Sally Beauty Holdings (SBH) risk factors, FY2024 10-K

Operational, Strategic and General Business Risks

1. 01The beauty products distribution industry is highly competitive and is consolidating
2. 02We may be unable to anticipate and effectively respond to changes in consumer preferences and buying trends in a timely manner
3. 03Our future success depends in part on our ability to successfully implement our strategic initiatives to improve the customer experience, attract new customers and improve the sales productivity of our stores
4. 04We do not manufacture any products we sell and instead purchase our products from recognized brand manufacturers and private label fillers. We depend on a limited number of manufacturers for a significant percentage of the products we sell
5. 05The loss of exclusive distribution rights with key vendors could have a material adverse effect on our business, financial condition and results of operations
6. 06Fluctuations in the price, availability and quality of inventory may result in higher cost of goods, which we may not be able to pass on to the customers
7. 07Our e-commerce businesses may be unsuccessful or, if successful, may redirect sales from our stores
8. 08Diversion of professional products sold by BSG could have an adverse impact on our revenues
9. 09BSG’s financial results are affected by the financial results of BSG’s franchise-based Armstrong McCall business
10. 10If we are unable to optimize our store base, by profitably opening and operating new stores and closing less profitable stores, our business, financial condition and results of operations may be adversely affected
11. 11If our marketing, advertising and promotional programs are unsuccessful, our results of operations and financial condition could be adversely affected
12. 12If we fail to attract and retain highly skilled management and other personnel at all levels of the Company, our business, financial condition and results of operations may be harmed
13. 13The integration and use of artificial intelligence (AI) and similar technology in our business presents risks and challenges that could adversely affect our business, reputation, and results of operations

General Economic, Market and Foreign Risks

1. 14The political, social and economic conditions in the geographies we serve may affect consumer purchases of discretionary items such as beauty products and salon services, which could have a material adverse effect on our business, financial condition and results of operations
2. 15Price inflation for labor, materials and services could adversely affect our business, results of operations and financial condition
3. 16The occurrence of large-scale catastrophes or crises, including natural disasters, acts of violence, conflicts, wars or terrorism and global health crises, could adversely affect our operations and financial performance
4. 17Currency exchange rate fluctuations could result in higher costs and decreased margins and earnings
5. 18We are subject to risks related to our international operations
6. 19A reduction in traffic to, or the closing of, other retailers in shopping areas where our SBS stores are located could significantly reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitability and cash flows

Regulatory, Legal and Cybersecurity Risks

1. 20Legal proceedings, including litigation, regulatory proceedings, and other claims, and the outcome of such proceedings, litigation or claims, could have a material adverse effect on our business, financial condition and cash flows
2. 21If products sold by us are found to be defective in labeling or content, our credibility and that of the brands we sell may be harmed, marketplace acceptance of our products may decrease, and we may be exposed to liability that exceeds our products liability insurance coverage and manufacturer indemnities
3. 22We could be adversely affected if we do not comply with current laws and regulations or if we become subject to additional or more stringent laws and regulations
4. 23Climate change and other environmental impacts, and increased focus by stakeholders on environmental issues, could adversely affect our business, financial condition and operating results
5. 24In addition, concern over climate change may result in new or increased regional, federal or global legal and regulatory requirements to reduce or mitigate the effects of climate change and greenhouse gases. These requirements may lead to an increase in tax, transportation and utility expenses
6. 25Failure to meet evolving expectations concerning environmental, social, and governance ("ESG") reporting could adversely affect our sales and results of operations
7. 26If we fail to protect our intellectual property rights or if our products are found to infringe on the intellectual property rights of others, it could materially and negatively impact our business
8. 27foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. The costs required to protect our intellectual property rights and trademarks are expected to continue to be substantial
9. 28We may be adversely affected by any disruption in our information technology systems
10. 29Unauthorized access to confidential information and data on our information technology systems, security and data breaches

Financial Risks

1. 30Our comparable sales and quarterly financial performance may fluctuate for a variety of reasons
2. 31worldwide economic conditions and, in particular, the retail sales environment in North America and Europe
3. 32A portion of our indebtedness is subject to floating interest rates
4. 33As of September 30, 2024, certain of our subsidiaries, including Sally Holdings LLC ("Sally Holdings"), had an aggregate principal amount of approximately $1.0 billion of outstanding debt
5. 34limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; and
6. 35Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations