Sally Beauty Supply 2011 Annual Report Download - page 19

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In addition, Sally Beauty Supply offers a comprehensive ethnic product selection with specific appeal to
African-American and Hispanic customers. Its ethnic product offerings are tailored by store based on
market demographics and category performance. For example, sales of products targeted for these
customers averaged approximately 9.0% of net sales in Sally Beauty Supply’s U.S. stores during the past
three years. We believe the wide selection of ethnic products available in Sally Beauty Supply stores is
unique and differentiates its stores from its competition. Sally Beauty Supply also aims to position itself to
be competitive in price, but not a discount leader.
Sally Beauty Supply’s pricing strategy is differentiated by customer segment. Professional salon customers
are generally entitled to a price lower than that received by retail customers. However, Sally Beauty Supply
does offer discounts to retail customers through its customer loyalty program (please see Marketing and
Advertising below).
Leading Third-Party Branded Products
Sally Beauty Supply offers an extensive selection of hair care products, nail care products, beauty sundries
and appliances from leading third-party brands such as Clairol↧, Revlon↧ and Conair↧, as well as an
extensive selection of exclusive-label merchandise. We believe that carrying a broad selection of the latest
premier branded merchandise is critical to maintaining long-term relationships with our customers. The
merchandise Sally Beauty Supply carries includes products from one or more of the leading manufacturers
in each category. Sally Beauty Supply’s objective is not only to carry leading brands, but also to carry a full
range of branded and exclusive-label products within each category. As hair trends continue to evolve, we
expect to offer the changing professional beauty product assortment necessary to meet the needs of retail
consumers and salon professionals.
Exclusive-Label Products
Sally Beauty Supply offers a broad range of exclusive-label products. We believe exclusive-label products
provide customers with an attractive alternative to higher-priced leading third-party brands. Exclusive-
label products accounted for approximately 44% of Sally Beauty Supply’s product sales in the U.S. during
the 2011 fiscal year. Generally, the exclusive-label brands have higher gross margins than the leading third-
party branded products, and we believe this area offers continued potential growth. Sally Beauty Supply
maintains exclusive-label products in a number of categories including hair care, small electrical appliances
and salon products. Sally Beauty Supply actively promotes its exclusive-label brands through in-store
promotions, print advertising and direct shopping guides. We believe our customers perceive our exclusive-
label products to be comparable in quality and name recognition to leading third-party branded products.
The following table sets forth the approximate percentage of Sally Beauty Supply’s sales by merchandise
category:
Fiscal Year Ended
September 30,
2011 2010 2009
Hair color ...................................... 22.5% 22.7% 22.8%
Hair care ...................................... 21.3% 20.7% 19.7%
Skin and nail care ................................ 15.2% 14.2% 13.0%
Brushes, cutlery and accessories ...................... 14.5% 15.1% 15.6%
Electrical appliances .............................. 10.6% 11.8% 11.9%
Ethnic products .................................. 7.9% 8.1% 8.7%
Other beauty items ............................... 8.0% 7.4% 8.3%
Total ........................................ 100.0% 100.0% 100.0%
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