Sally Beauty Holdings, Inc. (SBH): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear, actionable breakdown of the external forces shaping Sally Beauty Holdings, Inc. (SBH) right now. The quick takeaway is this: SBH is navigating a tight economic environment by doubling down on their professional stylist loyalty program and accelerating their digital channel growth, but they face constant margin pressure from new e-commerce entrants and shifting consumer preferences toward clean beauty. Honestly, the biggest near-term risk is economic, specifically how persistent inflation near an estimated 3.5% for 2025 is hitting the core professional stylist's wallet, plus the regulatory noise around product ingredients is only getting louder. Let's dive into the Political, Economic, Sociological, Technological, Legal, and Environmental factors that defintely matter for SBH's future.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Political factors

Increased scrutiny on US-China trade relations affecting supply chain costs.

You need to be watching Washington and Beijing closely, because the renewed focus on US-China trade relations is a direct and volatile cost driver for Sally Beauty Holdings, Inc. (SBH). The beauty industry is highly exposed to these geopolitical shifts, with over 13% of U.S. cosmetic imports originating from China, according to industry analysis. This reliance means any new tariffs translate immediately into higher costs for raw materials, packaging, and finished goods.

In March 2025, there was discussion of a potential US tariff increase on goods from China to 20%, plus new tariffs on imports from Mexico and Canada, which are key trade partners. This political posturing creates massive supply chain uncertainty. Sally Beauty Holdings executives have already signaled that they would likely have to implement selective price increases to offset these tariff costs, a move that risks alienating their price-sensitive customer base. The risk here is not just the tariff amount, but the need to accelerate supply chain diversification, which is a costly, long-term capital expenditure.

Potential for new federal or state-level import tariffs on beauty products.

The threat of new tariffs is a near-term financial risk that requires immediate mitigation planning. The proposed average tariff rate on imports for beauty brands in 2025 is projected to be around 25.8%. This is a significant tax hike that directly impacts the cost of goods sold (COGS) for a retailer like Sally Beauty Holdings. While the company has a strong portfolio of owned brands, much of the manufacturing input still faces import duties.

The political environment suggests existing US tariffs on imports are likely to remain in place through the end of fiscal year 2026. This means the higher-cost base is not a temporary blip but a structural reality. For a company that reported a consolidated GAAP gross margin of 52.0% in Q2 Fiscal 2025, a sudden, large increase in import tariffs could erode profitability quickly, forcing a choice between margin compression and price hikes.

Here is a quick look at the political tariff risk landscape as of late 2025:

• China Tariff Risk: Potential increase to 20% or more on certain goods.
• Industry-Wide Impact: Projected 25.8% average tariff rate on beauty imports.
• SBH Mitigation: Must diversify sourcing or pass costs to consumers via price increases.

Stable, but complex, international operating environment across 10+ countries.

Sally Beauty Holdings operates a significant international footprint, distributing professional beauty supplies across 11 countries outside the US, including Canada, Mexico, the United Kingdom, and Germany. This geographical diversification is a strength, but it also creates a complex political and regulatory environment. You have to manage 11 different sets of labor laws, consumer protection regulations, and tax codes.

The complexity is immediately visible in the financial statements through foreign currency translation. In Q2 Fiscal 2025, consolidated net sales of $883 million included an unfavorable foreign currency impact of 110 basis points. This loss is a direct result of political and economic stability (or instability) in its international markets, especially in Latin American countries like Chile, Mexico, and Peru. The stable but complex environment requires a dedicated compliance and treasury function to manage currency risk and adhere to varied local regulations on product labeling and ingredient safety.

International Operating Metric (FY 2025)	Value	Political/Financial Implication
Number of Operating Countries	11	Requires compliance with 11 different legal/tax systems.
Q2 FY25 Unfavorable FX Impact	110 basis points on net sales	Direct hit to sales from foreign government/central bank policies.
Key International Markets	Canada, Mexico, UK, Germany, Chile, France, etc.	Exposure to European Union regulations (e.g., REACH) and NAFTA/USMCA trade rules.

Government support for small businesses impacting independent stylists, SBH's core customer.

The political climate is generally supportive of small businesses, which is a positive tailwind for Sally Beauty Holdings' core professional customer-the independent stylist and salon owner. Programs from the U.S. Small Business Administration (SBA) offer loans and resources to help these small businesses grow. This government support helps keep SBH's primary customer base financially solvent and able to purchase supplies from the Beauty Systems Group (Cosmo Prof) segment.

