Sally Beauty Q3 2023 Earnings Call Transcript

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Provided by Quartr
August 3, 2023

There are 5 speakers on the call.

Operator

Good morning, everyone, and welcome to Sally Beauty Holdings Conference Call to discuss the company's fiscal 2023 Third Quarter Results. All participants have been placed in a listen only mode. After management's prepared remarks, there will be a question and answer session. Additional instructions will be given at that time. Now, I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer for Sally Beauty Holdings.

Operator

Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and thank you for joining us. With me on the call today are Denise Polonis, President and Chief Executive Officer and Marlo Cormier, Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks on this call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those recent annual report on Form 10 ks and other filings with the SEC.

Speaker 1

Any forward looking statements made on this call represent our views only as of today and we undertake no obligations to update them. The company has provided a detailed explanation and reconciliation and non GAAP financial measures in its earnings press release and on its website. Now I'd like to turn the call over to Denise to begin the formal remarks.

Speaker 2

Thank you, Jeff, and good morning, everyone. Three quarters into our fiscal year, we are on track with our operating plans and the financial guidance we laid out at the beginning of the year. Engagement from our Sally and BSG customers remains strong and our core color category is growing in both segments. In Q3, we delivered net sales of $931,000,000 and strong gross margin performance of 51%. Additionally, SG and A expenses were below prior year, supported by continued focus on cost efficiencies and the realized benefit of our store and distribution center optimization efforts.

Speaker 2

As a result, we delivered 3rd quarter adjusted EBITDA of $119,000,000 and free cash flow of $32,000,000 On our last earnings call, We needed some softening of transactions and ticket at Sally beginning in late March and continuing into April. Trends picked up in May and remained relatively steady through quarter end. While our low to middle income customers continue to spend in our core categories of color and care, They limited their basket adds and remain conservative on what they consider to be non essential purchases. In turn, at Sally, comparable sales increased by 3%, while comparable transactions were flat with average ticket up 6%, driven by average unit retail prices up 7% and units per transaction down 1%. Total Color sales increased 3% and Care was down 1%, which includes the impact of store closures.

Speaker 2

Comparable transactions were up 1%, while average ticket was down 4%, driven by units per transaction down 10% and average unit retail prices up 7%. From a category perspective, total color sales increased 1%, Well, Care was down 7% as we watched some product launches in Care in the prior year. We're pleased to see the resiliency transactions and color sales as both key performance indicators reflect the healthy ongoing engagement we have with our customer base. At a time when macro dynamics are impacting spending on consumer goods, we remain focused on our strategies to support the long term growth through our core strategic initiatives, enhancing customer centricity, driving innovation and increasing operating efficiency. We're seeing good traction in the early days of this work and feel confident that our strategies will continue to build upon our modern and dynamic retail platform that will take us well into the future.

Speaker 2

Before I provide an update on several of the initiatives that we previously shared, I'm thrilled to tell you about our newest customer centric growth initiative, the launch of our Happy Beauty Co. Value concept. This concept grew out of our focus over the past 2 years to drive top line growth, best serve our customers and expand our reach. In our journey to build out our strategic initiatives to grow our core businesses, it became clear to us that there was also ample opportunity for and engaging beauty experience with a value price point offering. Happy Beauty Co.

Speaker 2

Was developed to provide quality beauty at great prices in an accessible, fun and expressive environment, leveraging our understanding of the industry and our extensive capabilities across product, operations, sourcing and supply chain. All of our merchandise is priced under $10 and product offerings encompass 4 key categories: cosmetics and facial care, Bath and Body, Nail and Hair. Our offerings will be comprised of a strong mix of entrepreneurial third party and our own proprietary brands. With our strong track record of product and brand development, we'll be exercising this muscle bring our customers compelling value alternatives to well known premium price products. At the same time, we'll be partnering with smaller vendors who view this as a valuable opportunity to build visibility and drive growth for their brand.

Speaker 2

Our target demographic includes Savvy Millennials, Value Seekers and Discount Beauty Buyers with an average income under $100,000 The concept tested well in our focus groups and we're excited about the opportunity to pursue a new avenue to drive long term profitable growth. Over the last 6 weeks, we have opened 3 pilot stores, 2 in the Dallas Fort Worth area and 1 in Phoenix. We plan to open an additional 7 stores over the next few months to have a total of 10 pilot locations that will serve as learning environment for us over the coming quarters and allow us to assess the long term potential of the concept. Now, let me provide some additional updates on our ongoing strategic initiatives. Starting with customer centricity.

