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J.P. Morgan Smid Cap Conference November 28, 2012 Gary Winterhalter, Chairman, President and CEO

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  • J.P. Morgan Smid Cap Conference

    November 28, 2012

    Gary Winterhalter, Chairman, President and CEO

  • 2

    Company Highlights

    Sally Beauty Holdings is a leading international specialty retailer

    and distributor of professional beauty products Sally Beauty Supply in business for 50 years

    Annual revenue of over $3.5 billion

    Strong cash flow generation

    4,499 stores located in 11 countries (1)

    Experienced and motivated leadership team

    Industry leading position with ~32% channel share

    Proven resilience in recessionary cycles

    Well-positioned for long-term growth

    (1) As of September 30, 2012

  • 3

    Overview of Our Concepts

    (1) Fiscal year 2012 adjusted earnings excludes a $25.6mm, net of tax, charge related to the issuance of the new Senior Notes and the redemption of the old Sr. and Sr. Sub notes and a $10.2 million charge for a potential settlement of litigation. (2) Adjusted EBITDA is a non-GAAP financial measure; see appendix for EBITDA and EPS reconciliations. (3) As of September 30, 2012. (4) Operating income does not include Unallocated Expenses and Share Based Compensation.

    3,309 stores (3)

    1,190 stores (3)

    1,044 sales consultants (3)

    • Retail consumers (75% of sales) • Booth renters, professional stylists,

    small salons (25% of sales)

    • Stores – Booth renters, professional stylists, small salons (65% of sales)

    • Full Service sales – small to medium sized salons (35% of sales)

    Sales SSS growth Operating income (4)

    Profit margin

    $2,198mm 6.5%

    $430mm 19.5%

    $1,352mm 6.1%

    $182mm 13.8%

    Sales SSS growth Operating income (4)

    Profit margin

    YoY Sales $3,524mm Gross Profit Margin 49.5 % 70 bps GAAP EPS

    Adjusted EBITDA (2) $591mm

    Segments

    Distribution Channel

    Customers

    2012 Financial Highlights

    Consolidated Results

    $1.24

    7.8%

    17.6%

    8.8%

    Fiscal Year 2012 Fiscal Year 2011 YoY Sales $3,269mm 12.1%

    Gross Profit Margin 48.8% 60 bps

    $1.14 46.2%

    Adjusted EBITDA (2) $503mm 24.1%

    GAAP EPS Adjusted EPS $1.42 (1) 32.7% $1.07 39.0% Adjusted EPS

  • 4

    Our Customer

    Open-Line Retail Exclusive / Full-Service

    3,309 stores 1,190 stores 1,044 consultants

    Professional stylists Salons

    Retail Consumers $$$ High-end $ Value

    Customers:

    Distribution:

    Note: Store count as of September 30, 2012.

    SBH plays an important role in the supply chain

  • 5

    Industry Channels of Distribution (U.S.)

    Professional Beauty

    Products ~$4.24 billion (1)

    Distribution Channels

    Mega-Salon Manufacturer direct to

    large-format salons

    13% (2) $0.5B

    41% (2) $1.6B

    35% (2) $1.4B

    11% (2) $0.5B

    Direct Manufacturer direct to manufacturer-owned salons or “high-end”

    salons

    Open-Line Distributes professional

    product to the public via retail stores

    Competition: Local and regional

    operators

    Exclusive / Full-Service

    Third party distribution to salons and beauty

    professionals via sales force and “professional

    only” stores

    Competition: L’Oreal’s

    Area of focus for

    SBH

    Source: Professional Consultants & Resources, 2011 Study. (1) Professional beauty supply channel size based upon a 2011 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2011 manufacturer-level sales for professional beauty supplies were approximately $4.24 billion. (2) Represents an estimated breakdown of salon haircare product sales in 2011 by channel of distribution.

  • 6

    Stable & Consistent Industry Growth

    U.S. Beauty Supply Industry has experienced steady growth with a CAGR of ~5%(1)

    ($ in

    bill

    ions

    )

    Source: Professional Consultants & Resources, 2011 Study. (1) Based on manufacturer sales of professional beauty supplies in the U.S.

    Recession Resistant Industry

    2010-2011 growth of

    6.0%

    $4.0

    At manufacturer dollars

  • 7

    Our Leading U.S. Industry Position

    (1) Professional beauty supply channel size is a management estimate, based upon a 2011 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2011 manufacturer-level sales for professional beauty supplies were $4.24 billion. Retail sales of $8.4 billion is calculated using gross margin of 49.5% (from SBH’s actual gross margin in the U.S. for FY2011) as the spread between manufacturer cost and retail sales.

