What changed in this filing

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Item 1. Business

2021-11-22 compared with 2020-11-24 · 73 added, 61 removed, 206 unchanged (39% of the section changed)

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based on store count.

At September 30, 2020, we operated two business segments, Sally Beauty Supply (“SBS”) and Beauty Systems Group (“BSG”), with 4,895 company-operated stores, 143 franchised stores and e-commerce platforms.

At September 30, 2021, we operated two business segments, Sally Beauty Supply (“SBS”) and Beauty Systems Group (“BSG”), with 4,777 company-operated stores, 134 franchised stores and several e-commerce platforms.

Within BSG, we also have one of the largest networks of distributor sales consultants (“DSCs”) for professional beauty products in North America, with 719 sales consultants who sell directly to salons and salon professionals.

SBS targets retail consumers, salons and salon professionals, while BSG exclusively targets salons and salon professionals.

Within BSG, we also have one of the largest networks of distributor sales consultants (“DSCs”) for professional beauty products in North America, with approximately 715 sales consultants who sell directly to salons and salon professionals.

We provide our customers with a wide variety of leading third-party branded and owned-brand professional beauty supplies, including hair color and care products, styling tools, skin and nail care products and other beauty items.

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Because we service retail and professional customers through a variety of channels, we are able to reach broad, diversified geographies and customer segments using a variety of product assortments and tactics.

Our stores are conveniently located and offer a wide selection of competitively priced beauty products, beauty solutions and expertise delivered by our knowledgeable salespeople.

We also offer a comprehensive selection of textured hair products that we believe further differentiates us from our competitors.

On our professional side of our business, we believe that our DSCs distinguish us from other full-service/exclusive-channel distributors by providing us with a better understanding of our professional customers’ needs.

In addition to placing orders through our DSCs, our customers have the ability to order and pick up the products they need between visits from our DSCs by visiting a nearby BSG store.

We believe that our differentiated customer value proposition and strong brands drive customer loyalty.

Operating Strategy

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Our focus and experiences with hair color include a strong emphasis on our sales force.

We believe our approach to recruiting, training, and compensation results in a highly knowledgeable and effective sales force.

We believe our approach to recruiting, training, and compensation results in a highly knowledgeable, engaged and effective sales force.

Also, as the partner of choice for established brands, as well as product innovators, we offer our customers a broad strategic product assortment.

Our goal is to continue to drive additional customer traffic to our stores to increase their sales productivity.

In connection with this goal, we believe that creating an appealing shopping environment that embraces the retail consumer and salon professional and highlights our extensive product offerings will create a compelling shopping environment, and over time, will help drive increased customer traffic.

Our digital strategy continues to evolve from a largely transactional-based experience to a more content-rich experience that enables customers to learn about the latest trends and techniques from experts and influencer communities and engages them with our latest product launches and research products.

As a result of the novel coronavirus (“COVID-19”) global pandemic, we have seen customers adjust their shopping habits to practice social

Going forward we will continue to focus on enhancing our digital offerings, refining those options and adding new services like buy online, pick-up in store, all while tying in with our mobile apps.

We believe that these efforts will drive additional traf fic and improve sales in the future.

Our stores are conveniently located and offer a wide selection of competitively priced beauty products, beauty solutions and expertise delivered by our knowledgeable sales associates.

We also continue to expand our selection of textured hair products, including over 50 Black-founded brands, and offer innovation in the nails category that we believe further differentiates us from our competitors.

On the professional side of our business, we believe that our DSCs distinguish us from other full-service/exclusive-channel distributors by providing us with a better understanding of our professional customers’ needs.

In addition to placing orders through our DSCs, our customers have the ability to order through our websites ( www.cosmoprofbeauty.com and www.cosmoprofequipment.com and the CosmoProf mobile commerce-based app) and pick up the products they need between visits from our DSCs by visiting a nearby BSG store.

We believe that our differentiated customer value proposition and strong brands drive customer loyalty.

We continue to invest in initiatives that support our omni-channel strategies.

Our goal is to deliver an easy, reliable shopping experience and deliver best-in-class customer service online and in stores.

In connection with these investments, w e have robust omni-channel fulfillment capabilities such as parcel delivery, 2-hour rapid delivery, and buy online/pick up in-store (“BOPIS”).

Additionally, we have recently relaunched mobile-optimized e-commerce websites and mobile apps.