Speaker 2

Our 17,000,000 active loyalty members accounted for 78% of the sales at Sally U. S. And Canada in Q3. At BSG, rewards credit card purchases represented 9% of sales for the quarter. We are pleased to be holding our Sally loyalty count steady after executing roughly 350 store closures and our teams are deploying strategies spending more with us versus a year ago.

Speaker 2

In short, we are seeing a more engaged and valuable customer at Sally. Our virtual Color Expert program, which we're now calling licensed Colorist on Demand, is currently in 75 stores and continues to perform well with great customer response and feedback. Customers utilizing this service We expect to have this rolled out to approximately 20 states by the end of this fiscal year. We're pleased with the trajectory of our Studio by Sally concept as well, which is gaining momentum in its initial months as customers experiment with all aspects of the salon from tinsel extensions simple chair rental. Customer feedback has been positive, particularly around education, inspiration and the digital experience and units per transaction are trending above the Sally fleet.

Speaker 2

We are on track with our expansion plans for the coming months and expect to open 5 additional locations prior to our fiscal year end. Moving to BSG. As our pilot, the Salon HQ enters its next phase of maturation, We made the strategic decision to rebrand the platform as CosmoProfdirect. During the quarter, we expanded the platform to an additional 7 states, ending Q3 with 9 states and more than 1700 storefronts. Our stylists are embracing this new tool and gaining a deeper understanding of how they can leverage this resource and growth of our business.

Speaker 2

Moving on to our second strategic initiative, product innovation and owned brand growth. Park innovation continues to be an important growth driver at both Sally and BSG. In Q3, we saw strong performance at BSG from new product launches, including Amica, well as Ultimate Repair and Danger Gems, as well as expanded distribution with Color Wow! The pipeline at BSG continues to be robust. We have newness coming in color, hair and nails across key brands.

Speaker 2

In color, this includes new bright hues from Paul Mitchell, grades and silver tones from Matrix and the continued focus on blonding, which is a consistent traffic driver. Additionally, this month, BSG will be collaborating with Schwarzkopf on their exciting partnership with the iconic Barbie franchise with focus around Leitner's, including Barbie Dream Salon Kits and Home Spa Kits. In the Care category, we have newness from Olaplex, Paul Mitchell and Color Wow! At Sally, we're bringing innovation across color, nails, tools and textured hair. This includes 2 of our highly successful owned brands, Bombard and Strawberry Leopard.

Speaker 2

On the heels of our initial success with Bombard, will be introducing a color line in September, which is among our biggest launches of the year and plan to be a sizable business for us over the long term. Of note, Bonn Bar is resonating with our existing Sally shoppers, while also bringing in new customers. 20% of our Bonn Bar customers are new to Sally. In addition, next month, our strawberry leopard brand will be rolling out new colors and sprays. In the nail category, we recently completed the launch of Sally Hansen's Miracle Gel and Nail Booze Gel Polish, where we have an exclusive through calendar year end.

Speaker 2

Lastly, we're continuing to prioritize textured hair and have a number of new brands hitting the shelves later this month, including H. I. T. S, Aussie, The Dew and Uncle Funky's Daughter. In Q3, Own Advanced Brands penetration for Sally segment was 34%, up 150 basis points over the prior year.

Speaker 2

We expect this to continue to increase as we advance our goal to exceed 50% of sales over the next 4 to 5 years. Turning now to our 3rd strategic initiative, capturing efficiencies and optimizing our capabilities. The benefits from our store optimization efforts continue to track in line with our expectations. As a reminder, the bulk of the optimization efforts occurred 2022, and we expect SG and A savings to be approximately $50,000,000 with a $10,000,000 benefit to operating earnings in fiscal 2023. Additionally, as we disclosed in our last earnings call, we've been testing a new shipment frequency to our stores that we believe will unlock more benefits to our transportation costs as well as better labor productivity in our stores and distribution centers, while maintaining healthy in stock levels.

Speaker 2

I'm pleased to announce that this initiative tests well enough that we have expanded this process to approximately half of our Sally and BSG stores in the U. S. As of the end of July. We're confident that the actions we are taking to fundamentally change the way we operate will enable us to capture efficiencies in the near to medium term, and their commitment to serving and delighting our customers. While the macro environment remains dynamic, we remain agile and data driven as we navigate the near term, while advancing our long term growth agenda.

