Sally Beauty Holdings Inc (SBH) 2009 Q3 法說會逐字稿

Welcome to the Sally Beauty Holdings Conference Call to discuss the Company's fiscal 2009 Third Quarter Financial Results. (Operator Instructions) I would now like to turn the call over to Karen Fugate, Vice President of Investor Relations for the Company. Please go ahead.

Thank you. Before we begin, I would like to remind you that certain comments on matters such as forecasted financial information, contracts or business, and trend information made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934. Many of these forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "estimate," "assume," "continue," "project," "plan," "believe" and similar words or phrases. These matters are subject to a number of factors that could cause actual results to differ materially from expectations. Those factors are described in the Sally Beauty Holdings SEC filings, including its 2008 annual report on Form 10-K. The Company does not undertake any obligations to publicly update or revise its forward-looking statements. The Company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website.

With me on the call today are Gary Winterhalter, President and Chief Executive Officer; and Mark Flaherty, Senior Vice President and Chief Financial Officer. Now, I would like to turn the call over to Gary.

Thank you, Karen, and good morning, everyone. Thank you for joining us for our fiscal 2009 third quarter call. I will begin today's discussion with a high level review of our financial results and business initiatives. Mark will then take you through the results in more detail.

For the 2009 third quarter, Sally Beauty Holdings once again delivered solid financial results despite the difficult economic environment. We grew consolidated same store sales by 2.6%, which is notable growth in a quarter when most retailers failed to reach positive comps.

We continue to benefit from our margin expansion efforts illustrated by a 60 basis-point improvement for the quarter and year-to-date. We paid down an additional $30 million of our long-term debt, demonstrating confidence in our ability to generate cash for the long-term. Net of this payment, cash at the end of our third quarter was a $106 million. And for the second quarter in a row we had no outstanding borrowings on our ABL facility. Inventory is down approximately $40 million from our fiscal '08 year-end.

Consolidated net sales for the third quarter were $673.3 million, a slight decline of 0.5%. Unfavorable foreign currency exchange of $21.9 million, or 3.2% of sales, was a significant driver behind these results. Sales growth was also dampened by softness in BSG's franchise division and sales consultant business. However the majority of this decline was offset by sales growth in new stores.

Consolidated operating earnings were $82.2 million, up 7.4% over the year-ago quarter. Operating earnings as a percent of sales reached 12.2%, a 90 basis-point improvement over last year's quarter. Both business segments contributed to this strong performance.

SG&A expenses were down by 1.2%, primarily due to cost reductions in the BSG segment. As a percent of sales, SG&A was 33.3%, down 20 basis points from the prior year. Net store count was 3,821, an increase of 2.8%, or 105 stores over last year's third quarter. We expect to end the fiscal year with organic store growth of nearly 3%, the lower end of our estimated range of 3% to 5%.

Now turning to the segment performance starting with Sally Beauty Supply. The Sally business grew net sales by 1.6%. Sales growth was significantly impacted by unfavorable foreign currency exchange of 3.9%. Same-store sales as reported on a constant currency basis grew 3.2%. This growth was driven by strong performance in North America.

Although economic conditions in the UK continue to be a challenge, we are pleased with the progress made to improve operations. Same-store sales greatly improved in the quarter with two of the three months posting positive growth. We completed the rollout of assisted replenishment and remain optimistic that performance in the Sally UK business will continue to progress.

As I mentioned last quarter, we continued our customer acquisition campaign to support our CRM program at Sally US, and doubled the number of stores involved to a total of 800. We are very pleased with the results, and the program continues to yield positive returns. We have two additional mailings scheduled for the remainder of this year.

During the third quarter our BSG segment grew same-store sales by 0.6%. Net sales were $239 million, a decline of 4.1% over the prior year's quarter. Sales growth was impacted by unfavorable foreign currency exchange of 2%.

We also experienced softness in the sales consultant business. You may recall the primary customer for our sales consultants includes the mid to large salons. In this economy, the salon customer is waiting longer between salon visits and doing more hair care maintenance at home. BSG stores are recovering some of these lost sales, but mostly our Sally segment benefits from this trend.

Operating margins for BSG reached an historical high of 10.7%, growth of 190 basis points. In light of the softness on the top line, BSG and the franchise business did a terrific job in rationalizing their cost structure. BSG operating margins were positively impacted by the anniversary of $1.6 million of distribution consolidation expenses.

