Sally Beauty Supply 2011 Annual Report Download - page 26

www.ebobdirect.com). We expect electronic commerce, or e-commerce, will increasingly lead to additional
higher margin sales for both business segments as a result of the incremental operating expenses (including
rent and other occupancy expenses, payroll, and shipping and handling expenses) associated with
traditional brick-and-mortar stores. Please see ‘‘Risk Factors—Our internet-based business may be
unsuccessful or may cause internal channel conflict.’’
Pursue Strategic Acquisitions and New Territories for Organic Growth
We have completed more than 35 acquisitions during the last 10 years. We believe our experience in
identifying attractive acquisition targets, our proven integration process and our highly scalable
infrastructure have created a strong platform for potential future acquisitions. Recent acquisitions have
included:
• In October 2010, we acquired Aerial, an 82-store professional-only distributor of beauty products
operating in 11 states in the midwestern United States.
• In March 2010, we acquired certain assets and the business of a former exclusive distributor of John
Paul Mitchell Systems beauty products with sales primarily in south Florida and certain islands in
the Caribbean.
• In December 2009, we acquired Sinelco, a wholesale distributor of professional beauty products
located in Belgium with sales throughout Europe.
• In September 2009, we acquired Schoeneman, a 43-store beauty supply chain located in the central
northeast United States.
• In September 2009, we acquired Intersalon, a leading distributor of premier beauty supply products
with 16 stores located in Chile.
• In May 2008, we acquired Pro-Duo NV (‘‘Pro-Duo’’), a cash and carry retailer of both professional
and retail hair products with 40 stores located primarily in Belgium, France and Spain.
We intend to continue to identify and evaluate acquisition targets and organic growth targets both
domestically and internationally, with a focus on expanding our exclusive BSG territories and allowing
Sally Beauty Supply to enter new geographic areas principally outside the U.S. Please see ‘‘Risk Factors—
We may not be able to successfully identify acquisition candidates or successfully complete desirable
acquisitions.’’
Competition
Although there are a limited number of sizable direct competitors to our business, the beauty industry is
highly competitive. In each geographic area in which we operate, we experience competition from
domestic and international businesses often with more resources, including mass merchandisers, drug
stores, supermarkets and other chains offering similar or substitute beauty products at comparable prices.
Our business also faces competition from department stores. In addition, our business competes with local
and regional open-line beauty supply stores and full-service distributors selling directly to salons and salon
professionals through both professional distributor sales consultants and outlets open only to salons and
salon professionals. Our business also faces increasing competition from certain manufacturers that use
their own sales forces to distribute their professional beauty products directly or align themselves with our
competitors. Some of these manufacturers are vertically integrating through the acquisition of distributors
and stores. In addition, these manufacturers may acquire additional brands that we currently distribute and
attempt to shift these products to their own distribution channels. Our business also faces competition
from authorized and unauthorized retailers and internet sites offering professional salon-only products.
Please see ‘‘Risk Factors—The beauty products distribution industry is highly competitive and is
consolidating’’ for additional information about our competition.
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