Declining foot traffic is taking its toll on the world’s largest retailer and distributor of beauty products.
Sally Beauty Holdings (Denton, Texas) announced it will close about 350 stores beginning in December, as well as two small distribution centers in Oregon and Pennsylvania. Volumes from those centers will be transferred to larger distribution facilities, the company says.
Sally Beauty estimates it will save approximately $50 million from the reduction of its store and distribution footprint, with an expected benefit of about $10 million to earnings for fiscal year 2023.
While the beauty chain was able to maintain healthy foot-traffic levels through the pandemic, inflation has presented a stiffer challenge.
Data collected by SafeGraph and reported by Glam show in-store visits for Sally Beauty began dropping off in May 2022 and continued through the summer. Morgan Stanley analyst Simeon Gutman says rising prices are to blame, writes Barron’s, as the retailer is geared to lower-income consumers who are shifting their dollars to nondiscretionary purchases like gas and groceries.
For fiscal year 2022, Sally Beauty reported $3.8 billion in net sales, a 1.5% decrease from the prior year.
“As we turn to fiscal 2023, the teams will continue to leverage the omnichannel capabilities and modern retail infrastructure we have built,” CEO Denise Paulonis said in a prepared statement. “Additionally, we will be executing against three strategic initiatives. … We will enhance our customer centricity, including an expanded services ecosystem to support our professional stylists and increased education and expertise to inspire and support all customers; grow our Sally portfolio of high margin owned brands and amplify innovation; and increase the efficiency of our operations.”
As of Sept. 30, 2022, Sally Beauty Holdings operated a total of 4794 stores under its Sally Beauty, CosmoProf and Armstrong McCall labels. The Sally Beauty banner accounts for more than 3700 of those locations, which are found in the U.S., Puerto Rico, Canada, Mexico, Peru, the U.K., Belgium, Chile, France, Ireland, the Netherlands, Spain and Germany.