Sally Beauty Supply 2006 Annual Report Download - page 8

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Table of Contents
Favorable Demographic and Consumer Trends
The aging baby-boomer population is expected to drive future growth in professional beauty supply sales through increased usage of
hair color and hair-loss products. Additionally, continuously changing fashion-related trends that drive new hair styles are expected to
result in continued demand for hair styling products.
Business Segments, Geographic Area Information and Seasonality
We operate two business segments: (1) Sally Beauty Supply, a domestic and international open-line distributor of professional beauty
supplies offering professional beauty supplies to both retail consumers and salon professionals, and (2) BSG, a full-service beauty
supply distributor offering professional brands directly to salons and salon professionals through our own sales force and professional-
only stores, many in exclusive geographical territories in North America. BSG also franchises beauty supply outlets in the United
States and Mexico, and supplies sub-distributors in Europe. Sales of Sally Beauty Supply accounted for approximately 60%, 60% and
62% of the company’ s consolidated net sales for the years ended September 30, 2006, 2005 and 2004, respectively. BSG accounted
for approximately 40%, 40% and 38% of the company’ s consolidated net sales for the years ended September 30, 2006, 2005 and
2004, respectively.
Financial information about business segments and geographic area information is incorporated herein by reference to the “Business
Segments and Geographic Area Information” note 18 of the “Notes to the Consolidated Financial Statements” in “Item 8—Financial
Statements and Supplementary Data” of this report.
Neither the sales or product assortment for Sally Beauty Supply or BSG are seasonal in nature.
Sally Beauty Supply
Sally Beauty Supply is the largest open-line distributor of professional beauty supplies in the U.S. based on store count. It carries an
extensive selection of professional beauty products, ranging between 5,400 and 7,400 stock keeping units (“SKUs”) of beauty
products, including hair care, nail care, beauty sundries and appliances. It targets retail consumers and salon professionals. We believe
that Sally Beauty Supply has differentiated itself from its competitors through its attractive customer value proposition, attractive
pricing, extensive selection of leading third-party branded and private label products, broad ethnic product selection, excellent product
knowledge of its sales associates and convenient store locations.
Store Design and Operations
Sally Beauty Supply stores are designed to create an appealing shopping environment that embraces the retail consumer and salon
professional and highlights its extensive product offering. Sally Beauty Supply stores average 1,700 square feet in size and are located
primarily in strip shopping centers. Generally, Sally Beauty Supply stores follow a consistent format, allowing customers familiarity
between Sally Beauty Supply locations.
Sally Beauty Supply stores are segmented into distinctive areas arranged by product type with signs allowing its customers to easily
navigate through its stores. Sally Beauty Supply seeks to stimulate cross-selling and impulse buying through strategic product
placement and use the front of the store to highlight new products and key promotional items.
Merchandise
Sally Beauty Supply stores carry a broad selection of branded and private label beauty supplies. Sally Beauty Supply manages each
category by product and by SKU and uses centrally developed planoguides to maintain a consistent merchandise presentation across
its store base. Through its information systems, Sally Beauty Supply actively monitors each store’ s category performance, allowing
maintenance of consistently high levels of in-stock merchandise. We believe Sally Beauty Supply’ s tailored merchandise strategy
enables it to meet local demands and helps drive traffic in its stores. Additionally, its information systems track and automatically
replenish inventory levels, generally on a weekly basis.
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