Furthermore, various federal tax credits and grants provided a lifeline to the industry in recent years. For instance, self-employed beauty professionals could file for federal credits up to $32,200 through the Families First Coronavirus Response Act (FFCRA) for the 2021 tax year, with a filing deadline in April 2025. While these are retroactive, the continued availability of grants, such as the NASE Growth Awards (up to $4,000), directly supports the working capital and growth of the independent stylist, ensuring a healthy demand channel for Sally Beauty Holdings' high-margin professional products.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Economic factors

Persistent US inflation near 3.0% (estimated 2025) pressuring consumer discretionary spending.

You are seeing a tough economic truth play out right now: inflation is sticky, and that hits discretionary spending hard. While the Federal Reserve (Fed) has worked to cool things down, the annual US inflation rate still hit 3.0% in September 2025, a figure that keeps the cost of living elevated. This matters because Sally Beauty Holdings, Inc. (SBH) sells non-essential items like hair color and professional tools.

When your core customer-the everyday consumer or the independent stylist-sees their grocery and rent costs rise, they start making trade-offs. They might stretch the time between salon visits or switch from a premium product to a lower-priced alternative at a mass-market retailer. For a company like SBH, this translates directly to softer comparable sales, which were only up 0.3% for the full fiscal year 2025. It's a fight for every dollar of wallet share.

High interest rates increasing the cost of SBH's operational debt and capital expenditure.

The high-rate environment is a double-edged sword for any company carrying debt, and SBH is no exception. The Federal Reserve's benchmark rate was in the 3.75%-4.00% target range following the October 2025 meeting, which keeps the cost of borrowing high for everyone. This elevated cost of capital affects everything from refinancing existing obligations to funding new growth initiatives.

To be fair, SBH has been proactive. They ended fiscal 2025 with a healthy net debt leverage ratio of 1.6x and managed to repay $119 million of their term loan B debt during the year, which is a smart move in this environment. Still, the cost of funding their operations and capital expenditures (CapEx) remains higher than in years past. Here's the quick math on their investment capacity:

Metric (Fiscal Year 2025)	Amount (in millions)
Cash Flow from Operations	$275 million
Free Cash Flow	$216 million
Implied Capital Expenditures (Net)	$59 million

While their CapEx for FY2025 was approximately $59 million, their future target is a range of $90 million to $120 million annually. That higher cost of debt makes hitting the high end of that CapEx range to fund store remodels or technology upgrades a more expensive proposition.

Strong US dollar weakening international sales conversion and profits.

The strength of the US dollar (USD) is a clear headwind, especially since SBH operates internationally, including in Canada, Puerto Rico, and parts of Europe and Latin America. A strong Dollar Index (DXY), which was trading near 100.23 in November 2025, means that foreign sales convert back into fewer US dollars, directly hitting the top line.

The financial impact is concrete:

• Consolidated net sales for the full fiscal year 2025 were negatively impacted by an expected unfavorable foreign exchange rate effect, projected to be approximately 50 basis points lower than comparable sales.
• In the first quarter of fiscal 2025, the unfavorable foreign currency impact on consolidated net sales was actually 60 basis points.

This is a constant drag. The company has to sell more units abroad just to break even on the currency conversion, which is defintely a challenge in a slow-growth global economy.

Competitive pricing pressure from mass-market retailers eroding gross margins.

The beauty and personal care market is fiercely competitive. Mass-market retailers like Walmart and Target, plus online giants like Amazon, are constantly pressuring prices, forcing SBH to be strategic about its own pricing and promotions. This competition is a perpetual threat to gross margins (the profit left after the cost of goods sold).

The good news is that SBH has been successful in managing this pressure through better supply chain efficiencies and lower shrink (inventory loss). For the full fiscal year 2025, the consolidated GAAP gross margin actually expanded by 70 basis points to reach 51.6%. This margin expansion is a testament to strong operational execution, but it doesn't mean the pressure is gone.

The core risk remains in the Sally Beauty Supply segment, where the customer is more price-sensitive than the professional stylist served by the Beauty Systems Group segment. If the economic slowdown forces more customers to trade down to cheaper alternatives, SBH will have to choose between protecting its 51.6% gross margin or sacrificing margin to keep market share.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Social factors

Growing consumer demand for 'clean beauty' and natural ingredients requiring product portfolio overhaul.