Speaker 2

Our path is clear and we have a relentless drive to deliver sustainable growth and value to our shareholders. Now, I'll turn the call over to Marlo to discuss the financials.

Speaker 3

Thank you, Denise, and good morning, everyone. 3rd quarter consolidated net sales declined 3% to $931,000,000 on 3.52 fewer stores and 20 basis points favorable foreign currency impact. Consolidated comparable sales grew 1%, reflecting 3% growth at Sally and a 2% decline at BSG. This compares to a 4% decline in consolidated comparable sales in the prior year. For perspective, total sales in Q3 of fiscal 2022 or $961,000,000 which reflects normalized top line performance.

Speaker 3

Unpacking the negative fiscal 2022 comparable sales when sales topped $1,000,000,000 driven by the COVID reopening. 3rd quarter global e commerce sales increased 3% on a constant currency basis $83,000,000 and represented 9% of total net sales. Moving down the P and L, we maintained strong adjusted gross margins, which came in at 50.9%, down 10 basis points to the prior year Increased product margin at Sally Beauty driven by pricing leverage and higher own brand penetration was offset by lower margins at BSG due to a channel mix shift between stores and our expanded Regis business as well as a shift in some North Texas distribution center costs from SG and A into gross margin. 3rd quarter's SG and A expenses totaled $384,000,000 down $7,000,000 to last year. The year over year decline primarily reflects the savings from our previously announced distribution center consolidation and store optimization plan, lower advertising costs and cost control, partially offset by higher labor and accrued bonus expense.

Speaker 3

Looking at Q4, we anticipate that SG and A dollars will be down slightly versus the prior year. Importantly, we are on track to achieve the previously outlined expense savings under the DC consolidation and store optimization plan, totaling approximately $50,000,000 for fiscal 2023. Prudent cost control and strong gross margin performance and adjusted diluted earnings per share of $0.49 Looking at segment results. Sally Beauty comparable sales were up 3%, while net sales declined 3%, reflecting 327 fewer stores in operations versus a year ago and 70 basis points of favorable foreign currency impact. At constant currency, Sally e Commerce sales declined 5% to $32,000,000 and represented 6% of segment net sales for the quarter.

Speaker 3

While our e commerce performance was below our expectations, Industry data shows we are outperforming the rest of the mass beauty market in our core categories of color, care and nails. For the Global Sally Beauty segment, Color was up 3% driven by gray coverage and Care decreased 1%. At Sally U. S. And Canada, Color increased by 3%, while Care was down 6%, including the impact of store closures.

Speaker 3

Gross margin at Sally expanded 30 basis points to 58.8 percent, reflecting strong product margins, driven primarily by pricing leverage and higher owned brand penetration. Segment operating margins expanded by 50 basis points coming in at 16.6%. Moving to the VSG segment. Comparable sales declined 2%, while net sales were down 3% on 25 fewer stores and 40 basis points of unfavorable foreign currency impact. On a constant currency basis, BSG e Commerce sales increased care declined 7% at BSG on a total sales basis, as we lapped some new product launches from last year.

Speaker 3

Gross margin at BSD decreased 40 basis points to 40.5%, primarily driven by lower margins due to the sales channel mix shift between stores and our and Regis partnership as well as the shifts in some North Texas distribution center costs from SG and A into gross margin. Segment operating margin came in at 12.3% versus 13.7% in the prior year. We are pleased to see BSC's profitability profile begin Moving to the balance sheet and cash flow. We ended the quarter with $74,000,000 of cash and cash equivalents and $16,000,000 outstanding under our asset base revolving line of credit. Our net debt leverage ratio stood at 2.2 times.

Speaker 3

As we previously announced, during the Q3, we entered into a 3 year interest rate swap agreement, which swaps a notional amount of $200,000,000 of our new term loan from a floating term so far rate to a fixed rate of 3.705 percent. Moving to inventory. We ended the quarter at just under $1,000,000,000 That's down 2% versus a year ago and reflects a healthy overall position, including strong in stock level. 3rd quarter cash flow from operations was $53,000,000 and capital expenditures totaled $22,000,000 For the full year, we expect free cash flow generation to be approximately $175,000,000 which includes approximately $35,000,000 in one time cash payments related to our DC and store optimization efforts. This provides us with the financial flexibility to invest in our new strategic initiatives to drive long term growth, to continue optimizing our capital structure and to return value to shareholders.

