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spk04: was a dominant piece of the change to the guidance. When we just look at the consumer and what's happening, we do see real positives against some of the initiatives that we're working on. So we will bring in more Regus business as we stand up more customers as we go through Q4. We just reset our nails business in both our BSG and Sally stores. We're working a lot of personalization journeys, and we see those as really offsets to what we're seeing of just the customer being a bit more frugal. You specifically asked about AUR going up. The core of our business is color and care. We have taken pricing and so that's the more natural movement of AUR. And that makes a bigger difference to us than where we might have lost just truly high AUR items such as a blow dryer or straightening iron out of the basket compared to where we were last year. So just seeing that more in pricing coming through as we would have anticipated.
spk02: Got it. Thanks. And then I wanted to get your view in terms of the consumer interest in color. And I don't mean from the, you know, covering gray's perspective, but, you know, Vivid was obviously huge for some time, particularly in the last two years. Just general view in terms of color trends outside of gray coverage. That would be great. Thank you so much.
spk04: Overall, hair, hair expression, personalization, we are not seeing any meaningful change in behavior in customers from what we've seen over the last 12 to 18 months. Vivid is still quite strong. It represents 29% of our business, and I think that's pretty flat in Sally. It's pretty flat to what we've seen over the last few quarters in terms of penetration. So really no drop-off in interest of people experimenting there. And I think a really fun business because you do it a lot more with, semi-permanent or short-term types of color where people can get a pop of color and then step away from it if they choose to do that. And then core color remains also generally on trend. As we talked about the overall statistics, we were a little lighter in Sally this year than we were last year. I think that's more about the fuel of the reopening that actually happened last year with the consumer as COVID really The vaccines were there, people reemerged, business really kind of took a different turn. And on the BSG side, color trend, color demand remained quite strong. The only thing that we feel held us back were some of the vendor out-of-stock issues. As we talked about, we think we would have posted a slightly positive comp in our color business in BSG, excluding the vendor out-of-stocks. So still feel good. The hair color, hair trend is real overall. And I think we, personally for our business, are optimistic that as people think more about that gray coverage and maybe different ways to achieve that, could be an interesting trend as we watch further into Q4 and the new year.
spk02: Thanks so much. Best of luck.
spk05: Thank you. We will next go to the line of Simeon Guttman with Morgan Stanley. And your line is open.
spk00: Hey guys, this is actually Justin on behalf of Simeon. Thanks guys for taking my question. Earlier you guys mentioned that for the BSG segment you mentioned you were seeing good progress toward the end and you expected to improve going into Q4. I was wondering if you could talk maybe just a little bit color on, you know, volume and price that you saw a little more detail towards the end of the quarter and then if you guys think you're taking share from your key competitors.
spk04: Yeah, I think overall, if we just talked about the VSG business, specifically of our improvement towards the end of the quarter, that was in regards to in stocks. So that's where we saw ourselves get back better in stock in some of the key SKUs that were out with some of our vendors and saw that kind of positive trend convert over into customers in terms of basket and traffic. It also coincided with what we do every quarter of a customer appreciation sale. And the value that got provided there, we see more and more with folks looking for that value, just a good time to shop. So we were happy to have that inventory back in stock and what we were seeing. And I think your other question, which forgive me, I'm forgetting right now.
spk00: It was if you guys think you're taking share in the BSG segment.
spk04: Yeah, I think in our general, in our view of everything we can see in the numbers, we are currently holding share in Care and Color and VSG. The one gap to Color that we know we have is a little bit of slowdown because of the vendor out of stocks, but working hard to get those back into stock. But with Care growing about 5%, that feels like a good, healthy growth rate in the business. And I think the thing that gives us a great conviction that our customers are still actively coming in, the customer counts remain stable. So we feel really good about that. And as I mentioned earlier, you know, we're also working hard to be looking at how we're going to grow share rather than just, you know, maintain share with our customers. The ability that we have that we're now adding on a lot of new Regus business, those 2,500 accounts coming online, and it's going to be a great build to our business as we look to Q4, but even more importantly, 2023. You know, we'll get our product back in stock with our vendors. We just reset our nail walls within BSG. It gives us access to a whole bit of a different customer base. So clearly our stylists buy and participate in that for their independent businesses, but we also believe there's more leverage there to get people back into our stores as they understand the new assortment for their nail tech businesses. And then we're really focused on the products that make a difference to our stylists right now, a big one of that being Express. So the more efficient she can be in running her chair, turning over her client base in a difficult time, being able to do color in a 10, 15-minute process instead of a much longer process is pretty important. So we're working with all of our vendors for that express piece to come through as well so that we can convert as our vendors are back in stock to growing share in color as well.
