Q3 FY2026
Filed Aug 3, 2026Q3 Consolidated Net Sales Increased 0.2%; Consolidated Comparable Sales Flat; GAAP Diluted EPS Increased 25%; Adjusted Diluted EPS Increased 8%; Narrows Full Year Fiscal 2026 Outlook Within Prior Guidance Ranges
Consolidated net sales increased 0.2% and consolidated comparable sales were flat, with 2.2% segment sales growth at Sally Beauty offset by a 2.4% decline at Beauty Systems Group. Gross-margin expansion, EPS growth and $81 million of operating cash flow supported results, while full-year sales and adjusted operating-earnings guidance were narrowed within prior ranges.
Actuals vs. the company’s prior outlook
from its previous release| Metric | Guided | Reported | Verdict |
|---|---|---|---|
| Consolidated Net Sales | $3.725 billion to $3.750 billion | $935 million | n/a |
| Comparable Sales | Flat to up 1% | flat | n/a |
| Adjusted Operating Earnings | $328 million to $342 million | $87 million | n/a |
| Adjusted Diluted EPS | $2.02 to $2.10 | $0.55 | n/a |
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Consolidated net salesGAAP | $935 million | – | increased 0.2% |
| Consolidated comparable salesother | flat | – | flat |
| Global e-commerce salesGAAP | $110 million | – | increased 11% |
| Global e-commerce sales as a percentage of net salesother | 12% of net sales | – | – |
| Gross marginGAAP | 52.4% | – | expansion of 90 basis points |
| Adjusted Gross Marginnon-GAAP | 52.4% | – | expansion of 40 basis points |
| Selling, general and administrative expensesGAAP | $404 million | – | increase of $1 million |
| Adjusted Selling, General and Administrative Expensesnon-GAAP | $404 million | – | increase of $5 million |
| Operating earningsGAAP | $86 million | – | – |
| Operating marginGAAP | 9.2% | – | – |
| Adjusted Operating Earningsnon-GAAP | $87 million | – | – |
| Adjusted Operating Marginnon-GAAP | 9.3% | – | – |
| Diluted net earnings per shareGAAP | $0.55 | – | increase of 25% |
| Adjusted Diluted Net Earnings Per Sharenon-GAAP | $0.55 | – | increase of 8% |
| Cash flow from operationsGAAP | $81 million | – | – |
| Free Cash Flownon-GAAP | $62 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Sally BeautyComparable Sales Growth/(Decline) was 1.6%, compared with (1.1)% in Q3 FY25. Sally U.S. and Canada delivered 3.5% comparable sales growth, supported by the strength of hair color, digital growth and new customer acquisition. | $538,570 (In thousands, except percentages) | – | 2.2% |
| Beauty Systems GroupComparable Sales Growth/(Decline) was (2.1)%, compared with 0.5% in Q3 FY25. | $396,920 (In thousands, except percentages) | – | (2.4)% |
Full Year Fiscal 2026 outlook
- Revenue$3.725 billion to $3.733 billion
- NoteComparable Sales: Approximately 0.5%
- NoteAdjusted Operating Earnings: $329 million to $335 million
- NoteAdjusted Diluted EPS: $2.04 to $2.08
- NoteCapital Expenditures: No change
- NoteFree Cash Flow: No change
- NoteAssumes approximately 30 basis points of favorable impact from expected foreign currency rates
- NoteAdjusted Diluted EPS assumes 50% of Free Cash Flow goes towards share repurchases
Capital returns
- Repurchased 1.9 million shares under its share repurchase program at an aggregate cost of $25 million.
- Completed $20 million in term loan repayment.
What drove it
- Sally U.S. and Canada delivered 3.5% comparable sales growth, supported by the strength of hair color, digital growth and new customer acquisition.
- Global e-commerce sales increased 11% to $110 million.
- GAAP gross margin expanded 90 basis points to 52.4%.
- Adjusted Gross Margin expanded 40 basis points to 52.4%.
Concerns
- Consolidated comparable sales were flat.
- Beauty Systems Group net sales declined (2.4)% and comparable sales declined (2.1)%.
- Full-year consolidated net-sales guidance was narrowed to $3.725 billion to $3.733 billion from $3.725 billion to $3.750 billion.
- Full-year adjusted operating-earnings guidance was narrowed to $329 million to $335 million from $328 million to $342 million.