We also realized a portion of the expected cost savings coming from the warehouse optimization project of $2.9 million. If you will recall, we estimated a cost savings in fiscal 2009 of $5 million to $7 million.

The BSG segment ended the third quarter with 942 stores, including 163 franchises locations, for a year-over-year increase of 3%, or 27 stores.

In summary we are pleased with our third-quarter performance. We remain confident in our ability to generate cash and paid down an additional $30 million of long-term debt during the quarter. Lowering our debt structure will continue to be part of our long-term strategy to create value for our share holders.

Now Mark will provide more financial detail for the third quarter. Mark?

Thanks, Gary. Consolidated net sales for the 2009 third quarter were $673.3 million, a slight decline of 50 basis points and include a negative impact from foreign currency exchange of $21.9 million, or 3.2%. Consolidated gross profit was $317.8 million, or 47.2% of sales, a year-over-year improvement in margin of 60 basis points.

Third quarter consolidated SG&A expenses were $224 million, or 33.3% of sales, a 20 basis-point decrease from the year-ago quarter. SG&A expenses decreased by $2.7 million, principally due to the cost control efforts in the BSG business. Partially offsetting this decline is an increase in rent and occupancy-related expenses from incremental stores, higher payroll-related costs and professional fees, as well as higher advertising costs at the Sally segment.

Consolidated operating earnings for the third quarter improved by $5.6 million to $82.2 million, with operating margin improvement of 90 basis points to 12.2%. These results reflect cost reduction efforts across both businesses and improved gross margins in the Sally segment.

Interest expense net of interest income for the third quarter was $31.1 million. Interest expense increased by approximately $1.2 million over last year's quarter primarily due to the acceleration of debt issue cost from the $30 million debt pay-down. Included in the third quarter 2009 and 2008 results were noncash credits related to interest rate swap transactions totaling $2.5 million and $7.6 million, respectively. Adjusted EBITDA for the third quarter was $95.5 million, a 6.2% increase compared to the $89.9 million in the prior year quarter.

The fiscal 2009 third-quarter provision for income tax was $19.7 million, resulting in an effective tax rate of 38.5%. The increase in tax rate for the quarter and year-to-date is primarily due to lower international earnings verses the prior year. We continue to expect our full year effective tax rate to be approximately 38.7%.

Adjusted net earnings increased approximately 22.5% to $30 million, resulting in adjusted earnings per share of $0.16. GAAP net earnings were $31.5 million, up from 7.3%, resulting in earnings per share of $0.17.

Now, turning to the business segments starting with Sally Beauty, net sales in the fiscal 2009 third quarter were $434.7 million, an increase of 1.6% over the year-ago quarter. We estimate the impact of unfavorable foreign currency exchange to be approximately $16.8 million, or 3.9% of sales. Gross profit for the quarter was $224.8 million, an increase of 3.1% over the year-ago quarter, and margin improvement of 70 basis points. This margin improvement was primarily the result of a shift in product and customer mix, recent marketing efforts, and low cost sourcing initiatives.

The Sally segment reported third quarter operating earnings of $76.7 million, up 5.1% over the 2008 third quarter. Segment operating margins were 17.7% of sales versus 17.1% of sales in the year-ago quarter. Operating earnings improved primarily due to growth in same-store sales and gross margin improvement in North America.

Turning to the BSG business, during the 2009 third quarter, BSG's net sales were $238.6 million, a decrease of 4.1% over the 2008 third quarter. This sales decline is largely attributable to the unfavorable foreign currency exchange of $5.1 million, or 2% of sales, and lower sales in our consultant business, or 2.6% of sales.

BSG's gross margins were up 90 basis points sequentially from the fiscal 2009 second quarter and flat versus the fiscal 2008 third quarter. This margin improvement over the second quarter is due to customer mix shift from the sales consultants to the BSG stores.

Segment operating margins increased 190 basis points to 10.7% of sales. Cost reduction initiatives and the realization of $2.9 million of cost reductions from the warehouse optimization project played a role in expanding margins. In addition, included in the 2008 third quarter is $1.6 million in warehouse optimization expense that did not recur in the fiscal 2009 third quarter.