Speaker 3

Turning now to guidance. With our year to date performance, we are bringing up our adjusted operating margin to the higher end of our original guidance and maintaining all other components of our outlook for fiscal 2023 as follows. Comparable sales are expected to increase by low single digits compared to the prior year. Net sales are expected to decline by low single digits compared to the prior year. At the end of fiscal 2023, total store count is expected to be down 6% to 7% compared to the end of fiscal 2022 due to our store optimization plan and a small number of new store openings.

Speaker 3

Gross margin is expected to remain above 50% and adjusted operating margin is now expected to be in the range of 9% to 9.4%. This reflects increased investments in store labor, partially offset by an expected benefit to operating earnings of approximately $10,000,000 related to our DC consolidation and store optimization plan. For added perspective, we expect total sales in the 4th quarter to be similar to our 3rd quarter levels. We appreciate your time this morning. Now, I'll ask the operator to open the call for Q and A.

Operator

Thank you. Please press 1 then 0 on your touchtone phone. You will hear an acknowledgment tone that you've been placed in the queue and you may remove yourself from queue at any time by repeating the one zero command. The first question will come from Oliver Chen from Cowen. Please go ahead.

Speaker 3

Hi, this is Joelle on for Oliver. Thanks for taking our questions. Just curious on the promotional front we are hearing in the industry hair care, saw higher promotions. What have you seen in terms of the promotional environment and what is embedded in your guidance? And also on Happy Beauty Company, that concept, just curious how that customer set might differ from existing Sally customer and how you think that will be incremental to Sally?

Speaker 3

Thank you.

Speaker 2

Yes. Happy to answer both of those questions. On the promotional activity front, We're seeing a little bit different behavior on our Sally side of our business versus our BSG side of the business. On the Sally side of the business, Promotional activity is fairly consistent with what we've seen in the 1st 2 quarters of the year. So that's moderate ongoing promotional activity, but nothing I think when we look at the BSG side of the business, we certainly have stylists that are seeking out deals.

Speaker 2

They are working to stretch their money. They are looking for those deals. And so we saw promotional activity tip increase just

Speaker 3

a bit on that side

Speaker 2

of the business. I think what's important on both sides of the business and even more so at BSG is we watch the trends in the industry right along with our vendor partners. And our vendor partners have been very supportive in leaning in where we can fund those promotions, drive some unit growth in the business, but enable us to maintain our gross margin profile, while getting those incremental sales. So I'm anticipating that that promotional cadence is going to remain pretty consistent as we move through the next few quarters and we'll continue to partner with our vendors to make the right choices to serve our customers well on that front. On the Happy Beauty Company front, we're just so excited about the We have here to reach a bit of a different customer base in fact, and importantly reach them with different categories than what we have in the baseline of our Sally business today.

Speaker 2

We think the concept really has great potential. And when we think about the customer base, it's about millennials, value seekers of all age, discount beauty buyers. And when we look at the market, there's about $30,000,000,000 of beauty and personal care that's spent from households making under $60,000 a year and that's where we actually believe the Happy Beauty Co. Concept should have the highest appeal. 2 of our stores are going to be directly targeting and going after that profile that I just described.

Speaker 2

But we're also going to test stores that have a very different profile and we're going to get a good sense on how the concept resonates across a bunch of different economic and and geographic groups as we go forward. So we're really in the early innings there. But when you think about both the ability to serve that value customer, But really expand and focus on cosmetics, skincare, bath and body, With some nails and some hair, we're really stretching into the other side of the category that we don't participate in as much today with the Sally brand. Got it. Thank you.

Operator

Thank you. The next question is from Ashley Helgan from Jefferies. Please go ahead.

Speaker 3

Hi. Thanks for taking our questions. Anything you can share about the 3rd party brands you're going to have at Happy Beauty? And then also, anything on kind of the real estate location strategy? Thanks.

Speaker 2

Yes, sure. On the 3rd party brand front, it is all work in development. Right now with the pilots we opened, it's some well known brands, but also some more entrepreneurial brands that are coming in with some Korean beauty brands, some Australian beauty brands, things that really can bring great product efficacy at the value price point that's out there. So that 3rd party branch piece is going to continue to deliver and develop over time as we think about that and look forward and married up with our own Happy Beauty Co brand in the stores as well. So a healthy mix across both of those that we're excited about.