    (2) Estimated U.S. channel share calculated as follows: (i) Sally Beauty Supply’s U.S. net sales for the fiscal year ended September 30, 2011 divided by estimated marketplace size of $8.4 billion and (ii) BSG’s U.S. net sales for the fiscal year ended September 30, 2011 divided by estimated marketplace size of $8.4 billion.

    U.S. professional beauty supply marketplace, in distribution dollars, was roughly $8.4 billion in 2011 (1)

    • Estimated 13% channel share (2)

    • Leading exclusive / full-service distributor in North America

    • 1.2x sales of next largest competitor

    Sally Beauty Holdings estimated channel share 32%

    • Estimated 19% channel share (2)

    • Largest open-line retailer/distributor in U.S. based on store count

    • Fragmented marketplace

  • Business Overview

  • 75%

    25%

    9

    Sally Beauty Supply: Overview

    Sally Beauty Supply global footprint

    3,309(1) stores worldwide

    2,638 stores in U.S. (including Puerto Rico)

    671 stores in Canada, the UK, Ireland, Belgium, Netherlands, France, Germany, Spain, Chile & Mexico

    Average store size 1,700 sq. ft., 90% selling space

    Professional open-line business - merchandise assortment not available through mass retailers

    (1) As of September 30, 2012.

    Sales Mix

    Retail

    Professional

  • 10

    Sally Beauty Supply: Strong, Consistent Financial Track Record

    $1,047 $1,132$1,208 $1,296

    $1,359 $1,419$1,567 $1,673

    $1,696$1,835

    $2,012$2,199

    $0

    $400

    $800

    $1,200

    $1,600

    $2,000

    $2,400

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

    ($ in millions)

    Net Sales

    2.6% 2.7%

    6.8%6.0% 5.7%

    2.7%3.8%

    2.4% 2.4% 2.7%

    1.2%2.1%

    4.1%

    6.3% 6.5%

    0.0%

    2.0%

    4.0%

    6.0%

    8.0%

    1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

    Same Store Sales Growth

    Growth of 9.2%

  • 11

    Sally Beauty’s Customer Profile

    Serves retail and professional customers

    ~90% of customers are women Professional customers work in small salon or “booth” renter Retail customer household income primarily $50k to $80k 34 to 65 years old is the primary customer age range

  • 8%

    8%

    14%

    10%

    16%

    22%

    22%

    12

    Sally Beauty Supply: Merchandise Offering

    Hair Care

    Hair Color

    Skin and Nail Care

    Electrical Appliances

    Brushes, Cutlery and Accessories

    Ethnic Products

    Other Beauty Items

    We offer a diversified mix of beauty products

    Note: Percentage of sales by merchandise category for fiscal year 2012.

  • 13

    2,511 2,6942,844 2,923 3,032

    3,158 3,309

    0

    1,000

    2,000

    3,000

    4,000

    2006 2007 2008 2009 2010 2011 2012

    Sally Beauty Supply Growth Initiatives

    Expand store base organically and through acquisitions

    Plan to grow store base 4 to 5 percent in FY2013

    Potential for current 2,638 U.S. store base to grow to over 3,000 stores

    Increase customer traffic through loyalty programs and customer relationship management (CRM)

    Further expand Internet channel

    Drive gross margin expansion

    Growth Initiatives

    92 83 110 60 108 Organic 0 100 40 19 1

    Openings

    Acquisition

    Capital Required $70k

    Average Inventory $85k

    Positive Contribution Margin 4 Months

    Cash Payback on Investment 2 Years

    Worldwide Sally Beauty Supply Stores

    Sally Beauty Supply Store Economics

    126 0

    129 22

  • 14

    Grow Sally Beauty Supply Internationally

    671 Sally Beauty stores located in 10 countries

    Stores located in Canada, the UK, Ireland, Belgium, France, Netherlands, Germany, Spain, Chile & Mexico

    22% of Sally Beauty Supply sales from international

    Sales mix differs from U.S.

    ~80-85% professional

    ~15-20% retail

    Existing International Platform Long-Term Store Growth Potential (1)

    (1) Store count as of September 30, 2012.

    (Canada) ~250

    (Mexico) 149 ~250

    (UK / Ireland) 258 ~300

    (Belgium, France, Germany, Spain, Netherlands)

    150 600-800

    (Chile) 33 ~45

    Other South American Countries 0 green field

    Total 671 ~1,500+

    Potential Current

    81

  • 15

    Beauty Systems Group: Overview

    Beauty Systems Group – 1,190 professional stores & 1,044 professional distributor sales consultants

    1,031 company-operated / 159 franchised stores (Armstrong McCall)

    1,044 professional distributor sales consultants

    Average store size 2,700 sq. ft.

    Sells to salons and salon professionals

    Professional exclusive / full-service business – includes merchandise assortment of premium brands sold through salons and not available in mass or at Sally stores

    (1) BSG operates stores under the CosmoProf service mark.

