Sally Beauty Holdings Q4 Profit Declines, Results Miss View

(RTTNews) - Specialty retailer Sally Beauty Holdings Inc. (SBH) on Thursday reported a 1 percent decline in profit for the fourth quarter as an increase in sales were more than offset by a higher provision for income taxes. Both revenue and earnings per share for the quarter missed analysts' estimates. Shares of the company are down more than 3 percent in the regular trading session.

Segment-wise, Sally Beauty Supply segment sales for the fourth quarter edged up 0.2 percent to $556.09 million, while Beauty Systems Group segment net sales rose 7 percent to $350.35 million.

Sally Beauty Holdings' net earnings for the fourth quarter were $64.81 million, down from $65.63 million in the year-ago period. However, earnings per share increased to $0.38 from $0.35 in the prior-year quarter on lower number of weighted average shares outstanding in the latest quarter.

Excluding a $10.19 million charge, before taxes, related to a litigation settlement, adjusted net earnings for the year-ago period were $72.15 million or $0.39 per share.

On average, eleven analysts polled by Thomson Reuters expected the company to report earnings of $0.39 per share for the latest quarter. Analysts' estimates typically exclude one-time items.

Consolidated net sales for the quarter rose 3 percent to $906.44 million from $882.56 million in the year-ago quarter. Analysts had a consensus revenue estimate for the quarter of $909.87 million.

The increase in net sales reflects the addition of new stores and growth in Beauty System Group or BSG's full service business. The impact from changes in foreign currency exchange rates in the latest quarter was not material.

Consolidated same-store sales growth for the quarter was 0.4 percent, compared to an increase of 4.3 percent in the prior-year period.

Gross profit margin was 49.6 percent, down 30 basis points from the same period last year. However, operating profit margin rose 70 basis points to 14.1 percent.

For the latest quarter, provision for income taxes increased 33 percent to $36.09 million. The effective tax rate for the quarter was 35.8 percent, compared to 29.2 percent for the year-ago period. In the prior-year quarter, a limited restructuring occurred for U.S. income tax purposes. This tax planning opportunity resulted in the recognition of $10.3 million in income tax benefits.

For fiscal 2013, Sally Beauty Holdings' net earnings increased to $261.15 million or $1.48 per share from $233.06 million or $1.24 per share in the prior year. Adjusted net earnings for the previous year were $267.23 million or $1.42 per share. Net sales for the year rose 3 percent to $3.62 billion from $3.52 billion last year.

Analysts expected the company to report earnings of $1.50 per share for the year on revenues of $3.63 billion.

Consolidated same-store sales growth for the year was 0.8 percent, compared to 6.4 percent in the prior year.

Looking ahead to fiscal 2014, Sally Beauty forecasts consolidated same-store sales growth in a range of 1 percent to 3 percent, and assumes a gradual sales improvement in the Sally U.S. retail business throughout fiscal 2014. In addition, the company projects consolidated organic store growth for the year of 3 percent to 4 percent.

In Thursday's regular session, SBH is trading at $26.68,down $0.96 or 3.47 percent on a volume of 394,820 shares.