You are seeing a massive, undeniable shift in consumer preference toward 'clean beauty' and ingredient transparency, and this is a headwind for any legacy retailer that doesn't move fast. The global clean beauty market is estimated to reach approximately $8.02 billion in 2025, growing at a compound annual growth rate (CAGR) of 12.1% from 2024. In the U.S. specifically, the clean beauty market is projected to grow at a CAGR of 14.5% through 2030. This trend demands a complete overhaul of product portfolios and supply chain transparency, not just a few new SKUs (Stock Keeping Units).

Sally Beauty Holdings, Inc. (SBH) is addressing this by amplifying innovation, evidenced by the Beauty Systems Group (BSG) segment securing a distribution partnership with K18, a biotech-backed hair care brand, which launched on April 1st, 2025. This move directly responds to the demand for products that offer molecular repair and faster, more effective solutions, which often aligns with the consumer's desire for high-efficacy, minimalist formulations. The risk is that the pace of portfolio transformation may lag the market's double-digit growth rate, diluting the impact of their $3.70 billion in Fiscal Year 2025 consolidated net sales.

Shift towards DIY beauty and hair care, benefiting SBH's retail segment.

The post-pandemic normalization still leaves a strong core of consumers who prefer the cost savings and convenience of at-home beauty, especially for hair color. This shift is a clear opportunity for the Sally Beauty Supply segment, which is predominantly B2C (business-to-consumer). The segment demonstrated its strength in this area, with segment comparable sales increasing 1.7% in the first quarter of Fiscal Year 2025, driven primarily by strong growth in hair color and digital marketplaces.

The company is capitalizing on the DIY trend beyond hair with a strategic focus on the nail category, expanding its assortment to over 1,400 products in 2025. This category has become a key entry point for new customers. Furthermore, the Licensed Colorist OnDemand service, which provides personalized at-home hair color consultation, is proving effective in customer acquisition, with 44% of its users being new customers. That's a clean one-liner on customer acquisition.

Strong loyalty of professional stylists to the Sally Beauty Supply and CosmoProf brands.

Professional stylist loyalty is the bedrock of the Beauty Systems Group (BSG) segment, primarily branded as CosmoProf. This B2B (business-to-business) segment saw comparable sales increase by 1.4% in the fourth quarter of Fiscal Year 2025, a solid indicator of sustained professional engagement. The company's strategy is heavily focused on innovation to maintain this loyalty, a move that is paying off: innovation drove upwards of 30% of BSG's total hair care sales in fiscal 2025.

The distribution deal with K18, a brand focused on professional-first products, is a direct investment in the stylist relationship, giving CosmoProf a competitive edge by offering cutting-edge products that enhance salon service quality. The BSG segment's ability to drive high-margin sales is crucial, as its GAAP gross margin was 39.8% in Q2 2025. Maintaining this professional-grade product pipeline is non-negotiable for protecting the segment's revenue, which was $412.4 million in Q1 2025.

Demographic changes increasing demand for specialized hair care products for diverse textures.

Demographic shifts in the US are driving a structural increase in demand for specialized hair care products that address diverse hair textures, from waves to coils. This is a high-growth, high-loyalty segment. SBH is actively testing strategies to capture this market, noting that a test focused on the 'textured hair customer' is yielding higher Units Per Transaction (UPT) and Average Transaction Value (ATV) compared to the rest of the store fleet. This suggests a higher-value customer base when properly engaged.

The company leverages proprietary brands like Silk Elements® to serve this specialized market, offering a crucial point of differentiation from mass-market retailers. The strategic opportunity here is significant, as success in this niche often translates into strong brand affinity and repeat purchases. The focus is not just on volume, but on transaction quality.

SBH FY 2025 Social Trend Impact Metric	Value/Amount	Segment Impact
Consolidated Net Sales (Full Year)	$3.70 billion	Overall performance baseline.
Global Clean Beauty Market Size (2025 Est.)	$8.02 billion	External market opportunity driving product innovation.
Sally Beauty Comparable Sales (Q1 2025)	+1.7%	DIY trend benefit, driven by hair color and digital marketplaces.
Licensed Colorist OnDemand New Customers	44%	Success metric for the DIY service model.
BSG Hair Care Sales Driven by Innovation (FY 2025)	Upwards of 30%	Direct result of professional stylist focus and brand partnerships like K18.
Sally Beauty Nail Product Assortment Expansion	Over 1,400 products	Concrete action to capture the DIY nail trend.

