Sally Beauty Supply 2007 Annual Report Download - page 15

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new products and beauty trends. We believe these classes increase brand awareness and drive sales in BSG stores.
Store Locations
BSG stores are primarily located in secondary strip shopping centers. Although BSG stores are located in visible and convenient locations, salon professionals
are less sensitive about store location than Sally Beauty Supply customers.
The following table provides a history of BSG store openings since the beginning of fiscal year 2003:
Year Ended September 30,
2007
2006
2005
2004
2003
Stores open at beginning of period 828 822 692 543 535
Net store openings during period 46 6 37 26 8
Stores acquired during period — — 93 123 —
Stores open at end of period 874 828 822 692 543
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 markets, both organically and through strategic acquisitions. Specific elements of our growth strategy include the
following:
Increase Sales Productivity of Our Stores
We intend to grow comparable store sales by focusing on improving our merchandise mix and introducing new products. In addition, we plan to tailor our
marketing, advertising and promotions to attract new customers and increase sales with existing customers. We also plan to enhance our customer loyalty
programs, which allow us to collect point-of-sale customer data and increase our understanding of customers' needs.
Open New Stores and Exploring New Markets
In fiscal year 2007, we opened 83 and 46 net new stores for Sally Beauty Supply and BSG, respectively. Because of the limited initial capital outlay, rapid
payback, and attractive return on capital, we intend to continue to expand our Sally Beauty Supply and BSG store base. We believe there are growth
opportunities for additional stores in the U.S., Canada, Mexico and Europe. In addition, we are exploring the potential to enter new markets such as South
America. We expect new store openings in existing and new markets to be an important aspect of our future growth opportunities.
Increase Sales of Exclusive Label Products
We currently intend to grow exclusive label sales in Sally Beauty Supply. We believe our customers view our exclusive label products as high-quality,
recognizable brands, which are competitive with leading third-party branded merchandise. Exclusive label products are currently sold through our Sally Beauty
Supply stores, with very limited exclusive label offerings at BSG. Exclusive label products account for a substantial amount of the Sally Beauty Supply segment
net sales and generate a gross margin greater than that of the leading third-party brands sold through our stores. Potential growth for such products is believed to
be significant. In addition, our broad exclusive label product offering minimizes our dependence on any one brand or supplier. We believe exclusive label
products present opportunities to grow profits and also increase store loyalty.
8
Source: Sally Beauty Holding, 10-K, November 29, 2007