Speaker 2

When we think about the real estate strategy, when we just think geographically, we're starting our tests in the Dallas Fort Worth area as different types of centers that target different demographics and different economic profiles to really get a sense of where the concept will most resume. That can span from a heavy Hispanic market that might skew a little bit lower income to a more middle income, closer to college university environment that would be out there and literally everything in between. And that's why we're really excited about The planning that we've done to pull the pilot together to say 3 months, 6 months, 9 months from now, we'll be so much smarter about Where it resonates, what we would do to tweak the concept and where we would go. But most of these will all be in traditional types of strip mall centers, just different ones depending upon the notion of the demographic that we're going after. Great.

Speaker 2

Super helpful.

Operator

Thank you. Our next question is from Olivia Tong from Raymond James. Please go ahead.

Speaker 4

Great. Thanks. Good morning. I wanted to ask you about the comp, which slowed after a Promising performance in March quarter, you did talk about some weakness last quarter on last quarter's call in March April. It sounds like May got a little bit better.

Speaker 3

So can you talk a

Speaker 4

little bit about where you stand relative to the guide?

Speaker 2

Is some of that

Speaker 4

a view on perhaps improving profitability as you narrow your margin target to the upper end?

Speaker 2

So if we break it up, we have those the BSG and Sally businesses performing a little differently this quarter. But if I backed up one step, I think when you think about the performance this quarter, we also have to look at the historical comparison. Marlo mentioned that a bit in our prepared remarks. But The comparison that we were going up against in Q3 fiscal 2022 was comparing against an incredibly high base in fiscal 2021 coming off of the COVID reopening where we had a quarter that was over $1,000,000,000 in sales. So we posted a modestly negative comp last year kind of And Q3 last year was really a good normalized baseline to kind of compare the business go forward.

Speaker 2

So on the Sally business this quarter, what we saw was continued strength in the recaptured sales from the store optimization that contributed almost All of the 3 comps that we put out there in the market. And to your point about the cadence of the quarters, we did see the softness in April. And interestingly, it looks like many stabilized as we continue to move through June. So glad that we saw that resurgence of activity from where we were in March April timeframe, but that April timeframe did factor into the performance in the quarter. And then I think the only other important part that I'd mention on the Sally side is if we thought about what happened in Q2 where we posted a 9 comps, remember that that had a different comparison in the prior year, which It's really the year when we still had the COVID outbreak situation in the January, February timeframe.

Speaker 2

And so the portion of that was simply lapping the prior year. So overall, Sally on track with where we thought that it would be as we move through the year. And then with BSG, I think the thing that I'm personally most pleased about as we continue to see transaction growth and we continue to see strength in Color with Growth in Color. Offsetting that a bit, we did see solid demand trends remaining consistent with what we've seen in the last few where there is a frugality and really buying what is needed. And I think the other part for us that we saw coming into the quarter was that in hair care this year in Q3, we launched a lot of new innovation.

Speaker 2

The reality though, while much of that innovation was quite It wasn't enough to offset what was a very big innovation quarter last year, which included the launch of Olaplex No. So a little moderation on that care side just as we were in a different innovation cycle last year versus what we were in this year. So All in all, the quarter came in when we think about versus year ago very similar to what we thought. Cadence for the balance of the year, I think Performance that we saw in Q3 gives us confidence to deliver on our full year guidance, which was comp sales up low single digits and total sales Down low single digits. Yes, the strength of our efficiency program, the solid performance of our continued gross margin above 50 It's really what gives us great confidence to go to the upper end of our guide when we think about that operating income.

Speaker 2

I think we're now guiding between 9% and 9.4% from our operating margin rate. So All in all, quarter year are playing out very much as we expected. I think we remain quite agile and data driven in making our decisions as we work through a pretty interesting macro environment that we're all seeing, but looking to finish the year strong.

Speaker 4

Got it. Thank you. And then just, zooming in a little bit more on the margin, nice to see the narrowing towards the high end. Could you just talk a little bit more about the current promotional environment, any trends that you're seeing whether towards the upper end of the market versus the more value oriented consumer products, any particular trends that you're seeing, whether it's in color or other hair care related categories? And then just lastly, your views on why you think that e comm was lagging, whether it's just a particular point in time or something more systemic there?

Speaker 4

Thank you.

