment and macroeconomic factors remain watch points.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will monitor (1) the effectiveness of the Sally Ignited store refresh in driving higher transaction values and customer engagement, (2) expansion of digital and omnichannel initiatives, including the BSG app relaunch and marketplace partnerships, and (3) the pace of category expansion into skin, spa, fragrance, and men’s grooming. Execution on cost optimization and the ability to sustain color category momentum will also be key signposts for progress.

Sally Beauty currently trades at $14.48, down from $14.69 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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