Here's the quick math: if the BSG segment can maintain its innovation momentum, driving over 30% of hair care sales from new or amplified products, it solidifies its moat against direct-to-consumer professional brands. The risk is that a challenging macro backdrop, which impacted consolidated comparable sales (-1.3% in Q2 2025), could slow down the professional stylist's investment in new, higher-priced products.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Technological factors

E-commerce sales growth targeted to exceed 15% of total revenue in FY2025.

Sally Beauty Holdings, Inc. (SBH) is heavily focused on digital commerce as a core growth driver, aiming for e-commerce to exceed 15% of total consolidated net sales, a significant strategic goal for fiscal year 2025. While the company is pushing hard, the actual penetration rate for the first three quarters of FY2025 shows a clear runway for growth. For example, in the third quarter of FY2025, global e-commerce sales reached $99 million, representing 10.6% of total net sales. This is a solid gain from the prior year's level of 9.7%, but it shows the 15% target is an ambitious stretch.

The Beauty Systems Group (BSG) segment, which serves salon professionals, is leading the digital adoption curve. In the first quarter of FY2025, BSG's e-commerce sales hit 14.0% of its segment net sales, nearly achieving the company-wide goal. This segment's success is key to driving the consolidated number higher. The Sally Beauty Supply (SBS) segment, which focuses on retail consumers, saw its e-commerce penetration at 7.9% in Q1 FY2025.

Here's the quick math on the digital channel's progress in FY2025:

Metric (FY2025)	Q1 2025	Q2 2025	Q3 2025
Global E-commerce Sales	$99 million	$94 million	$99 million
E-commerce as % of Total Net Sales	10.6%	10.7%	10.6%
BSG E-commerce as % of Segment Net Sales	14.0%	N/A (Segment e-commerce sales were 13.9% at constant currency)	13.7%

Investment in AI-driven inventory management to reduce stockouts and optimize store labor.

While the company does not explicitly use the term 'AI-driven inventory management' in all public releases, its commitment to advanced inventory optimization technology is clear through the 'Fuel for Growth' program. This strategic initiative is designed to drive structural gains in profitability.

The results show the technology is working to reduce operational friction. For instance, the company reported a 3.2% year-over-year reduction in inventory, ending Q2 FY2025 with an inventory value of $1.01 billion. This is defintely a sign of better forecasting and reduced carrying costs. The optimization efforts, which include lower shrink expense and lower logistics costs, contributed to a 100 basis point expansion in the consolidated GAAP gross margin in Q2 FY2025, reaching 52.0%.

Enhanced mobile app features for professional stylists (e.g., booking, education, loyalty tracking).

The digital strategy is highly segmented, focusing on professional stylists through the Beauty Systems Group (BSG) and the Sally Beauty app. The key technological feature driving professional engagement is the Licensed Colorist OnDemand (LCOD) service, which provides at-home hair color consultations from licensed professionals.

This service is a strong example of using technology to enhance the professional-grade experience, and it's paying off:

• The LCOD service expanded to over 75 licensed colorists in Q1 FY2025.
• It handles more than 4,000 weekly consultations.
• Customers using LCOD have average orders that are 23% higher than non-LCOD customers.

The overall mobile app is seeing 'nice engagement' because the Customer Relationship Management (CRM) activity is becoming more sophisticated and personalized.

Increased reliance on digital marketing and personalized promotions to drive traffic.

Sally Beauty Holdings, Inc. is using big data and sophisticated CRM tools to cut through the noise of a highly promotional retail environment. They are moving away from broad discounts to targeted, personalized promotions delivered via SMS, email, and the mobile app. This shift is part of the broader brand refresh rolling out in the second half of FY2025, which emphasizes a more personalized shopping experience.

Another key part of this strategy is expanding digital fulfillment options and marketplace integration. The company has partnered with DoorDash and Instacart to offer two-hour delivery, which expands their digital reach beyond their owned platforms. This marketplace expansion, coupled with richer app personalization, is designed to strengthen the bridge between online discovery and in-store convenience.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Legal factors

Stricter FDA and state regulations on cosmetic ingredient safety and labeling.

The regulatory environment for cosmetics has fundamentally changed, moving from a largely self-regulated model to one with mandatory federal oversight. This shift is driven by the Modernization of Cosmetics Regulation Act of 2022 (MoCRA), which significantly expands the Food and Drug Administration (FDA)'s authority for the first time since 1938. For Sally Beauty Holdings, Inc., this means increased compliance costs, especially for its private-label brands and its role as a distributor of thousands of other products.