Turning to our consolidated balance sheet, cash and cash equivalents ended the quarter at $106 million. Overall, working capital increased $53.3 million from the fiscal 2008 year-end to $420.5 million due to improved inventory and payables management. Inventories as of June 30, 2009 were $559.6 million, a decrease of $38.6 million from September 30, 2008. We narrowed the capital expenditure range and now expect to end the year with capital expenditures closer to $37 million to $39 million versus the previous projections of $35 million to $40 million.

From a liquidity standpoint, we ended the quarter with approximately $326 million of borrowing capacity on our ABL facility.

Now I will turn it back over to Gary.

Thanks, Mark. In summary, we had another quarter of solid financial performance and strong liquidity. We believe we are well positioned to execute our long-term strategy of growing the company both organically and through potential acquisitions, while at the same time prudently managing our liquidity.

Before we get to the Q&A, I'd like to briefly comment on the 8-K filed this morning announcing L'Oreal's amended complaint against our Armstrong McCall franchise business. As we disclosed, L'Oreal is alleging, among other things, that certain Armstrong McCall employees were engaged in improper business transactions for personal benefit.

As soon as we learned of L'Oreal's allegations, the audit committee of our board of directors launched an investigation through independent counsel. After extensive review, the audit committee and independent counsel found insufficient evidence to support a conclusion that our employees entered into improper transactions for personal benefit.

Let me assure you, we do not expect a material impact on our financial performance as a result of this latest move by L'Oreal. Our Armstrong McCall business currently retains it exclusive rights to distribute L'Oreal's Matrix brand in its territories.

Because it is our Company policy not to comment on ongoing litigation matters outside of our SEC filings, I won't be able to answer many of your questions surrounding these issues. But please refer to our 8-K. It includes more detail and an investor Q&A.

We will now turn it back to the operator to take your questions.

(Operator Instructions) Thank you. One moment, please, for our first question. Thank you. First we will hear from the line of Grant Jordan with Wells Fargo Securities. Go ahead please.

Thanks for taking the questions. As it relates to the M&A environment, have you seen anything of interest, or do you expect M&A activity to pick up at some point?

Grant, we are always shopping, as I have stated many times in the past. I think you will see what is due a lot of relatively small acquisitions, particularly outside the US as we grow our European business. I have said for the last two years that we would love to get a start with a small acquisition in South America and hopefully something along those lines will be coming soon.

But, you know, our industry, not only for us, but for the people that we would be looking to do deals with, it has proven that it is relatively recession-resistant. So, I wouldn't tell you that we are seeing any fire sales out there that would make us jump at a lot of different deals. But we have historically grown this Company through a mixture of organic sales and acquisitions, and that is how we have provided significant increase in shareholder value over the years as part of Alberto Culver and a standalone, and we will continue to do that.

Great. I appreciate the color on BSG margins. As I look back a couple of years ago, you talked about getting back to a normalized level of margins for BSG, and now you have even exceeded those targets. Do you feel like there is more upside to the BSG margin than you had originally thought?

Well, not necessarily than we originally thought, but I think we tend to be a little cautious when we talk about the future of BSG margins. We have not realized quite all of the warehouse optimization projects, so there is a little more of that to be realized.

As I have said to you many times, that business continues to shift a little more towards the stores as more and more of the business goes toward booth renting, and that is a more profitable sale for us at the gross margin line.

So, I believe we still have upside on the BSG business. Right now our BSG international business has been really suffering with currency, so if that normalizes and turns around a bit, there is a fair amount of upside there as well.

Thank you very much. (Operator Instructions). Next we will go to the line of Emily Shanks with Barclays. Go ahead, please.

Hi. This is actually Jason Trujillo in for Emily. First, around the debt pay-down, it looks as though you bought back about $5 million of the subnotes. Will you continue to evaluate bond buybacks in the future? And what is your remaining capacity to buy back bonds?

Well, Jason, of course we will, as we said, if the market conditions certainly allow us to do so. As you are probably keenly aware, it is just that our bonds are trading above par both on the 9.25 and 10.5, so that makes it a little bit of an economic disadvantage for us to do that. But if the opportunity would present itself to allow for us to repurchase bonds, we certainly would consider it.

As far as availability is concerned, we have plenty of availability under both baskets to do so. We have approximately $47 million in our general basket, and we have got about $145 million to $150 million in our restricted basket, so we have plenty of dry powder to do what opportunities may present themselves.