spk00: Thank you. And just a quick follow-up on that. Before you mentioned, I know the care business being up 5% color. I think you mentioned about down 7% due to out of stock. Would you say that's kind of the biggest divergence you guys are seeing in category? Or any insight you can provide in other categories or maybe how the new nail walls are performing thus far? Thank you.
spk04: So care and color are by far the largest businesses within BSG. So that really represents a huge base of the store. The nail walls were reset in the third quarter. They'll be more fully kind of full quarter as we go into Q4 and more product coming in behind them. Early on, we've seen very positive response. And so with, you know, three or four weeks of the sets kind of under our belt, people are figuring out that it's there, it's new, we're getting messaging out about it. So I would call it, you know, so far, positive.
spk00: Got it. Thank you. Best of luck.
spk05: Thank you. Our next question will come from the line of Carla Casella with JP Morgan, and your line is open.
spk01: Hi. I'm wondering on the e-comm side, is that business accretive or dilutive to margins at this point?
spk03: Sorry, your e-comm margins? Was that the question?
spk01: Yeah. Are the e-comm margins better or worse than in-store?
spk03: Yeah, so we've been on quite a journey with e-comm versus just standing it up, you know, throughout the journey we were on with COVID and bringing on all of our digital capabilities. I mean, we now have a full suite in our platform in both banners and still building a bit more into that in terms of bringing CRM and personalization into the mix as well to further enhance that. I would say early on, it was all about speed and getting people getting the capability stood up. Since that time, we have made tremendous amount of improvements in our profitability. We're now at a point where we have a good part of the business being fulfilled out of the store, which is more profitable than doing that from a DC. In through that too, as well as our operational improvements, cancellations, splits, just improving the overall customer experience. You've heard us talk about better conversion, So we just have a much more efficient operation as well. And so since that time, I would say we are now starting to approach – and BSD has always been the stronger banner in terms of profitability. Sally has now caught up to BSD, and we are now starting to approach store profitability at this point. We don't expect to ever be at parity, but we are getting closer. Okay. That's great.
spk01: And then on the, just given the consumer environment and kind of supply chain, any change to how you're looking or assorting for holiday? Or just even given the, you know, the business shift because you've spent so much time lately putting, growing that color and, you know, hair and nail categories. Are we going to see a shift in the stores as a holiday time frame?
spk04: Yeah, when I think about that, we aren't a big seasonal business. So I think for one, we don't typically have a much different buy-in for the holiday time period. We do see more customers coming into our stores a bit more on the gifting front than maybe you'd see through the rest of the year. In our preparation for holiday, we're thinking more about how you think about stocking stuffers and things that become affordable luxuries that you can get in the store. complementing what we always do, which is have styling tools and other things that make good gifts under the tree. I'm clearly taking in mind where the customer's head is, but I think the most important part to us is our assortment that we buy at Holiday isn't any different than our day-in, day-out assortment. When we say we're going to stock up on something because it'll be stocking stuffers, it's core go-forward products. We're just bringing in knowing that seasonality might be there a little differently for those products. We certainly hope that we see a nice gifting season. I think we all quickly forget that last December was a bit hampered by the joys of Omicron and all the things that it did impacting store labor and just general activity. So we're hopeful that that customer does want to get back out and think about their holidays in a more positive light, but also I think just for us realizing that we're not a huge seasonal business.
spk01: Okay, great. And then any thoughts in terms of the timing of the debt pay down or kind of a target there, given the revolver borrowing?
spk03: Yeah, we don't have a specific target date, but I would say our overall capital structure being in a strong position, we're going to continue to assess the best uses of our cash generation across business investments, returning value to shareholders, and optimizing our debt.
spk01: Okay, great. Thank you.
spk05: Thank you. And with that, we have no further questions. So please go ahead with any closing remarks.
spk04: I'll just take a minute to say thank you for all the interest in Sally Beauty Holdings. We're excited about the business. We're excited about where we're headed to go forward and how that we can serve our customers. So we do appreciate that interest. And as always, a big thank you to our associates across the globe. They work hard every day to bring color and care and happiness to our customers, and we appreciate all they do. So thanks for that, and we'll talk to you again next quarter.
spk05: Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.
spk01: We're sorry. Your conference is ending now. Please hang up.
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