Sally Beauty Supply 2011 Annual Report Download - page 24

consultants. We believe that our differentiated customer value proposition and strong brands drive
customer loyalty and high repeat traffic, contributing to our consistent historical financial performance.
Attractive Store Economics
We believe that our stores generate attractive returns on invested capital. The capital requirements to open
a U.S.-based Sally Beauty Supply or BSG store, excluding inventory, average approximately $70,000 and
$80,000, respectively, with the capital requirements for international stores costing less or substantially
more depending on the local economic conditions. Sally Beauty Supply stores average approximately 1,700
square feet and BSG stores average approximately 2,700 square feet in size in the U.S. and Canada. In the
U.S., our stores are typically located within strip shopping centers. Strong average sales per square foot
combined with minimal staffing requirements, low rent expense and limited initial capital outlay typically
result in positive contribution margins within a few months of opening, and cash payback on investment
within approximately two years. Due to such attractive investment returns and relatively high operating
profit contributions per store, during the past five fiscal years Sally Beauty Supply and BSG have opened
an aggregate of 487 and 181 net new stores, respectively, excluding the effect of acquisitions. Outside the
U.S. and Canada, our store format, sizes and capital requirements vary by marketplace, but we believe
these stores also generate compelling unit economics.
Consistent Financial Performance
We have a proven track record of strong growth and consistent profitability due to superior operating
performance, new store openings and strategic acquisitions. Over the past five fiscal years, our
consolidated same store sales growth has been positive in each year and has averaged nearly 4.0%, as set
forth in the following table:
Fiscal Year Ended September 30,
Same store sales growth(a) 2011 2010 2009 2008 2007
Sally Beauty Supply ..................... 6.3% 4.1% 2.1% 1.2% 2.7%
Beauty Systems Group ................... 5.5% 6.2% 1.0% 6.9% 10.1%
Consolidated ......................... 6.1% 4.6% 1.8% 2.6% 4.5%
(a) Same stores are defined as company-operated stores that have been open for at least
14 months as of the last day of a month. Our same store sales are calculated in constant
dollars and include internet-based sales (beginning in fiscal year 2009) and store expansions,
if applicable, but do not generally include the sales from stores relocated until at least
14 months after the relocation. The sales from stores acquired are excluded from our same
store sales calculation until at least 14 months after the acquisition.
Experienced Management Team with a Proven Track Record
Our senior management team led by our President and Chief Executive Officer Gary Winterhalter,
averages 24 years of beauty industry experience and possesses a unique combination of management skills
and experience in the beauty supply market. Our team also has a strong track record of successfully
identifying and integrating acquisitions, which continues to be an important part of our overall strategy.
Our Strategy
We believe there are significant opportunities to increase our sales and profitability through the further
implementation of our operating strategy and by growing our store base in existing and contiguous
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