All right, great. That is very helpful. And then just lastly, what marketing efforts or changes did you make at Sally's specifically to drive the gross margin improvement?

You say what did we do?

Yeah, as far as marketing effort changes go. What specifically did you do to help boost gross margins in the quarter on that end?

Well Jason, we are doing the same thing that we have been doing for the last two or three years. We have a very effective loyalty card program called the Beauty Club Card, and we are adding, as I mentioned in my script, more and more stores to that program, the CRM aspect of that. So, that is helping drive our margin.

Secondly the shift that we have experienced for many, many years, the gradual shift toward more retail business, which is a higher margin business for us, continues to take place. And also the private label mix, as it has for many years, increases about a point a year. We expect to be up about a point this year over where we were last year. And our low country cost sourcing on our electricals and brushes over the last 12 to 18 months has helped our margin significantly.

Thank you very much. Next we will hear from the line of, I believe it is Karru Martinson with Deutsche Bank. Go ahead please.

Good Morning. In terms of the CRM program in the mailings, you have now expanded it out to 800, and obviously you are getting good success with that program. What is the thought here to continue to roll that out, especially, certainly as other opportunities might not be as ready for in terms of acquisitions and other things on that front?

Well we fully intend to continue to roll it out. We went from 400 stores very early in our fiscal year. We added another 400 to 800 in the spring of '09, and with the results that we are seeing, I am certain we will continue to add stores into 2010 and beyond.

On the real estate front, certainly on the low end, you know, 3% organic store growth, what is kind of the focus there in terms of shifting to the low end there? Is it that the opportunities just aren't there or are you seeing a pushback from landlords, or what is driving the thought process there?

It is a combination of a couple of things, and to be very honest, in the first quarter we, as many other retailers back around Christmas of '08, were a little bit concerned about what was going on in the economy, and we made a conscious decision to back off our openings slightly.

Now the problem with that is when you decide to crank it back up, there is a pipeline that has to be refilled. Looking back on it hindsight is always 20/20, I wish we would not have made that decision, because I believe we could have opened 4% or 4.5% new stores with the availability of real estate that is out there.

The good news is there are some good deals out there in shopping centers that are having a difficult time, but it's kind of like residential real estate. It's all location, location, location. If you find a good center that is full, you're not finding fire sale lease prices. But we are ramping that back up to our historical range of 4% or 5% of organic growth, which going forward I am comfortable with.

Thank you. Next we will hear from the line of Christina Boni with RBC. Go ahead, please.

Yes, good morning, everyone. Just a follow-up to that last question. Ramping back to the 4% to 5% organic growth, do you have a target for 2010 in terms of your CapEx plan which came down slightly this year? Will that go back to the $40 million range?

Well, as we ramp up the growth back to 4% or 5% organic growth, of course, that will take our CapEx up somewhat. And the other thing that I will tell you is, a greater and greater percentage of our stores are being opened outside the US, and those stores are more expensive to open. So, the average CapEx for a new store over the next several years is going to slightly increase. It is nothing to get alarmed about, but we will be, probably in our next call, revealing what our expectations are for CapEx next year.

Okay, that's helpful. My second question is with respect to balancing acquisitions in gross versus debt pay-down. Maybe you can give us some thought process into that. It sounds like obviously there is opportunities that you want to obviously continue to pursue on the M&A front. You paid down debt this quarter; do you have a target leverage ratio or a specific goal in mind? Thank you.

Well, our leverage ratio has been declining ever since we spun out of the Culvert 2.5 years ago, and I would expect that will continue. As we have said many times, we believe that we need to have a balance of paying down debt and investing some of our free cash flow to grow the business, not only organically but by acquisitions that make sense for us. So, I don't want to box us into a percentage, because I think you will find in some years, if we have the opportunities to do a little more on the acquisition side, we would do that. But, quite frankly, there is going to be years, as really this year has been, where we have not found any acquisitions that we felt were in our best interest, so we have paid down a significant amount of debt.

Thank you very much. We will hear from the line of Erika Maschmeyer with Robert W. Baird. Go ahead, please.

Good morning. Could you give some more color on the salon environment? I know it has been distressed for several quarters; did that deteriorate further this quarter?

