Sally Beauty Supply 2006 Annual Report Download - page 10

Table of Contents
Marketing and Advertising
Sally Beauty Supply’ s marketing program is designed to promote its extensive selection of brand name products at competitive
prices. The program is currently centered on multi-page, color flyers highlighting promotional products. Separate flyers are created
and tailored to Sally Beauty Supply’ s retail customers and salon professionals. These flyers, which are available in Sally Beauty
Supply stores, are also mailed to loyalty program customers and salon professionals on a monthly basis and are supplemented by e-
mail newsletters. Additionally, a Sally Beauty magazine that provides customers with beauty trends and product information is sold in
Sally Beauty Supply stores.
Sally Beauty Supply’ s customer loyalty and marketing programs allow Sally Beauty Supply to collect point-of-sale customer data and
increase our understanding of customers’ needs. The Sally Beauty Club is a loyalty program for customers who are not salon
professionals. Beauty Club members, after paying a small annual fee to join, receive a special, discounted price on almost every non-
sale item. Members are also eligible for a special Beauty Club e-mail newsletter that contains additional savings, beauty tips, new
product information and coupons. Beauty Club customers are rewarded with additional discounts as their store spending increases.
The ProCard is a marketing program for salon professionals. ProCard members receive discounts on all beauty products sold at Sally
Beauty Supply stores. We believe these programs are highly effective in developing and maintaining customer relationships.
Store Locations
Sally Beauty Supply selects geographic markets and store sites on the basis of demographic information, quality and nature of
neighboring tenants, store visibility and location accessibility. Sally Beauty Supply seeks to locate stores primarily in strip malls,
which are occupied by other high traffic retailers including grocery stores, mass merchants and home centers.
Sally Beauty Supply balances its store expansion between new and existing markets. In its existing markets, Sally Beauty Supply
adds stores as necessary to provide additional coverage. In new markets, Sally Beauty Supply generally seeks to expand in
geographically contiguous areas to leverage its experience. We believe that Sally Beauty Supply’ s knowledge of local markets is an
important part of its success.
The following table provides a history of Sally Beauty Supply store openings since the beginning of fiscal year 2002:
Year Ended September 30,
2006 2005 2004 2003 2002
Stores open at beginning of period 2,419 2,355 2,272 2,177 2,112
Net store openings during period 92 62 83 95 64
Stores acquired during period
—
2
—
—
1
Stores open at end of period 2,511 2,419 2,355 2,272 2,177
Beauty Systems Group
We believe that BSG is the largest full-service distributor of professional beauty supplies in the U.S. As of September 30, 2006, BSG
operated 658 company-owned stores, supplied 170 franchised stores and had a sales force of approximately 1,200 professional
distributor sales consultants selling exclusively to salons and salon professionals in 43 U.S. states and portions of Canada, Mexico and
certain European countries.
Store Design and Operations
BSG stores are designed to create a professional shopping environment that embraces the salon professional and highlights its
extensive product offering. Company-owned BSG stores average 2,800 square feet and are located primarily in secondary strip
shopping centers. BSG store layout is designed to provide optimal variety and options to the salon professional. Stores are segmented
into distinctive areas arranged by product type with certain areas
5