SBH 10-K & 10-Q changes, risk factors and insider trading

ImportantBelow, we describe important risk factors that could materially affect our business, financial condition or results of operations in future periods are described below.periods. These factors are not intended to be an all-encompassing list of risks and uncertainties and are not the only risks and uncertainties we face. Additional risks not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition or results of operations in future periods.

The beauty products retail and distribution industry is highly competitive and is consolidating.

We face significant competition from other beauty stores and outlets, salons, mass merchandisers, online retailers, drug stores and supermarkets. The primary competitive factors in the beauty products retail and distribution industry are: price,price; quality,quality; perceived value,value; consumer brand name recognition, packagingpackaging, and variety; availability; customer service; desirable and availability, customer service, desirableconvenient store locations,locations; in-stock inventory; and, with respect to e-commerce, the look and feel of websiteour digital platforms, ease and security of the checkout process, and delivery times and costs. Competitive conditions may limit our ability to maintain prices or may require us to reduce prices to retain business or channel share, particularly because customers are able to quickly and conveniently comparison-shop and can determine real-time product availability using digital tools. This behavior can lead to decisions driven solely by price, the functionality of the digital tools, or a combination of these and other factors. Some of our competitors have greater financial and other resources than we do and are less leveraged than our business and may therefore be able to spend more aggressively on advertising and promotional activities and may respond more effectively to changing business and economic conditions. Furthermore, there are few significant barriers to entry into the marketplace for most of the products we sell, making it easy for new market entrants to compete with us. We expect existing competitors, business partners and new entrants to the beauty products distribution industry to constantly revise or improve their business models in response to challenges from competing businesses, including ours. If these competitors introduce changes or developments that we cannot address in a timely or cost-effective manner, our business may be adversely affected.

In addition, our industry is consolidating, which may give our suppliers and our competitors increased negotiating leverage and greater marketing resources. For instance, we may lose customers if those competitors which have broad geographic reach attract additional salons (individualor andsalon chain) that are currently BSG customers,professionals, or if professional beauty supply manufacturers align themselves with our competitors or begin selling directly to customers. Not only does consolidation in distribution pose risks from competing distributors, but it may also place more leverage in the hands of certain manufacturers, resulting in smaller margins on products sold through our network.

If we are unable to compete effectively in our marketplace or if competitors divert our customers away from our networks, it would adversely impact our business, financial conditioncondition, and results of operations.

Our success depends in part on our ability, and our distributed third-party brands'brands’ ability, to anticipate, gauge and react in a timely mannerreact to changes in consumer spending patterns and preferences for specific beauty products. If we or the brands we distribute do not timely identify and properly respond to evolving trends and changing consumer demands for beauty products in the geographies in which we compete, our sales may decline significantly. Furthermore, weWe may accumulate additional inventory and be required to mark down unsold inventory to prices that are significantly lower than normal prices, which would adversely impact our margins and could further adversely impact our business, financial condition and results of operations. Additionally, a large percentage of our SBSSally product sales come from our owned and exclusive-label brand products. The development and promotion of these owned and exclusive-label brand products often occur well before these products are sold in our stores. As a result, the success of these owned and exclusive-label brand products is largely dependent on our ability to develop products that meet future consumer preferences at prices that are acceptable to our customers. Furthermore, we may have to invest significant amounts on the advertising and marketing of our owned and exclusive-label brands to drive customer awareness of these brands. There can be no assurance that any new owned or exclusive-label brand will meet consumer preferences, gain acceptance among our customer base or generate sales to become profitable or to cover the costs of its development and promotion.

We expect continuously changing fashion-related trends and consumer tastes to influence future demand for beauty products. Changes in consumer tastes, fashion trendstrends, and brand reputation can have an impact on our financial performance. If we or third-party brands we distribute are unable to anticipate and respond to trends in the marketplace for beauty products and changing consumer demands and/or maintain a strong brand reputation, our business could suffer.

