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Sally Beauty Holdings’ CosmoProf Idea Proposal (SBH)

Sally Beauty Holdings’ CosmoProf Idea Proposal (SBH)
 

Is Sally Beauty’s CosmoProf business seeing a COVID-related slowdown amid DIY solutions and stylists considering competitors?

Report Available: October 9, 2020

 

Blueshift’s initial research found Sally Beauty Holding’s CosmoProf in a position to potentially see a slowdown in sales as a result of COVID-19. The distributor of salon brands and supplies to stylists saw sales come to a near halt when salons shut down in April, forcing customers to turn to DIY solutions. With salons re-opening a few months later, CosmoProf sales surged, though it is unclear if it was because of pent up demand requiring a one-time re-supply or if these increases are sustainable. Some customers will stick with their DIY approach and some stylists will order more products online instead of in-store, opening more possibilities of choosing a competitor like Amazon or L’Oreal’s SalonCentric. How significant of an effect this will have on CosmoProf’s business remains to be seen.

 

Observations

  1. SBH’s Q3 earnings missed expectations while revenue was in-line, dropping 28% year to year caused by the closing of stores because of the pandemic for much of the quarter. Same-store sales fell nearly 27%, though demand began to rebound as stores resumed operations in May and June. In fact, June sales at Sally stores were up 10.8% year to year. Ecommerce sales surged with physical store closures, growing 278% compared to a year ago.
  2. SBH’s Beauty Systems Group, which houses CosmoProf and supplies stylists and salons with hair products, saw sales decline 28% in the quarter, but with a 23.1% year-to-year growth in June and $155 million in revenue – its highest monthly sales ever as stylists and salons refilled their supplies with salons re-opening and customer demand returning. Beauty Systems Group also introduced same-day delivery to help salons and stylists re-supply faster.
  3. Early in the pandemic, beauty and haircare became an in-home necessity with customers relying on DIY solutions. Now that most salons have re-opened, some customers are still choosing to continue with their DIY routine in an effort to save time and money. Or they are going to salons less frequently, choosing to do touch-ups at home and only major color changes with their stylists. In April, countless websites, blogs, and videos popped up with instructions on how to color hair at home and there are still many how-to articles and product reviews. These include where consumers can find the products, with Target, Amazon, and Sephora standing out most.
  4. Salons and stylists are also seeing an influx of competition and a leveling of the playing field as they order supplies online instead of needing to go in to their local CosmoProf stores. L’Oreal’s Salon Centric is a direct competitor to CosmoProf, while Amazon and Ulta are seeing their online sales to DIYers and professionals climb these last several months. Amazon launched a store for beauty professionals a year ago.
  5. Blueshift’s 20 report said ULTA is expected to be able to defend itself from online and direct-to-consumer (DTC) competition, though it will face many challenges along the way. ULTA was hailed for its speed in adapting to trends, its successful online platform, its mutually beneficial partnerships with brands, and its improvement in developing exclusive deals with brands. ULTA’s website is a popular destination and further defense against competition. Four of the six brand sources said their products sell well in ULTA stores and Ulta.com. One source said their sales at ULTA exceed the industry. Another source experienced a 10% year-to-year increase at Ulta in 2019—with up to 10% of their sales on Ulta.com—and expects the same in 2020. Yet another said a sizable part of their sales occur on Ulta.com.

 

How are sales trending at professional suppliers to salons? How much of an effect is the at-home DIY market having on these businesses? What demand are salons and stylists seeing for their services? How are stylists’ ordering patterns now and how do they compare to pre-COVID? What are product manufacturers seeing? How does online ordering compare to in-person sales? How does CosmoProf compare to Salon Centric? How is Amazon’s effort to woo stylists progressing? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Product manufacturers, Competitors, Salon professionals and stylists, Store personnel, and Industry specialists.  

 

Companies: Sally Beauty Holdings Inc. (SBH), L’Oreal (LRLCF), Ulta Beauty (ULTA), Amazon (AMZN)

 

Research Begins: September 21, 2020

 

To see other ideas Blueshift Research is currently working on, please click here.

 

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