Simeon Gutman: Okay. A follow-up on BSG. The press release, it listed first expanded distribution as a factor for improvement. At the end, it was improving salon demand trends. So can you talk about those two? Goldwell, what you bought, does that enter into the comp base or that stays out of it for a while? And then just related to it, the weather impact, did that impact BSG and Sally proportionally in January, or was it more Sally?
Denise Paulonis: So, overall, when we think about what drove the BSG business, there were three key factors overall. So innovation, expanded distribution, and improving salon demand trends, I’d say, in that order. With innovation very broadly, Amika, Wella’s Ultimate Repair, Color Wow, Moroccannoil are places where we saw our customers lean in into that mix. And in particular, when we have expanded distribution in a few of those brands with Color Wow and Moroccannoil, that certainly helped. The Goldwell portion of the business part of that acquisition goes into comp, and part of it does not. So the new stores that came with the acquisition do not go into comp, but the full service and rest of the business does go into comp. So it’s a big split there.
But we had expected that to be a $10 million to $15 million build for the entire year, and we’re seeing that perform in line with expectations. So we’re really pleased with how that has come to bear and then finally, the improving salon demand trend, what we’re really seeing that in, as we saw traffic pick up and come into the stores and shop the intercepts with customers, just saying, I’m just a little busier. And that was great for us to see coming in and feeling that as part of the mix. And then if you could remind me what your second part of your question was?
Simeon Gutman: It was weather, where you talked about some softness. Does that affect Sally and BSG?
Denise Paulonis: Yes. So the softness that we saw in the early part of January tied to weather, the great news is really has turned around at the end of January. And as we launch into February today, we believe that that will continue. It was predominantly Sally, but it was across both businesses. So I have to — if I have to split it, it was 60% Sally, 30% BSG, give or take, 40% BSG, if we looked at it that way. But it did affect both businesses.
Simeon Gutman: Makes sense. Okay, thanks. Be well.
Operator: Thank you. And the next question is from Olivia Tong please, sorry from Raymond James. Please go ahead.
Olivia Tong: Great. Thank you. You mentioned improving salon demand trends at BSG. Could you just expand on what’s driving that? You did leave the full-year comp outlook unchanged. But given that BSG was a bit better than expected, could you just talk about how that influences your full-year expectations to start? Thank you.
Denise Paulonis: Yes. When we talked about and seeing improving salon demand trends, we talked about it being modest improvement in demand trends and the way that we understand that is really just watching the purchase behavior of our stylists as they come into our stores, as they transact with us online and how they talk about their businesses. The way they phrased it was coming into the holiday season. They saw a bit more normalcy in people wanting to come in ahead of the holiday, refresh their look, kind of filling their chair to a bit more extent than they had been in the earlier period of the year. So we’re encouraged that we’ve seen a little bit of that uptick for our stylists in their salon business. But it’s a really new trend line.
So we’re not really baking an expectation that, that’s going to have further growth or continuation as we look to our projections for the remainder of the year and we’ll certainly watch it and continue to react as we see that come through. Overall, in holding our guidance, the thing that I would come back to is we really performed in line with our expectations in the first quarter. As we look to the second quarter, we did see this unusually persistent weather very early in January to start things off. And overall retail traffic was certainly pressured through that point. It lasted long enough that in our minds, we’re not betting that we’re going to recoup a bit of the softness that we saw in those early couple of weeks, but rather get back on the rest of the trend for the quarter, as really happened at the last week of January and going forward.
So our guide for Q2 really reflects the fact that we think that, that was a pocket of air and a little bit of lost sales that came from that, but the rest of the business underneath that, quite healthy. So down 0% to 2% on comp sales for the quarter reflects that bit of early January pressure. But we believe that gross margin will continue to improve from Q1 to Q2, as Marlo had discussed in an earlier question. And then, we’re really well prepared to ramp into the back half of the year. We also outlined that on the call, but we think about the strength of BSG that will finally lap the hair care headwinds from one brand from last year. We’re also continuing to be set up for this momentum with new brand innovation and expanded distribution. And then Sally, as we continue to embark in the back half of the year with the growth that we see in marketplaces coming through, our Colorist on — Licensed Colorist on Demand.
And then some improvements in Europe as well, where we’ve been working hard on pricing and new brand launches that we think are going to elevate the second half of the year. So all in all, the year is unfolding generally the way that we expected it to, and we do expect the second half of the year to be a bit stronger on the top line than what we’ll see for the first half of the year, but pleased with our start.
Olivia Tong: Thanks. That’s very helpful. So if I could just summarize, it sounds like Q1, more or less in line, maybe a touch better. Q2 obviously impacted by the weather that you don’t expect that to get back in the second half, more or less no change in expectation relative to your expectations going into December quarter?
Denise Paulonis: Fair enough.
Olivia Tong: Got it. Okay. Thank you. And then just my next question is around the fuel for growth program. You talked a little bit about incremental savings. Can you just talk about where that savings is coming from? Any new buckets or just as you continue that program, you’re just seeing a little bit better success rate with achieving savings in the existing buckets?
Marlo Cormier: Yes. Thank you. Yes, so as we called out last quarter, we were really in our early stages of our fuel for growth work. We had identified $20 million of benefits that we expect to flow through 2024. Most of that is back-half loaded. And we talked about that being weighted 75% SG&A, 25% cost of goods. We did talk about our partnership with an external adviser. We have completed that assessment, and now we believe we’re on a path to identifying another $50 million that we can see flow through fiscal 2025 and then cumulative through the program, get to $120 million run rate as we get into 2026. And where we see that coming from in the early stages, it’s programs that we were testing in our supply chain, like our biweekly shipping frequency, we are approaching 80% of the fleet.
For Sally, we’re shy of that. On BSG, our goal is to get to around 85% across both banners. We’re on path for that for this year. But as we look forward, we’re seeing greater opportunities within our merchandising and vendor negotiations and relationships. We’ve got goods not for resale opportunities within our non-trade payables. We see automation, we see outsourcing. So we see a variety of programs. But as we look forward and we start to see where that falls, more so in the merchandising and supply chain areas, we’ll get more benefits within gross margin. So you’ll see that 75-25 start to balance out a bit as we get into future years. But we’re pretty excited about the program, and I think we’re off to a great start.
Olivia Tong: Great. Thank you. Best of luck.