The most immediate and costly compliance factor for the 2025 fiscal year is the finalization of new manufacturing standards. The FDA is required to establish the final rule for Good Manufacturing Practices (cGMP) by December 29, 2025. This mandates that all products sold through SBH's supply chain meet rigorous, consistent quality and safety standards, requiring significant capital investment and operational changes for manufacturers and tighter vetting by the retailer.

Also, ingredient scrutiny is intensifying. As of January 1, 2025, the FDA's database contained 589,762 unique, active cosmetic product listings, a massive increase from pre-MoCRA voluntary registration. Furthermore, the FDA's safety assessment of PFAS (per- and polyfluoroalkyl substances, or forever chemicals) in cosmetics is due by December 29, 2025, which will likely lead to federal restrictions, forcing immediate product reformulations across the industry. This is a very real, near-term inventory risk.

• MoCRA Compliance: Mandatory facility registration and product listing (over 589,762 unique products listed as of January 2025).
• cGMP Deadline: Final rule for Good Manufacturing Practices due December 29, 2025.
• Ingredient Bans: State-level laws in Washington and California already prohibit chemicals like formaldehyde and lead, creating a complex, patchwork compliance map.

Continuous compliance with data privacy laws (e.g., CCPA) for customer purchase data.

As a major retailer with a vast customer loyalty program, Sally Beauty Holdings, Inc. continuously handles personal information for millions of consumers, making it a prime target for data privacy compliance. The California Consumer Privacy Act (CCPA), amended by the California Privacy Rights Act (CPRA), is the gold standard here, and SBH must comply with its stringent requirements for all California residents-a key market for the company.

The core challenge is operationalizing the consumer's right to know, delete, and opt-out of the sharing of their personal information. For a large retailer with over 4,000 stores, initial compliance costs for a company with more than 500 employees were estimated to average around $2 million, and ongoing maintenance is substantial. SBH confirmed its commitment by updating its California Privacy Rights notice in 2025, which outlines the categories of personal information collected, including identifiers and commercial information like purchase history, for purposes such as managing loyalty programs and providing relevant marketing.

Here's the quick math: managing opt-out requests, data mapping, and maintaining a robust cybersecurity posture against a landscape of evolving state laws (like those in Virginia, Colorado, and Utah) is a permanent, non-negotiable line item in the IT and Legal budgets.

Labor law changes (e.g., minimum wage hikes) impacting the 4,000+ store employee base.

The retail sector remains highly sensitive to changes in labor law, particularly minimum wage increases, which directly impact the payroll of Sally Beauty Holdings, Inc.'s extensive store employee base. As of January 2025, 21 U.S. states had already implemented minimum wage increases, a trend that continues to gain momentum at the state and local levels. This fragmented regulatory environment forces SBH to manage hundreds of different pay scales across its over 4,000 locations.

The financial pressure is clear. In high-cost-of-living areas, labor costs for retailers are expected to rise by 5-10% due to these hikes. For example, in New York, the fast-food sector minimum wage is climbing to $17.50 in New York City and its suburbs. Even the federal minimum wage is projected to rise to $9.50 per hour in late 2025, affecting stores in states with lower wage thresholds. This isn't just a cost increase; it's a strategic challenge to maintain margin while ensuring competitive wages to reduce employee turnover.

State/Local Minimum Wage Trend (2025)	New Hourly Rate (Example)	Impact on SBH Labor Costs
States with January 2025 Hikes	Varies by state (e.g., Missouri to $13.75)	Increased payroll expense across a majority of the 4,000+ store network.
High-Cost-of-Living Localities	NYC/Suburbs Fast-Food Sector to $17.50	Significant pressure on store-level operating margins in key metropolitan markets.
Federal Minimum Wage (Projected Nov 2025)	Projected to $9.50 per hour	Increased base wage for employees in states currently at the federal floor of $7.25.

Intellectual property defense against counterfeit beauty products in the supply chain.

Intellectual property (IP) defense is a critical legal factor for Sally Beauty Holdings, Inc., particularly in safeguarding its exclusive and private-label brands from the surge of counterfeit and unauthorized 'dupe' products. The cosmetics industry loses an estimated $5.4 billion each year to fraudulent sellers, a direct revenue drain that impacts every legitimate retailer and distributor. This isn't just about lost sales; it's about the significant liability risk associated with counterfeit products that often contain harmful ingredients like arsenic or high levels of bacteria.