Our future success depends in part on our ability to successfully implement our strategic initiatives to improve the customer experience, attract new customerscustomers, and improve the sales productivity of our stores.

We are continuing the implementation of a significant number of strategic initiatives designed to enhanceacquire and retain customers, strengthen our customerdigital centricity, increase our owned brand sales penetration,foundation, improve operational efficienciesefficiencies, and optimize our capabilities, including through the closure of underperforming stores and the consolidation of distribution centers. There can be no assurance that these or future strategic initiatives will be successful. Furthermore, we are investing significant resources in these initiatives and the costs of the initiatives may outweigh their benefits. If these strategic initiatives are not successful, our comparativecomparable sales will suffer and our growth prospects, financial results, profitabilityprofitability, and cash flows will also be adversely impacted.

We depend upon manufacturerssuppliers, whomanufacturers, and fillers that may be unable to provide products of adequate quality or whothat may be unwilling to continue to supply products to us.

Because we purchase products from many manufacturers and fillers pursuant to at-will contracts and contracts whichthat can be terminated without cause upon 90 days’ notice or less, or whichthat expire without express rights of renewal, manufacturers and fillers could discontinue sales to us immediately or upon short notice. Some of our contracts with manufacturers may be terminated if we fail to meet specified minimum purchase requirements. If minimum purchase requirements are not met, we do not have contractual assurances of continued supply. In lieu of termination, a manufacturer may also change the terms upon which it sells—for example, by raising prices or broadening distribution to third parties. For these and other reasons, we may not be able to acquire desired merchandise in sufficient quantities or on acceptable terms in the future.

Changes in SBS’sSally’s and BSG’s relationships with suppliers occur often and could positively or negatively impact the net sales and operating earnings of both business segments. Some of our suppliers may seek to decrease their reliance on distribution intermediaries, including full-service/exclusive and open-line distributors like BSGSally and SBS,BSG, by promoting their own distribution channels. These suppliers may offer advantages, such as lower prices, when their products are purchased from distribution channels they control. If our access to supplier-provided products were to diminish relative to our competitors or if we were not able to purchase products at the same prices as our competitors, our business could be materially and adversely affected. Further, consolidation among suppliers may increase suppliers' negotiating leverage, thereby providing them with competitive advantages that may increase our costs and reduce our revenues, adversely affecting our business, financial condition and results of operations. There can be no assurance that the impact of these developments, if they were to occur, would not adversely impact revenue or margins or that our efforts to mitigate the impact of these developments would be successful.

Furthermore, fromFrom time to time, our suppliers ship products to us that fail to conform to our quality control standards. Suppliers'Suppliers’ failure to comply with our quality control program may result in diminished inventory levels and product quality, which in turn may result in increased order cancellations and product returns, decreased consumer demand for our products, or product recalls,recalls – any of which may have a material adverse effect on our results of operations and financial condition.

Any unexpected significant interruption in manufacturers'manufacturers’ and fillers'fillers’ supply of products or disruptions in our supply chain infrastructure could disrupt our ability to deliver merchandise to our stores and customers in a timely manner, which could have a material adverse effect on our business, financial conditioncondition, and results of operations.

In addition, we directly source many of our owned and exclusive-label brand products, including, but not limited to, styling tools, salon equipment, sundries and other promotional products, from foreign third-party manufacturers and many of our vendors also use overseas sourcing to manufacture some or all of their products. Any event causing a sudden disruption of manufacturing or imports from such foreign countries, including the imposition of additional or increased import restrictions, duties or tariffs, political instability, local business practices, legal or economic restrictions on overseas suppliers’ ability to produce and deliver products orproducts, acts of war or terrorismterrorism, or pandemics, could materially harm our operations to the extent they affect the production, shipment or receipt of merchandise. Our operating results depend on the orderly operation of our receiving and distribution processes, which depend on manufacturers’ adherence to shipping schedules and our effective management of our distribution facilities and capacity.