Speaker 2

Great. A lot to unpack there. So let me start off a little bit just reiterating a bit of the thoughts that we have around the promotional environment. We saw a little bit of an uptick in BSG, remained very consistent within Sally. But our margin strength really comes in our partnerships with our with our vendors and really being able to leverage investment from their perspective to maintain our gross margin rate, To be able to see the increases in units that we get when we do lean into promotion, we don't anticipate promotion going to any outsized levels, but I would back to the Sally will maintain where we sit today and BSG will maintain the bit of uptick that we saw in this last quarter.

Speaker 2

But before getting to the e com question, I think it might be helpful if Marlo just provides a little bit more color around what else is driving the strength in the operating margin and kind of taking us to the high end of

Speaker 3

the guide. Yes, I think what gives us confidence in the high end of the guide is our strength of our gross margins being able to maintain above that 50% and where we are year to date, it's pretty much what we see for our full year. On the Sally side, the strength is coming from our increasing own brand penetration and we did call out pricing leverage. We have been able to overcome vendor cost increases with our pricing actions in recent quarters. We don't see further outsized vendor cost increases Going forward, we believe that moderates, but we will continue to monitor that.

Speaker 3

On the gross or on the PSG side, gross margins have Texas DC costs that are now up in margin that have moved up from SG and A. So really good performance on our gross margin front and believe we have stability there going When we look at SG and A, we're really pleased to see SG and A dollars down from last year. And looking at as we finish the year, we expect that to be case for Q4 as well. Getting really good benefits out of really strict cost controls as well as the planned benefits that we're getting out of our DC consolidation and store optimization efforts. And those things are offsetting some really important investments that we made in wages as well as our continued investments in our strategic initiatives.

Speaker 3

So with our optimization efforts delivering the $50,000,000 that we and SG and A savings this year and a lift on operating earnings of $10,000,000 to this fiscal year. And building off the strength of the gross margins. We believe we have we're in a great position to deliver on the higher end of our operating margin guidance range. And then

Speaker 2

I guess coming back to your comment on e commerce and what we think about the e commerce business today at Sally. What I would say is, I think we see a bit of a channel shift underway. The industry e commerce data that we have shows softness overall in our key categories. And that same data suggests that we're outperforming what the total kind of mass beauty market is doing in color, care and nails from an e com perspective. But when we see the same idea that we have customers and consumers who are trending back to experiences, they're trending to travel, they're trending to restaurants, You see that a bit in people trending back to an in store shopping behavior as well and we feel like that's what we saw in the quarter more so than anything.

Speaker 2

But to be clear, our performance is below our expectations in this space and we're working very hard to turn that dial and when the customer is ready to shop e commerce, we're going to be ready for them as well. We're really focused on the offering that we have with the expansion of marketplaces underway, The launch of our licensed Colorist On Demand coming online later in this month. But we rounded out with a really healthy e commerce business in the spirit of the Profitability of our e commerce channel is quite strong, which is largely fueled by the fact that our stores actually support the fulfillment of about 50% of sales in this past quarter, which should both be buy online, pick up in store as well as or 2 hour delivery from our stores. So right now, it feels like it's a little bit more market, but we're not satisfied with our and lots more that we can do there to continue to accelerate growth. Great.

Speaker 2

Thank you. Best of luck.

Operator

Thank you. And at this time, there are no further questions in queue. Please continue.

Speaker 2

Wonderful. Well, we thank you all for your presentation today. When we think about being 3 quarters into the year, we're on track with our operating plans, we're on track with our financial expectations that we laid out at the beginning of the year. And I'd like to close by saying, I'm extremely excited about where we're headed. We have spent the last 18 months charting our strategy, preparing initiatives that we have that we are going to launch and to some extent starting to test.

Speaker 2

But we're really turning the corner this quarter that we're now fully in pilot stage on many significant projects from our CosmoProf direct site to Studio by Sally, licensed Colorist On Demand and now recently discussed Happy Beauty Co. And that really gives us a great opportunity to continue to build those pilots, continue to test and learn And we're doing all of this with the past leading towards 2025 plus really being able to see the fruits of these labor start to gain traction and get an expansion. So excited about where the future is taking us. And as a final reminder, I'd just say thank you again to all of our associates around the world. You are the ones that make our customers happy every day and we appreciate all you do.

Speaker 2

And with that, we will talk to you again next quarter.

Operator

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT and T teleconference. You may now disconnect.

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