The rise of e-commerce and third-party marketplaces has made the problem worse. U.S. Customs and Border Protection (CBP) data shows the scale of the issue: in FY 2023, 31% of all intercepted counterfeit goods were beauty and personal care products. For SBH, the legal risk is two-fold: defending its own trademarks and trade dress, and ensuring its supply chain is completely clean of unauthorized goods, especially since the FDA has signaled a willingness to hold retailers responsible for introducing non-compliant third-party products into commerce. A single counterfeit-related health scare could irreparably damage brand trust among both professional stylists and general consumers.

The clear action here is to invest in advanced brand protection technologies and to partner closely with U.S. Customs and Border Protection to block counterfeit imports before they enter the domestic supply chain.

Sally Beauty Holdings, Inc. (SBH) - PESTLE Analysis: Environmental factors

Pressure from investors and consumers to reduce plastic packaging waste.

You're seeing the shift everywhere: investors and customers are defintely demanding less virgin plastic, and that pressure is a material factor for Sally Beauty Holdings. The company has responded by setting a clear, near-term goal for its high-margin Own Brands.

For fiscal year 2025, the company is positioned to ensure its Own Brand product packaging in the U.S. is comprised of more than 25% post-consumer recycled (PCR) materials. That's a measurable step toward circularity, and it's something we look for as analysts. They also continue to push for similar increases in Europe and Latin America.

This focus builds on earlier, large-scale waste reduction efforts. Back in 2020, the 'SBH Going Green' program eliminated over 104 million plastic bags from landfills annually by discontinuing their use in stores. That move alone saved an estimated $2 million to $3 million in annual operational costs, showing that sustainability can drive efficiency.

• FY2025 U.S. Own Brand packaging goal: >25% PCR content.
• Prior impact: eliminated over 104 million plastic bags per year.
• European strategy includes packaging from 'plastic from the ocean.'

Increasing focus on sustainable sourcing of raw materials like palm oil and mica.

The beauty industry's supply chain is complex, and raw materials like palm oil and mica carry significant environmental and social risks, particularly around deforestation and labor practices. Sally Beauty Holdings recognizes this through its commitment to a 'Responsible Sourcing and Supply Chain' focus area.

The company's merchandising and sourcing teams are actively working with vendors to integrate more sustainable, cleaner, and greener products into their offerings. While a specific public target for the percentage of Roundtable on Sustainable Palm Oil (RSPO) certified palm oil or ethically-sourced mica is not yet disclosed in their latest reports, the inclusion of Responsible Sourcing as a core pillar of their ESG strategy indicates a rising internal priority. This is a crucial area for future disclosure, but for now, the action item is on the vendor engagement side.

Public commitment to reducing Scope 1 and 2 carbon emissions across distribution centers.

Managing direct emissions (Scope 1) and purchased electricity emissions (Scope 2) is essential for any retailer with a large physical footprint. Sally Beauty Holdings is prioritizing energy efficiency across its stores and distribution centers to drive down these operational emissions.

The company has a goal to deliver a reduction of over 1,000 metric tons of carbon emissions through its energy management initiatives. This is a concrete, near-term target that maps directly to their capital investments. Here's the quick math on energy savings:

Investments made in late fiscal year 2023 for Energy Management Systems (EMS) and LED lighting are expected to yield a 25+% year-over-year decline in electricity usage in those stores. In Mexico, for example, they had already retrofitted 190 stores with efficient equipment by FY2023, representing 78% of their stores in that market.

This is a smart way to cut carbon-you save money and reduce your footprint simultaneously.

Supply chain vulnerability to climate events affecting ingredient harvesting and logistics.

Climate change isn't just an emissions problem; it's a direct operational risk. Sally Beauty Holdings formally recognizes this in its risk disclosures, noting that 'environmental events' are a factor that could cause an 'unexpected significant interruption' in the supply of products.

This vulnerability is twofold:

1. Ingredient Harvesting: Extreme weather events, like droughts or floods, can impact the sourcing and procurement of natural ingredients used in hair color and care products, which make up approximately 70% of total consolidated sales.
2. Logistics and Distribution: Severe weather can disrupt distribution center operations or transportation networks, delaying product delivery to their more than 3,500 stores globally.

The explicit mention of 'environmental events' in the 2024 Annual Report's risk factors shows that this is a top-level concern for the Board, not just a theoretical one. What this estimate hides, though, is the potential for non-physical risks, like rising insurance costs or regulatory changes in vulnerable regions.