What to watch
- Execution in Beauty Systems Group following Q3 net-sales growth/(decline) of (2.4)% and comparable-sales growth/(decline) of (2.1)%.
- Whether Sally Beauty sustains 1.6% segment comparable-sales growth and the 3.5% comparable-sales growth reported for Sally U.S. and Canada.
- Global e-commerce sales growth after an 11% increase to $110 million.
- Delivery against updated full-year consolidated net-sales guidance of $3.725 billion to $3.733 billion and adjusted diluted EPS guidance of $2.04 to $2.08.
- Use of Free Cash Flow, with adjusted diluted EPS guidance assuming 50% of Free Cash Flow goes towards share repurchases.
Balance sheet and cash flow
- Cash and cash equivalents of $173 million as of June 30, 2026.
- No outstanding borrowings under its asset-based revolving line of credit.
- Inventory was $996 million, down 1% versus a year ago.
- Third quarter cash flow from operations was $81 million.
- Free Cash Flow totaled $62 million.
- Net debt leverage ratio of 1.4x.
Analysis
Third-quarter performance was mixed at the consolidated level. Net sales were $935 million, up 0.2%, while consolidated comparable sales were flat. Sally Beauty generated net sales of $538,570 (In thousands, except percentages), up 2.2%, whereas Beauty Systems Group generated net sales of $396,920 (In thousands, except percentages), down (2.4)%. The contrast was also evident in comparable sales, at 1.6% for Sally Beauty and (2.1)% for Beauty Systems Group.
Margin performance and earnings growth were stronger than the sales outcome. GAAP gross margin expanded 90 basis points to 52.4%, while Adjusted Gross Margin expanded 40 basis points to 52.4%. GAAP operating earnings were $86 million at a 9.2% operating margin, and Adjusted Operating Earnings were $87 million at a 9.3% Adjusted Operating Margin. GAAP diluted net earnings per share and Adjusted Diluted Net Earnings Per Share were each $0.55, increasing 25% and 8%, respectively.
Digital activity and cash generation were central positive features of the quarter. Global e-commerce sales increased 11% to $110 million and represented 12% of net sales. Cash flow from operations was $81 million and Free Cash Flow was $62 million. The company repaid $20 million of term loan B debt and repurchased 1.9 million shares for an aggregate cost of $25 million, while reporting cash and cash equivalents of $173 million and a net debt leverage ratio of 1.4x.
The updated full-year outlook narrows several ranges within prior guidance. Consolidated net-sales guidance is now $3.725 billion to $3.733 billion, versus prior guidance of $3.725 billion to $3.750 billion. Adjusted Operating Earnings guidance is $329 million to $335 million, versus $328 million to $342 million previously, and Adjusted Diluted EPS guidance is $2.04 to $2.08, versus $2.02 to $2.10. The reported quarter is not directly comparable with annual guidance ranges, so the filing does not support an above, in-line, or below assessment versus prior annual guidance.
Management, verbatim
Our third quarter results reflect the progress we are making against our long-term strategy and the underlying strength of our operating model.
Denise Paulonis, president and chief executive officer
We delivered solid EPS growth and strong cash flow while continuing to invest in the initiatives that are reshaping our customer experience, expanding our reach and strengthening our competitive position.
Denise Paulonis, president and chief executive officer
Importantly, the traction we are seeing across our strategic initiatives has helped drive 9% adjusted EPS growth year-to-date, underscoring our ability to deliver profitable growth while investing in the future.
Denise Paulonis, president and chief executive officer
Not in the filing
stated, not guessed- GAAP net earnings amount
- Adjusted Net Earnings amount
- GAAP and adjusted EBITDA
- Prior-year and prior-quarter consolidated net-sales amounts
- Prior-year gross-margin percentages
- Prior-year GAAP and adjusted operating-earnings amounts and operating-margin percentages
- Prior-year GAAP and adjusted diluted EPS amounts
- Prior-year and prior-quarter cash flow from operations and Free Cash Flow
- Third-quarter capital expenditures
- Quarterly dividend information
- Term loan B debt balance and total debt balance
- Guidance for gross margin, operating expenses and tax rate
- Actual results for the full-year Fiscal 2026 guidance period
- A directly comparable prior-period figure for the stated 9% adjusted EPS growth year-to-date
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.