Professional Beauty Supply Industry Distribution Channels

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We believe that SBS, with its nationwide network of retail stores, is the largest open-line distributor in the U.S.

Our extensive store network allows us to service our customers when and where they want to shop with our in-store experience and omni service capabilities, including last-mile delivery.

In addition, SBS’s websites (including www.sallybeauty.com ) and other e-commerce platforms, including our new SBS mobile commerce-based app, provide retail consumers and salon professionals access to product offerings and information beyond our retail stores.

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BSG is one of the leading full-service distributors in the U.S.

and Canada, with its nationwide network of professional-only stores and DSCs.

and Canada, with its network of professional-only stores and DSCs.

In addition, BSG offers its products for sale to salons and salon professionals through e-commerce platforms (including www.cosmoprofbeauty.com, www.cosmoprofequipment.com and the CosmoProf mobile commerce-based app).

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to continue to drive sales growth in certain professional beauty product categories, including through an increase in the usage of hair color and care products.

Furthermore, due to the impact of COVID-19, we believe that consumer shopping habits have changed.

As consumers exercise socially responsible distancing measures, we started to offer curbside pick-up and quickly pivoted our digital capabilities to including ship-from-store at SBS and same-day delivery at BSG.

Our focus on hair color as a form of self-expression resonates with the Gen Z shoppers as their individualism is expressed through their hair journey.

We know convenience is important to customers and shopping patterns have changed post-COVID.

We have made significant investments in projects to “meet them where they are”, including new capabilities and tools on our mobile-native websites and mobile apps.

In addition, we continue to optimize our delivery modalities (curbside and in-store pickup, 2-hour/rapid delivery, as well as traditional delivery methods).

Increasing use of owned and exclusive-label brand products.

We offer an extensive range of owned and exclusive-label brand professional beauty products.

Our lines of owned and exclusive-label brand products have matured and become better known in our retail stores and e-commerce platforms, showing an increase in sales.

Our lines of owned and exclusive-label brand products have matured and become better known in our retail stores and e-commerce platforms, continuing to represent and ever increasing percentage of our overall sales.

Growth in chair renting and frequent stocking needs.

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Chair renters and suite renters, given their smaller and more frequent purchasing patterns, are dependent on frequent trips to professional beauty supply stores.

We expect that these factors will continu e to drive demand for conveniently located professional beauty supply stores, like BSG and SBS.

We expect that these factors will continue to drive demand for conveniently located professional beauty supply stores, like BSG and SBS.

Business Segments

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and Canada, SBS stores average approximately 1,700 square feet in size and are located primarily in strip shopping centers, which are occupied by other high traffic retailers such as grocery stores, mass merchants and home improvement centers.

SBS applies strong category management processes, including centrally developed guides, to maintain consistent merchandise presentation across its store base.

Store formats, including average size and product selection, vary by marketplace.

SBS applies strong category management processes, including store specific planograms, to maintain consistent merchandise presentation across its store base.

Store formats, including average size and product selection, vary by marketplace to meet the needs of the customer.

SBS balances its store renewals, remodels and expansions between new and existing geographies and regularly evaluates each store’s performance and strategically closes stores as necessary.

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(including Puerto Rico), with the remaining 862 company-operated retail stores located in Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain, Chile and Peru.

SBS also supplied nine franchised stores located in the United Kingdom, Belgium and France.

SBS also supplied two franchised stores located in the United Kingdom and Belgium.

Beauty Systems Group

BSG stores, including its franchise-based Armstrong McCall stores, are designed to create a professional shopping environment that highlights its extensive product offering and embraces the salon professional.

Company-operated BSG stores average approximately 2,700 square feet and are located primarily in secondary strip shopping centers, since the stores are themselves a ‘destination’ for professionals not requiring a traffic-supporting neighbor retail location.

Company-operated BSG stores average approximately 2,700 square feet and are located primarily in secondary strip shopping centers, since the stores are a ‘destination’ for professionals not requiring a traffic-supporting neighbor retail location.

BSG store layouts are designed to provide variety and options to the salon professional.

segmented into distinctive areas arranged by product type, with certain areas dedicated to leading third-party brands.

Stores are segmented into

distinctive areas arranged by product type, with certain areas dedicated to leading third-party brands.

The selection of these and other brands varies by territory.