The loss of exclusive distribution rights with key vendors could have a material adverse effect on our business, financial conditioncondition, and results of operations.

We have exclusive and non-exclusive distribution rights with several key vendors for well-known brands in certain geographies. If key vendors ceased granting us exclusive distribution rights, or decided to utilize other distribution channels for their products, thereforein each case widening the availability of these products in other channels, the revenue we earn from the sale of such products could be negatively impacted, which could have a material adverse effect on our business, financial conditioncondition, and results of operations.

Fluctuations in the price, availabilityavailability, and quality of inventory may result in higher cost of goods, which we may not be able to pass on to the customers.

Our suppliers frequently attempt to pass on higher production costs, which have generally increaseddue as a result ofto inflation over the past few years, which may impact our ability to maintain or grow our margins. The price and availability of raw materials may be impacted by inflation, demand, regulation, weatherweather, and other factors. Additionally, manufacturersManufacturers have and may continue to experience increases in other manufacturing costs, such as transportation, laborlabor, and benefit costs. These increases in production costs result in higher merchandise costs to us. We may not always be able to pass on those cost increases to our customers, which could have a material adverse effect on our business, financial conditioncondition, and results of operations.

We offer many of our beauty products for sale through our e-commerce businesses in the U.S. (such as www.sallybeauty.com, www.cosmoprofbeauty.com, www.cosmoprofequipment.com and mobile commerce-based apps) and abroad. We have undertaken a number of initiatives to significantly advance our digital commerce capabilities and grow our e-commerce businesses. As a result, we are more susceptible to risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our e-commerce operations, websites and software and other related operational systems. Furthermore, our e-commerce businesses face significant competition from larger retailers with more established e-commerce platforms, as well as online retailers, including Amazon, and online store e-commerce platforms, such as Shopify.

Although we believe our participation in both e-commerce and physical storein-store sales is a distinct advantage for us due to synergies and the potential for new customers, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations. For example, growth in our e-commerce business relative to in-store sales may result in dilution of operating margin and profit due to higher delivery expenses incurred in our e-commerce sales. Furthermore, as our e-commerce businesses successfully grow, they may do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online rather than from our physical stores, thereby reducing the financial performance of our stores. In addition, offering different products through each channel could cause conflicts and cause some of our current or potential internet customers to consider competing distributors of beauty products. In addition, offeringOffering products through our e-commerce channels (particularly directly to consumers through our professional business) could cause some of our current or potential vendors to consider utilizing competitive internet offerings of their products either directly or through competing distributors. As we continue to grow our e-commerce businesses, the impactimpacts of attracting existing rather than new customers, of experiencing conflicts between product offerings online and through our stores, and of opening up our channels to increased internet competition could have a material adverse impact on our business, financial condition and results of operations, including operating margin, profit, future growth and comparativecomparable sales. Furthermore, our recent initiatives to upgrade our e-commerce platforms may not be successful in driving traffic to our websites and increasing our online sales in the long term, which could adversely impact our net sales.business.

The majorityMost of the products that BSG sells, including those sold by our Armstrong McCall franchisees, are meant to be used exclusively by salons and individual salon professionals or sold exclusively to their retail consumers. However, despiteDespite our efforts to prevent diversion,it, incidents of product diversion occur, wherebyand our products are sold by these purchasers (and possibly by other bulk purchasers such as franchisees) to wholesalers and ultimately to general merchandise retailers, among others. These retailers, in turn, sell such products to consumers. The diverted productproducts may be old, tainted or damaged and sold through unapproved outlets, all of which could diminish the value of the particular brand. In addition, such diversion may result in lower net sales for BSG should consumers choose to purchase diverted products from retailers rather than purchasing from our customers or choose to purchase other products altogether because of the perceived loss of brand prestige. Furthermore, inIn many instances, BSG is subject to certain anti-diversion obligations under these manufacturers’ contracts that, if violated, may result in the termination of such contracts. In addition, our investigation and enforcement of these anti-diversion obligations may require us to cease selling to customers suspected of diversion, which could impact BSG’s net sales.