    As of September 30, 2012, fiscal year -end

  • 16

    BSG: Strong, Consistent Financial Track Record

    $405$535

    $616$802

    $895 $954 $945 $975 $941$1,081

    $1,257 $1,325

    $0

    $200$400

    $600$800

    $1,000$1,200

    $1,400

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

    ($ in millions)

    Net Sales

    5.8%

    15.5% 14.4%

    8.3%

    4.4% 4.6%

    8.5%

    (0.6%)

    4.1%

    10.1%6.9%

    1.0%

    6.2% 5.5% 6.1%

    (4.0%)

    0.0%

    4.0%

    8.0%

    12.0%

    16.0%

    20.0%

    1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

    Same Store Sales Growth

    Growth of 5.4%

  • 17

    BSG: Merchandise Offering

    We offer a diversified mix of beauty products not carried in Sally stores or mass retail

    7%5%

    10%

    12%

    30%

    36% Hair Care

    Hair Color

    Skin and Nail Care

    Electrical Appliances

    Promotional Items

    Other Beauty Items

    Note: Percentage of sales by merchandise category for fiscal year 2012.

  • 18

    828 874929 991

    1,0271,151 1,190

    0

    400

    800

    1,200

    2006 2007 2008 2009 2010 2011 2012

    Beauty Supply Group Growth Initiatives

    Expand store base organically

    Further penetrate existing geographies

    Enter new territories

    Opened 39 net new stores in FY2012

    Improve profitability

    Optimize distribution network

    Continue integration efforts

    Broaden offerings with new suppliers

    Seek potential fold-in acquisition opportunities

    6 46 44 16 36 0 0 11 46 0

    Organic

    Openings

    Acquisition

    Capital Required $80k

    Average Inventory $150k

    Positive Contribution Margin 4 Months

    Cash Payback on Investment 2 Years

    Growth Initiatives BSG Stores

    BSG Store Economics

    39 85

    39 0

  • Consolidated Financial Results

  • 20

    Strong Performance in Fiscal Year 2012

    Consolidated Fiscal Year 2012 Results

    (1) Adjusted EPS and Adjusted EBITDA is a non-GAAP financial measures; see appendix for reconciliations.

    (1)

    Same Store Sales 6.4%

    Consolidated Sales $3,524m

    Gross Profit Margin 49.5%

    Adjusted EPS (1) $1.42

    Adjusted EBITDA (1) $591m

    +30 bps

    +7.8%

    +70 bps

    32.7%

    17.6%

  • 21

    $59.5

    Sales and EPS Growth for total Company

    Sales

    $2,514$2,648 $2,637

    $2,916

    $3,269

    $0

    $500

    $1,000

    $1,500

    $2,000

    $2,500

    $3,000

    $3,500

    FY07 FY08 FY09 FY10 FY11 FY12

    (1) Includes a negative impact from unfavorable foreign currency exchange of $86 million, or 3.2% of sales.

    ($ in millions)

    (1)

    EPS (ADJUSTED)

    $0.32

    $0.44$0.52

    $0.77

    $1.07

    $0.00

    $0.20

    $0.40

    $0.60

    $0.80

    $1.00

    $1.20

    2007 2008 2009 2010 2011 2012

    Net Income $142.4 $95.9 $80.5 $200.3 4.5%

    Same Store Sales 4.6% 1.8% 2.6% 6.1%

    7.8% YoY

    6.4%

    32.7% YoY

    $267.2

    $3,524 $1.42

  • 22

    Numerous Opportunities for Growth

    Increase Sales Productivity of our Stores

    Expand our Store Base Organically

    Grow Internationally

    Increase Operating Efficiency and Profitability

    Pursue Strategic Acquisitions

  • 23

    Increase Sales Productivity of Our Stores

    Customer Mix

    Increasing percentage of retail customers

    “Control” brands

    Higher margin products

    Increasing as a percent of sales

    CRM initiative

    Driving more retail traffic and higher average ticket

    Customer Mix

    Increasing percentage of stylists shopping in the stores

    Higher margin sale

    Diversification and growth of product portfolio

    Additional brands

    Expansion of distribution rights in new geographies

    Sally Beauty Supply Beauty Systems Group

  • Capital Deployment

    24

    In fiscal 2012, stock repurchase authorizations total $500 million: • In May 2012, the Company repurchased approximately $200 million, or

    7,551,444 shares

    • In August 2012, the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $300 million of its common stock over an 18-month period beginning October 1, 2012 • As of November 14, 2012, the Company had purchased approximately

    $40 million under this program

    Excess cash expected to be returned to shareholders in the form of a dividend and/or stock repurchase program

  • 25

    Solid Balance Sheet

    No near-term maturities

    In November 2011, refinanced Sr. and Sr. Sub Notes for $750mm of 6.875% Senior Notes due 2019

    In May 2012, refinanced the Term Loan B with $700mm of 5.75% Senior Notes due 2021

    Targeted consolidated pro forma leverage ratio of 2.0x – 2.5x

    Lowered by over 3 turns in five years

    Ample liquidity

    Strong cash flow

    ABL Revolver of $400 million (refinanced in November 2010)

    On Sept. 5, 2012, issued $150 million aggregate principal amount of 5.75% Senior Notes due 2022.