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SBS stores and websites carry an extensive selection of professional beauty supplies for retail customers, salons and salon professionals, featuring an average of 7,000 SKUs of beauty products in our stores across a variety of product categories including hair color and care, skin and nail care, styling tools and other beauty products.

SBS’s stores and e-commerce platforms carry products from one or more of the leading manufacturers in each category, including third-party brands such as Wella ® , Clairol ® , OPI ® , Conair ® and Hot Shot Tools ® , as well as an extensive selection of owned and exclusive-label brand products.

SBS’s stores and e-commerce platforms carry products from one or more of the leading manufacturers in each category, including third-party brands such as Wella ® , Clairol ® , OPI ® , Conair ® and L’Oreal ® , as well as an extensive selection of owned and exclusive-label brand products.

We believe that delivering an extensive selection of leading third-party, owned and exclusive-label brand professional beauty products at attractive prices through knowledgeable sales associates and convenient store locations is what differentiates SBS.

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Beauty Systems Group

BSG’s stores and e-commerce platforms carry an extensive selection of third-party branded products, such as Paul Mitchell ® , Wella ® , Matrix ® , Schwarzkopf ® , Kenra ® , Goldwell ® , Joico ® and Chi ® , for salons and salon professionals at competitive prices.

BSG’s stores and e-commerce platforms carry an extensive selection of third-party branded products, such as Paul Mitchell ® , Wella ® , Matrix ® , Schwarzkopf ® , Kenra ® , Goldwell ® , Joico ® and Olaplex ® , for salons and salon professionals at competitive prices.

We feature an average of 10,000 SKUs in our BSG stores across a variety of product categories including hair color and care, skin and nail care, styling tools and other beauty items.

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Marketing and Advertising

We continue to invest in new talent and capabilities in our digital commerce, brand marketing and strategy and global sourcing.

As part of this effort, we have realigned our marketing and digital functions to create a new structure in which every team supports and fuels the growth for the U.S.

and Canadian operations of both SBS and BSG.

This allows us to leverage strong, centralized teams for areas such as e-commerce, loyalty and brand strategy, rather than trying to build duplicative capabilities for both segments.

SBS’s marketing programs are designed to drive customer traffic by differentiating SBS as a source of professional advice, solutions and salon-quality products at competitive prices, all backed by our “Love It or Return It” guarantee.

We believe that recent initiatives have differentiated SBS through value added education and content, such as launching DIY University by Sally Beauty last year and through our SallyCrew educators.

These programs provide hands-on education on a wide range of topics from the latest trends in hair color, textured hair, hair styling, and nails.

We continuously adapt our marketing initiatives and adjust our media and messaging mix to achieve a high return on our marketing and advertising dollars.

We target existing and potential customers through an integrated marketing approach designed to reach the customer through a variety of media, including digital advertising, email, social media, text messaging, direct mail and print advertising.

In fiscal year 2020, we launched a private label rewards credit card for both SBS and BSG that will make it even easier for our customers to shop with us.

We continue to refine the strategy for sallybeauty.com and our other e-commerce platforms, shifting from largely transactional-based to a more content-rich experience that enables customers to learn about the latest trends and techniques from influencers, engage in our latest product launches and research products.

We frequently update the home page to enhance its appeal to our existing and prospective customers.

In addition, we continue to refine our internal processes and partnerships to increase traffic to the website.

Many of our customers research products on our site before visiting a store.

We continue to refine the strategy for sallybeauty.com and our other e-commerce platforms, becoming a more personalized and content-rich experience that empowers and inspires customers to discover new styles and find the confidence to try new products.

We are building more robust tools to help customers understand not just what but how, and to do so in a way that is fast, easy, and built for mobile devices, where our customers increasingly are accessing us.

Beyond generating e-commerce sales, we believe our website and new SBS mobile app are important vehicles to reach consumers researching beauty products online who could potentially visit our stores as a result of their experience on our website or our SBS mobile app.

SBS’s customer loyalty and customer relationship management (“CRM”) programs in the U.S.

and Canada help generate loyalty through our Sally Beauty Rewards Program and our recently launched private label rewards credit card.

In return, SBS is able to collect valuable point-of-sale customer data as a means of increasing its understanding of customers’ needs and enhancing its ability to market to them in more personalized, relevant ways.

Our customer loyalty and customer relationship management (“CRM”) programs in the U.S.

and Canada help generate loyalty through our Sally Beauty Rewards Program and our private label rewards credit card.

