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In last year’s letter to shareholders, I summarized our plans for our multi-quarter transformation plan with the goal of strengthening our position as the “Hair Color Experts” for both the professional stylist and DIY consumer. In fiscal year 2019, our global organization experienced enormous change as we completed numerous investments across the Sally Beauty Holdings’ enterprise. At the same time, we continued to effectively manage the operations of the business and delivered on our financial plans for the year. I am extremely proud of the teamwork and efforts of our associates across the globe, both in the field and in our support center.
Our transformation plan was designed around four strategic objectives: refocusing on our differentiated categories of hair color and care, improving our retail fundamentals, advancing our digital commerce capabilities and continuing to drive costs out of the business while operating efficiently. I want to share the highlights of the progress we made in fiscal year 2019 against each key objective.
These two categories are strategically important to us as they represent approximately 60 percent of our global sales and include the majority of our owned and exclusive brands as well as SKUs with higher gross margin. This past year, we strengthened these categories by continuing to build the innovation pipeline with new exciting brands such as the vivid color lines of Arctic Fox and Good Dye Young in the Sally Beauty segment and the prestigious color and care brand, Pravana, and Swedish vegan brand, Maria Nila, in our pro channel at Beauty Systems Group. Additionally, we entered a multi-billion dollar category by launching pro color kits/box color across the Sally Beauty network. On top of the brand expansion in these categories, we also invested in marketing programs designed to build trial, awareness and loyalty for these brands.
During the first quarter of fiscal year 2019, we successfully launched our new Sally Beauty Rewards Loyalty Program in a seamless transition from our legacy Beauty Club Card program. The new program has grown to approximately 16 million active members and continues to progress nicely in terms of adding new members and increased redemption rates. In addition, we completed the installation of a new state-of-theart POS system to over 1,400 Sally Beauty and Beauty Systems Group stores and we launched phase one of a new merchandising and supply chain platform, which will dramatically improve our merchandising capabilities while reducing our inventory levels over time. We also started the process to optimize our supply chain by closing four distribution centers while executing a new lease for a large North Texas distribution center that is designed to serve operations for both Sally Beauty and Beauty Systems Group. Moreover, we implemented new pooling delivery arrangements in certain cities with the result of lowering our distribution costs while improving our on-time delivery to our stores. Lastly, in Las Vegas, we tested new store concepts for both business units with a focus on a better shopping experience and improved engagement for our customers through new technology, lower gondolas leading to better visibility in the store and enhanced marketing and product assortment.
In March, we launched the redesigned mobile-first website for Sally Beauty with enhanced features and functionality to improve the experience for our online beauty enthusiasts. Some of the enhancements included new educational resources, a “Shop by Solution” feature and customized product recommendations. The new site is designed with the goal of assisting our customers to quickly and confidently find what they need based on their specific hair needs. In the third quarter, we also launched the new Sally Beauty App which allows our consumers to access their loyalty points and shop directly from the App. Finally, we also made enhancements to the Beauty Systems Group App to remove friction from the buying experience for our pro customers.
Over the course of fiscal year 2019, we worked very hard to find efficiencies and savings in how we operate our business through negotiations with service providers, more streamlined operations and better sourcing. These savings helped fund the investments that we have been making over the past year as part of our transformation plan.
In March, we launched the redesigned mobile-first website for Sally Beauty with enhanced features and functionality to improve the experience for our online beauty enthusiasts. Some of the enhancements included new educational resources, a “Shop by Solution” feature and customized product recommendations. The new site is designed with the goal of assisting our customers to quickly and confidently find what they need based on their specific hair needs. In the third quarter, we also launched the new Sally Beauty App which allows our consumers to access their loyalty points and shop directly from the App. Finally, we also made enhancements to the Beauty Systems Group App to remove friction from the buying experience for our pro customers.
Over the course of fiscal year 2019, we worked very hard to find efficiencies and savings in how we operate our business through negotiations with service providers, more streamlined operations and better sourcing. These savings helped fund the investments that we have been making over the past year as part of our transformation plan.
Fiscal year 2019 was a significant investment year and I am really
pleased with the efforts of our global team in our execution of our
transformation plan while also operating the business and delivering
solid financial results. Although we still have work to do, we remain
confident in our transformation plan and strategy going forward.
Looking ahead into fiscal year 2020, we will seek to make the
necessary strategic investments in the business that will drive longterm growth, maintain cost discipline, better support our customers
and provide long-term value for our shareholders. As the “Hair Color
Experts” for both the professional stylist and DIY consumer, we want
to empower our customers to express themselves through hair.
Fiscal Year Ended September 30,
Chris Brickman
President and Chief Executive Officer