Sally Beauty Holdings generated continued digital growth during its fiscal third quarter of 2026, even as weaker demand at Beauty Systems Group offset improving performance across the Sally Beauty business.
Global e-commerce sales increased 11% to approximately $110 million.
Digital revenue represented about 12% of consolidated sales, compared with $99 million and 10.6% of sales during the prior-year quarter.
The increase shows that Sally Beauty’s online operations continued expanding substantially faster than the overall company.
Consolidated net sales increased only 0.2% to approximately $935 million, while comparable sales were flat.
E-commerce growth therefore provided an important offset to softer physical-store and professional-distribution activity.
The company has been expanding its digital reach through its own platforms, third-party marketplaces, social commerce, and services intended to make professional beauty products more accessible.
Sally Beauty launched on TikTok Shop earlier in 2026 as part of its effort to participate in the growing social-commerce market.
The quarter’s segment results showed a clear divergence between the Sally Beauty retail business and Beauty Systems Group.
Sally Beauty segment sales increased 2.2%, while comparable sales rose 1.6%.
Comparable sales across Sally Beauty’s U.S. and Canadian operations increased by a stronger 3.5%, indicating that the segment’s primary North American market outperformed its consolidated result.
Sally Beauty segment operating earnings increased 7.3%.
The segment benefited from stronger comparable sales, improving product margins, and savings generated through the company’s Fuel for Growth program.
Beauty Systems Group moved in the opposite direction.
Segment net sales declined 2.4%, while comparable sales fell 2.1%.
Beauty Systems Group distributes professional beauty products through Cosmo Prof and Armstrong McCall stores, direct sales consultants, franchise locations, and digital channels.
The segment’s operating earnings declined 3.4%, reflecting the effect of lower sales and reduced operating leverage.
The number of salon business consultants also decreased to 558 from 611, representing a decline of approximately 8.7%.
That reduction may have contributed to softer sales because consultants maintain direct relationships with salons and beauty professionals.
The company operated 4,386 stores at the end of the quarter, 39 fewer than one year earlier.
Sally Beauty had 30 fewer locations, while Beauty Systems Group operated nine fewer stores.
Despite the smaller physical footprint and flat consolidated comparable sales, Sally Beauty increased gross profit and earnings.
Consolidated gross margin expanded 90 basis points to 52.4%.
Cost of products sold declined approximately 1.6%, even though net sales increased slightly.
The margin improvement helped operating earnings increase 10.5% to $86.4 million.
Operating margin expanded 80 basis points to 9.2%.
GAAP diluted earnings per share increased 25% to $0.55 from $0.44.
Adjusted diluted EPS was also $0.55, compared with $0.51 during the prior-year quarter.
The identical GAAP and adjusted EPS figures indicate that the quarter contained few material restructuring, impairment, or other non-recurring adjustments.
Net earnings increased approximately 18%, while diluted EPS grew faster because the weighted average diluted share count declined by about 5%.
The lower share count reflected Sally Beauty’s continuing stock-repurchase program.
Cash provided by operating activities reached $81 million, and free cash flow totaled $62 million.
The company used $20 million to repay debt and spent another $25 million repurchasing approximately 1.9 million shares.
Sally Beauty ended the quarter with $173 million in cash.
Long-term debt declined to approximately $804 million, while net leverage improved to 1.4 times.
The balance-sheet improvement followed debt repayments during each of the first three fiscal quarters.
During the second quarter, Sally Beauty had also generated $73 million in operating cash flow, repaid $20 million of debt, and repurchased $25 million of stock.
The company narrowed its full-year adjusted EPS outlook to between $2.04 and $2.08.
The midpoint remained $2.06, indicating that management’s underlying earnings expectations were largely unchanged.
Sally Beauty’s third-quarter results show that digital commerce, margin expansion, debt reduction, and share repurchases are supporting earnings growth despite limited consolidated sales growth.
The main operational contrast remains the improving Sally Beauty retail segment and the continued sales pressure facing Beauty Systems Group.
Sustaining companywide growth will require Sally Beauty to maintain its digital momentum while stabilizing professional-channel demand at Beauty Systems Group.
KEY QUOTES:
“We delivered low-single digit sales growth, gross margin expansion, and strong cash flow from operations, driven by the compounding benefits of our growth initiatives.”
Denise Paulonis, President And Chief Executive Officer Of Sally Beauty Holdings