I can't say that we saw any signs of further deterioration, Erika. I think the habits that we have seen for, really, at least the last year now of consumers putting a little more time between salon visits continues, that has some impact on the BSG side of our business, which, as you know, services only the salons. The good news to that is as we -- as I said in my prepared remarks, that that home maintenance trend tends to help our Sally business, and that is exactly what we are seeing.

Okay, great. Could you talk about traffic and ticket? Are you still seeing strong trends in traffic?

We are seeing the same trends that we have seen, which is good trends in traffic, but people are purchasing less.

Okay. And then could you talk about the sequential increase in your inventory? I thought you had expected it to trickle down through year-end.

Our inventory has come down significantly since last year-end. The fourth quarter here, I don't believe we have any information on what we expect inventory to do. I don't expect it to be a significant change from where we ended Q3. I think we told everyone last year that this would be a year where working capital would be affected on the positive side by inventory, and that is primarily related to the BSG brands we brought on in 2007, and getting those to turn at a more normal rate in the latter half of 2008 and 2009. So, if you look at our inventory reduction, it has been primarily in the BSG side of our business, which is where we said it would be.

Next we will hear from the line of Jill Caruthers with Johnson Rice. One moment please.

Good morning. If you could talk about the BSG comp in the quarter, how it slowed down from last quarter. You commented on salon traffic being down in that business. Is it just the point of that comp ramping up is salon traffic coming back or is it the franchise unit really hitting it? A little bit more on that?

The franchise unit is not factored into our same-store sales comps at BSG, Jill, so that is not affecting it. I would tell you there are two things affecting BSG's comps. Number one is they were particularly strong through most of '07 and '08 because of all of the new brands I just mentioned that we brought in. Now that we have anniversaried that pipeline and the addition of those brands, it has slowed down somewhat, and there is no question that is being affected by the economic environment in the salon business. Now, the overall sales at BSG, not looking at comps, have been significantly affected by our BSG European business as well in the currency effect.

All right. And if you could comment on SG&A, your dollars were actually down despite a larger store base, though you are getting a lot of cost reductions on the BSG side. Is that something we can project and expect in the fourth quarter where dollars will be down year-over-year?

Well, as I mentioned we still have a lit bit of -- a little bit more of our warehouse optimization reduction or benefit that we will see. Specifically, looking at Q4 to Q4, I really can't answer that question whether we expect BSG's SG&A to be down quarter-over-quarter.

Yes, Jill, to further that point, it's that the trajectory that we see as far as the percentage of sales improvement, you know, we are certainly comfortable with what we are seeing. However as in terms of total dollars, we would expect in some cases the dollars to be up just because of some of the new store openings as well as payroll-related expenses or rent expenses for those stores.

Thank you very much. And next we will go to the line of Colleen Burns with Oppenheimer. Go ahead, please.

Hi, good morning. On the sales trends during the quarter, did they get progressively better throughout the quarter, and have you seen similar trends in July?

We really don't comment on monthly sales numbers. Keep in mind that we are not on a retail calendar, we are on a calendar calendar, which distorts the numbers anyway. So, it wouldn't be productive for us to give monthly information, because they are not good comparisons, Colleen.

Okay. But in general you had said your traffic and ticket has kind of held in with the trends you have seen.

That's correct.

Okay. And then on the gross margin kind of held in this 47% range this year, up slightly sequentially. As you look over the next year, do you expect to see continued gross margin improvement, or do you see this level as kind of the right level?

No, I expect to see it improve from the drivers that have improved it for the last 20 years. As we were talking about earlier, on the Sally side of our business the retail mix continues to drift a little more toward retail; that's a higher margin sale. The private label mix continues to grow faster than our overall sales base; that's a driver of margin. And our sourcing efforts in the Far East for a lot of the product that we sell also is a margin driver.

On the BSG side of our business, as that business continues to shift slightly more toward the stores due to the booth renter phenomenon, we get some margin improvement there as well. So, I guess I would tell you to look at the history of our margins over the last 10 years and just extrapolate that out and I think you would be fairly safe.

Thank you. Next we will go to the line of Henry [Kerpellen] with Oppenheimer. Go ahead.

Hi. Great. You mentioned earlier that the warehouse optimization had not been fully realized, and then I was thinking, is there any way to kind of break out what the operating margin benefit was to BSG in terms of the cost reduction initiatives and the warehouse optimization, so that maybe we can figure out how much more benefit you can get in the future?