    Funds to be used for general corporate purposes Source: Company filings. (1) Represents pre-acquisition debt of Pro-Duo NV and Sinelco Group BVBA (“Sinelco”) and capital leases. (2) Excludes “Other” debt which matures between 2012 and 2014.

    Long-term debt (as of 9/30/12)

    Maturity Profile (as of 9/30/12) (2)

    Amount ($mm)

    % of Total Debt

    5.750% Senior Notes (FY2022) $859.3 53.3% 6.875% Senior Notes (FY2020) $750.0 46.5% Other (1) $2.4 0.2%

    Total Debt $1,611.7 100.0%

    Total Capitalization $1,282 100.0%

    $750 $859

    $- $100 $200 $300 $400 $500 $600 $700 $800 $900

    $1,000

    2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

  • 26

    Investment Highlights

    Leader in Stable, Growing Professional Beauty Supply Channel

    Multi-channel Platform with Differentiated Value Proposition

    Strong, Consistent Financial Track Record

    Significant Cash Flow Generation

    Experienced and Motivated Management Team

    Solid Growth Potential

  • 27

    Addendum: Adjusted EBITDA Reconciliation

    Quarterly Adjusted EBITDA Reconciliation

    ($ in millions) Adjusted EBITDA FY06 FY07 FY08 FY09 FY10 FY11 FY12Net Earnings (GAAP) 110.2$ 44.5$ 77.7$ 99.1$ 143.8$ 213.7$ 233.1$

    Interest expense, net of interest income 0.1 146.0 159.1 132.0 113.0 112.5 138.4$ Provision for income taxes 69.9 38.0 46.2 65.7 84.1 122.2 127.9$ Depreciation and amortization 38.0 42.6 48.5 47.1 51.1 59.7 64.7$ Share-based compensation 5.2 13.1 10.2 8.6 12.8 15.6 16.9$ Transaction expenses (1a, 1b) 41.5 21.5 - - - - -Sales-based service fee charged by Alberto-Culver 28.9 3.8 - - - - -Non-recurring items - - - - - 5.7 -Litigation settlement and non-recurring charges - - - - - (27.0) 10.2

    Adjusted EBITDA 293.8$ 309.5$ 341.7$ 352.5$ 404.8$ 502.5$ 591.1$

    Adjusted net earnings and adjusted diluted earnings per shareNet Earnings (GAAP) 143.8$ 213.7$ 233.1$

    Marked-tomarket adjustment for certain interest rate swaps (2.4)$ - -Loss on extinguishment of debt - - 37.8Interest expense on redeemed debt - - 5.1Amortization of deferred financing costs - - 0.2Litigation settlement and non-recurring items, net (2) (21.3) 10.2Tax provision for the adjustments to net earnings 0.9 7.9 (19.2)

    Adjusted net earnings 142.3$ 200.3$ 267.2$ Diluted adjusted net earnings per share (non-GAAP): 0.77$ 1.07$ 1.42$ Diluted GAAP net earnings per share: 0.78$ 1.14$ 1.24$

    (1a) Transaction expenses of $41.5 for termination of the Regis transaction.(1b) Transaction expenses of $21.5 for separation of the Company from Alberto-Culver in November 2006.(2) Results for the nine months ended June 30, 2011, reflect a $27.0 mill ion benefit of a l itigation settlement and non-recurring charges of $5.7 mill ion.

    Slide Number 1Company HighlightsOverview of Our ConceptsOur Customer Industry Channels of Distribution (U.S.)Slide Number 6Our Leading U.S. Industry PositionBusiness OverviewSally Beauty Supply: OverviewSally Beauty Supply: Strong, Consistent Financial Track RecordSally Beauty’s Customer ProfileSally Beauty Supply: Merchandise OfferingSally Beauty Supply Growth InitiativesGrow Sally Beauty Supply InternationallyBeauty Systems Group: OverviewBSG: Strong, Consistent Financial Track RecordBSG: Merchandise OfferingBeauty Supply Group Growth InitiativesConsolidated Financial ResultsStrong Performance in Fiscal Year 2012Sales and EPS Growth for total CompanyNumerous Opportunities for GrowthIncrease Sales Productivity of Our StoresCapital DeploymentSolid Balance SheetInvestment Highlights Addendum: Adjusted EBITDA Reconciliation