In return, we are able to collect valuable point-of-sale customer data as a means of increasing its understanding of customers’ needs and enhancing its ability to market to them in more personalized, relevant ways.

We continue to assess and update our customer loyalty and CRM programs in an effort to further enhance the customer experience and promote repeat sales from both retail customers and salon professionals.

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BSG’s marketing programs are designed primarily to promote its extensive selection of brand name products at competitive prices and to educate, motivate and empower its customers to grow professionally.

BSG communicates on a frequent basis with its customers and potential customers, and distributes promotional material through multiple communication channels, including trade shows, educational events, store personnel, DSCs, print mail, e-mail, text and social media.

In addition, we believe that BSG’s websites ( www.cosmoprofequipment.com and www.cosmoprofbeauty.com ) and the CosmoProf mobile commerce-based app enhance other efforts intended to promote awareness of BSG’s products by salons and salon professionals.

In addition, we believe that BSG’s websites ( www.cosmoprofbeauty.com and www.cosmoprofequipment.com ) and the CosmoProf mobile commerce-based app enhance other efforts intended to promote awareness of BSG’s products by salons and salon professionals.

In addition, we believe the redesign of www.cosmoprofbeauty.com , the implementation of BOPIS, rapid delivery, and the upgrade of the CosmoProf mobile commerce-based app, which offers barcode scanning, updated order tracking and a digital membership card, enhance efforts intended to promote awareness and adoption of BSG products and services for salons and salon professionals.

As of September 30, 2021, BSG had a network of 719 DSCs, which exclusively consult, support and sell directly to salons and salon professionals.

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and the availability of desirable store locations.

We face competition from certain manufacturers that use their own sales forces to distribute their professional beauty products directly or th at align themselves with our competitors.

We face competition from certain manufacturers that use their own sales forces to distribute their professional beauty products directly or that align themselves with our competitors.

Some of these manufacturers are vertically integrating through the acquisition of distributors and stores.

We also face competition from authorized and unauthorized retailers and internet sites offering professiona l salon-only products.

We also face competition from authorized and unauthorized retailers and internet sites offering professional salon-only products.

Our Suppliers

We purchase our merchandise directly from manufacturers through supply contracts and by purchase orders.

For the fiscal year 2020, our five largest suppliers – Coty, Inc., Henkel AG & Co.

KGaA, the Professional Products Division of L'Oreal USA S/D, Inc., or L’Oreal, John Paul Mitchell Systems, and Conair Corporation – accounted for approximately 38% of our consolidated merchandise purchases.

For fiscal year 2021, our five largest suppliers – Wella Company, Henkel AG & Co.

KGaA, the Professional Products Division of L'Oreal USA S/D, Inc., or L’Oreal, John Paul Mitchell Systems, and Beauty Quest Group – accounted for approximately 29% of our consolidated merchandise purchases.

Products are purchased from these and many other manufacturers on an at-will basis or under contracts which can generally be terminated without cause upon 90 days or less notice or expire without express rights of renewal.

Our Employees

Our Company Purpose & Values

In late 2021, we released our new Company Purpose & Values, with the intent of establishing our rallying cry and focus our teams on the impact we intend to have in the world.

TO INSPIRE A MORE COLORFUL, CONFIDENT, AND WELCOMING WORLD

Come as you are—everyone is welcome here.

BE AN INSPIRATION.

Share your passion and knowledge with your team, your customers, the world.

Drive growth.

Create your future.

BE PART OF SOMETHING BIGGER.

Take care of each other, our community, and our planet.

Our Associates

At September 30, 2021, we had approximately 29,000 global associates and we believe they are our greatest asset with their combined skills, knowledge, work/life experiences and capabilities.

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Provide meaningful, engaging learning and development that grows our associates’ knowledge and capability with respect to our business and skills that will help them in business and life;

Create an environment and culture that where everyone can bring their true self to work, because our differences are what make us beautiful.

At SBH, we believe that our focus on Diversity, Inclusion & Belonging are crucial to improving how we interact with and influence our associates, customer environments and broader communities.

Create an environment and culture where everyone can bring their true self to work, because our differences are what make us beautiful.

At SBH, we believe our focus on Diversity, Inclusion & Belonging are crucial to improving how we interact with and influence our associates, customer environments and broader communities.

We are committed to being a force for change.

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Additionally, SBH values our partnerships with suppliers and vendors and understands the impact they can have on our associates.