No, we really don't give that kind of granule detail. As we have said before, it is that the range of savings is between $5 million to $7 million this year. You know, we are tracking very nicely within that range.

Okay, great. And then you mentioned that the UK trends were positive in two out of the three months. I was just wondering if you could give us a little more detail as to specifically what is going on in that business and how you have kind of, I guess, righted the ship over there?

Well, sure, several things. First of all we had a complete management change almost a year ago now. Secondly, we started late last summer on implementing our assisted replenishment inventory control system, which we finally completed and got all stores on it the end of June. And, as we stated through the first three quarters here, we have -- every time we put a store on assisted replenishment, we see a sales improvement, and it just stands to reason that we are filling in holes and stock outs that we had on a manual system.

So, that has been the primary driver. It certainly hasn't been an improvement in the economic conditions in the UK. They are pretty dismal. But, as I have said several times in the past, I believe we have the same recession resistancy in the UK that we have here in the US, and that a significant amount of the problems in the US have been our problems, and we are well on our way to getting those fixed and I expect to see continued improvement out of the UK.

Thank you. We will next go to the line of Mimi Knowles with Sidoti & Company. Go ahead, please.

Thank you. Good morning. Two questions. First, following up on the real estate, you mentioned that there is no fire sales, but I wonder with higher vacancy rates and more attractive lease rates, do you think about moving up a tier in terms of the, I guess the cachet of the real estate? You mentioned in the past you don't typically go for A or B tier real estate, rather going for C. Do you consider moving up if the rates become attractive enough?

Well, first of all I don't think we have ever said that on the Sally side we go for C real estate. We do on the BSG side because we don't sell retail. On the Sally side, I believe we definitely go for B real estate. Oftentimes, we don't find enough of a benefit going from B to A for it to be worth the rent.

Now, as far as vacancy rates, that becomes a bit of a two-edged sword. Yes, there are shopping centers that have a significant amount of vacancies. But we like to have a tenant mix in there that will attract female shoppers for us. So, a lot of the fashion guys are the ones that are getting hit hard in this recession, so we hesitate to go in to a shopping center where you have got two or three or four of the fashion guys that are kind of on thin ice.

So, we -- it's a difficult and kind of a complex situation that we are in. We do find that we are getting some better rental rates. We are definitely finding some better renewal rates as we renew leases that come due. We have been reaching out a couple of years and early renewing some leases if we can get a better rate, particularly in centers that we feel very strong about, or in stores that are performing exceptionally well.

Okay, that is great news. Thank you for that clarification. The second question I have was about your loyalty program. It sounds as though it is a deliberate yet gradual rollout. Why not be a little more aggressive than that? Is there some sort of a technology hurdle?

No, there's no technology hurdle. There is a cost associated with it and we are trying to do this in a very methodical way, keeping our arms around the results and spending a tremendous amount of time analyzing the results. So that we continue to see the progress and the very, very positive results that we see each time that we have added some stores to this.

Okay. Thank you. That's all I have.

You are welcome, Mimi.

Thank you very much. (Operator Instructions) We have a follow-up from the line of Henry Kerpellen. Go ahead, please.

Hi. Thanks. In the past you had mentioned from a regional perspective that California, Florida, and Arizona continue to be challenged and I was wondering if you had seen any change there in the third quarter?

Henry, we have actually seen a slight improvement, but I don't think it has anything to do with the economies there. We have put some extra effort promotionally into those geographies on the salon and stylist part of our business, as well as a fair amount of the stores that we have added to the Beauty Club Card program. And I mentioned we went from 400 to 800 were in those geographies.

So, we are doing some things to improve our business there, and our team on the Sally side has done a great job there. But, again, I think that we haven't seen anything in the way of economic improvement in those geographies that would at least lead me to believe that there has been much of an improvement there.

Okay great. Thank you.

Thank you very much. One moment please, ladies and gentlemen. All right, thank you, ladies and gentlemen, and at this time I am going to turn the conference back over to Mr. Winterhalter for closing remarks. Go ahead, please.

Thank you, Operator. Before we conclude, I would like to repeat that we had a solid quarter and once again demonstrated the recession-resistant nature of our business. We look forward to seeing you all soon and, as always, thanks for your interest in Sally Beauty Holdings.

Ladies and gentlemen, thank you very much for your participation. That does end our conference. We thank you for joining us today and you may now disconnect.