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Sally Beauty Holdings' CEO Discusses F3Q12 Results - Earnings Call Transcript

Turning to our segment performance, starting with Sally Beauty Supply. Same-store sales growth for Sally Beauty was 5.2%. If you recall, in the second quarter Sally comps reached a record high of 9.3% due in part to extraordinary circumstances such as an extra gain in February, favorable weather comparisons and Easter promotions following in March versus April last year.

Net sales reached $553.4 million or strong growth of 7%. An increase in total transactions and higher average ticket continue to be the primary drivers behind our strong sales performance. Gross profit margin at Sally Beauty increased 100 basis points to 55.4%. Favorable customer and product mix was primary drivers of this year-over-year performance.

Operating earnings reached $117.6 million or growth of 13.9%. Operating margin was 21.3%, an improvement of 130 basis points over last year's third quarter. Operating margin improvement was primarily due to strong gross margin expansion and SG&A leverage in our Sally North American businesses.

During the third quarter, our Beauty Club card memberships grew 20%. Sales from our club members were up 23% and were a key contributor to transaction growth and higher average ticket.

Now, turning to BSG. Our BSG segment had same-store sales of 5.3% growth. Net sales were $333.6 million, growth of 4.4%. This performance is primarily due to higher transactions and continued success in adding new brands and territory rights in more of our geographies.

BSG's gross profit margin was up 100 basis points to 41.4%. The strong performance was due to favorable customer and product mix. Operating earnings for BSG were $46.7 million versus $56.7 million in the prior-year quarter. BSG's operating results in the fiscal 2011 third quarter reflect a net positive impact of $19 million from a litigation settlement and non-recurring charges.

In summary, Sally Beauty Holdings had an excellent third quarter with strong sales, EBITDA and EPS growth. We refinanced our Term Loan B and repurchased over 7 million shares of our stock. Our business performance continues to be consistent in the countries in which we operate, despite an unpredictable global economy.

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