Thus, SBH has included rules that govern their conduct, both with respect to expectations while interacting with our associates, and, with our foreign suppliers, assurances that they too are providing a safe and healthy working environment for their associates.

Calendar year 2020 presented special challenges with respect to the health and safety of our associates and customers.

With the COVID-19 pandemic, we had to quickly adapt our priorities to make it possible for all of our associates to stay safe and reduce any exposure to the virus.

While this involved temporary store closures for our entire network, mostly during our second and third fiscal quarter, we also had to change our procedures and offer new customer engagement options.

When local requirements allowed us to re-open to the public, we quickly developed requirements and procedures for how to do so as safely as possible – both for our associates and customers.

We adopted additional safety protocols such as detailed cleaning protocols, personal protective equipment requirements, visual cues regarding social distancing and limitations on occupancy of stores during business hours.

We also installed rolling rapid testing for COVID-19 at three of our distribution centers.

We have continued to maintain these protocols, monitor for compliance and make improvements and adjustments where needed throughout fiscal year 2020.

Thus, SBH has included rules governing their conduct, both with respect to expectations while interacting with our associates, and, with our foreign suppliers, assurances that they too are providing a safe and healthy working environment for their associates.

Over the course of our fiscal year 2021, we have continued to adapt and respond to the various impacts of COVID-19 across our business.

As mentioned above, our main focus has been on health and safety.

Such efforts included

various safety protocols such as detailed cleaning protocols, personal protective equipment requirements, and visual cues regarding social distancing, mask-wearing, etc.

At times of peak case counts or the emergence of the new variants, we have instituted rolling, rapid testing for COVID-19 at a number of our distribution centers.

We have continued to maintain and update these protocols, monitor for compliance and make improvements and adjustments where needed throughout fiscal year 2021.

We have also managed through closures and capacity restrictions where required by local law, and sought to provide as much notice and support to our teams as reasonably possible.

Labor Practices

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We review our team’s input and comments, identify common themes and set out action plans to respond.

We believe that listening is crucial, but that taking action and making commitments are even more important.

We believe listening is crucial, but taking action and making commitments are even more important.

A core focus of our associate engagement and culture are our efforts focused on Diversity, Inclusion & Belonging, discussed below.

Diversity, Inclusion & Belonging

At Sally Beauty we celebrate differences, inclusivity and self-expression.

This fundamental aspect of SBH is rooted in our belief that beauty is for everyone and everyone should find their own path to beauty.

Our associates and our customers care about celebrating diversity and self-expression.

We want our company and our stores to be places where all of our associates and customers feel valued for who they are, and experience a sense of belonging.

We come together to create a culture for “One & All”

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Our Board’s composition leads the Company’s commitment to Diversity, Inclusion and Belonging.

Having diverse voices on our Board enhances the Board’s expertise, broadens its viewpoint and sets the

tone to encourage leaders at all levels of the Company to listen to the concerns of our associates and customers alike.

Our Compensation Committee has taken the recent step of expressly adopting Talent into its charter, and will provide hands-on oversight of our Diversity, Inclusion & Belonging initiatives.

Our Board believes that listening and responding to diverse voices is crucial to the Company’s success and long-term sustainability.

Having diverse voices on our Board enhances the Board’s expertise, broadens its viewpoint and sets the tone to encourage leaders at all levels of the Company to listen to the concerns of our associates and customers alike.

Our Compensation & Talent Committee provides hands-on oversight and guidance of our Diversity, Inclusion & Belonging initiatives.

Our Board believes listening and responding to diverse voices is crucial to the Company’s success and long-term sustainability.

In Our Workforce :

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In 2019 and 2020, Forbes named our Company one of America’s Best Employers for Diversity.

In 2021, Forbes named SBH as one of America’s Best Employers for Women.

We recognize and celebrate the bedrock values of workforce diversity, inclusion, belonging and engagement within our teams.

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Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to such reports are available, without charge, on our website, www.sallybeautyholdings.com , as soon as reasonably possible after they are filed electronically with the Securities and Exchange Commission, or SEC, under the Exchange Act.

The SEC maintains an internet site that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.

The SEC maintains an internet site that contains our reports, proxy and information statements, and other information we file electronically with the SEC at www.sec.gov.

We will provide copies of such reports to any person, without charge, upon written request to our Investor Relations Department at our principal office.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business