Sally Beauty Is Closing 350 Stores, Starting Next Month
Your local beauty supply store could be in danger soon.
Many of us turn to Sally Beauty when we want salon-like hair without the high price tag. This beloved beauty chain sells professional beauty products to everyone, making it a go-to for people who prefer to color their hair or do their nails without breaking the bank. But your next at-home dye job or DIY manicure might now be in jeopardy. Sally Beauty just announced it's closing 350 of its stores, starting next month. Read on to find out more about the beauty retailer's upcoming mass shutdown.
Sally Beauty has been struggling recently.
Sally Beauty has not had an easy year. The data company Safegraph shows that while Sally Beauty Supply's foot traffic was consistently over 100,000 throughout 2021, it dropped in May of this year and has continued to decline, Glam reported. In August, the retailer was seeing a total of roughly 89,500 in-store visits, which is a "drastic drop in shoppers" compared to last year, according to the beauty news outlet.
Morgan Stanley analyst Simeon Gutman told Barron's that much of this decline has to do with inflation. According to Gutman, Sally Beauty is geared mostly toward lower-income consumers who are being hit particularly hard by rising inflation and have shifted their spending more to necessities like gas and groceries as a result.
"When we think of how the customer's adjusting, what we're not seeing them do is choose to not buy a tube of color, or a bottle of shampoo, what they're really doing is saying, that is overall amount of money that I'm going to spend and I'm just being a little bit more frugal with that total amount of money I have," Sally Beauty CEO Denise Paulonis explained during an August earnings call.
Now, the beauty company is looking to tackle these challenges with a new tool: closures.
The company is planning to close 350 stores.
Parent company Sally Beauty Holdings Inc. released a new report on Nov. 10 detailing financial results from its 2022 fiscal year, which ended in late September. According to the report, the company's consolidated net sales were down 1.5 percent for the year.
In a statement, Paulonis said that the company will be executing three strategic initiatives as they enter the 2023 fiscal year to improve its financial performance. One of these initiatives is to increase the efficiency of Sally Beauty Holding Inc.'s operations, which includes transforming its retail footprint.
"The company is accelerating its store optimization plan, including the closure of approximately 350 stores," the new report stated. Most of the store closings will be Sally Beauty locations throughout the U.S., and the majority will start closing in Dec. 2022. There are currently a total of 3,439 Sally Beauty Supply stores globally, but the company did not disclose which exact locations will be shutting down.
Some Sally Beauty locations have already closed this year.
We've already lost some Sally Beauty Supply stores in 2022. The company closed roughly 110 of the retailer's stores over the last year, and several were located throughout the U.S. Back in June, a Sally Beauty Supply location shut down permanently in Macomb, Illinois, the McDonough County Voice reported. And over in Virginia, one of the retailer's stores in Gloucester closed this fall, according to the Peninsula Chronicle.
"Over the last several quarters, the company has been piloting store closures in various markets with the goal of maximizing the value of its large store portfolio and providing a seamless omni-channel experience to its customers," Sally Beauty Holdings Inc. said in its new report.
The company has chosen to go ahead with the closure of 350 locations as part of its store optimization plan "based on positive sales recapture rates and improved profitability" within these markets where smaller store closures were piloted.
The company is also shuttering some distribution centers.
Sally Beauty isn't just closing stores either. According to its report, two of the company's facilities are getting the axe soon as well. "The company will also be optimizing its supply chain by closing two small distribution centers in Oregon and Pennsylvania and transferring the volumes to larger distribution centers, effective in Dec. 2022," Sally Beauty Holdings Inc. said.
All in all, the beauty company is expecting to save around $50 million in expenses with its optimization plan, as well as increase its comparable sales. "We remain encouraged by the rebuilt foundation of the business and are excited about the potential of our new strategic initiatives," Sally Beauty Holdings Inc. said. "As we leverage these strengths, we also expect that the external environment will remain challenging in the nearer term, most notably the inflationary pressure that is negatively impacting consumer purchasing behavior and also driving increased labor costs."