BSG receives revenue from its sale of products to Armstrong McCall franchisees. Accordingly, a portion of BSG’s financial results is dependent upon the operational and financial success of these franchisees, including their implementation of BSG’s strategic plans. If sales trends or economic conditions worsen for Armstrong McCall’s franchisees, their financial results may worsen. Additionally, the failure of Armstrong McCall franchisees to renew their franchise agreements, any requirement that Armstrong McCall restructure its franchise agreements in connection with such renewals, or any failure of Armstrong McCall to meet its obligations under its franchise agreements, could result in decreased revenues for BSG or create legal issues with our franchisees or with manufacturers.

If we are unable to optimize our store base, by profitably opening and operating new stores and closing less profitable stores, our business, financial conditioncondition, and results of operations may be adversely affected.

Our future growth strategy depends in part on our ability to optimize and profitably operate our stores in existing and additional geographic areas, including in international geographies, and to close underperforming stores. While the capital requirements to open ana SBSSally or BSG store,store (excluding inventory,inventory) vary from geographyattributable to geography, such capital requirements have historically been relatively low in the U.S. and Canada. Despite these relatively low opening costs, we may not be able to open all the new stores we plan to open, and we may be unable to optimize our store base, either of which could have a material adverse impact on our business, financial condition and results of operations. Furthermore, we may incur costs associated with the closure of underperforming stores and such store closures may adversely impact our revenues.

In addition, as we continue to open new stores, our management – as well as our financial, distribution and information systems – and other resources will be subject to greater demands. If our personnel and systems are unable to successfully manage this increased burden, our business, financial conditioncondition, and results of operations may be materially affected.

Customer traffic and demand for our merchandise are influenced by our advertising, marketing and promotional activities. We use marketing, advertising and promotional programs to attract customers through various media, including social media (e.g., Instagram, TikTok, Facebook, YouTubeFacebook), websites, streaming services, mobile applications, e-mail, and print. Our future growth and profitability will depend in part upon the effectiveness and efficiency of our advertising and marketing programs. Further, disruptionDisruption to certain media channels on which we advertise could have a material adverse effect on our results of operations and financial condition.

In particular, thereThere has been a substantial increase in the use of social media platforms – including blogs, social media websites and other forms of digital communications – and the influence of social medialmedia influencers in the beauty products industry. Furthermore, socialSocial media advertising and marketing continues to increase in importance as consumers are paying less attention to more traditional media. As a result, the success of our marketing and advertising programs are increasingly dependent on the effectiveness of industry influencers that we engage to promote our products. Furthermore, actionsActions taken by these individuals could harm our brand image and reputation. Our social media marketing efforts may not ultimately be successful, and the availability of these platforms may make it easier for smaller competitors to compete with us. Certain brands and retailers have become subject to boycotts and faced negative media attention for marketing campaigns or actions of influencers or team members that are amplified by social media and there is no guarantee that we will not face such retail boycotts or negative media attention in the future.

Negative reactions or commentary regarding us or the products we sell may also be posted on social media platforms or other electronic means at any time and may be adverse to our reputation or business. Customers value readily available information and oftenmay act on such information without further investigation and without regard to its accuracy. Any harm to us or the products we sell may be immediate without allowing us an opportunity for redress or correction.

If we fail to attract and retain highly skilled management and other personnel at all levels of the Company, our business, financial conditioncondition, and results of operations may be harmed.

Our success has depended, and will continue to depend, in large part on our ability to attract and retain senior executives who possess extensive knowledge, experienceexperience, and managerial skill applicable to our business. Significant leadership changes or executive management transitions involve inherent risk, and any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance. In addition, from time to time, key executive personnel leave our Company, and we may not be successful in attracting, integrating and retaining the replacement personnel required to continue to grow and operate our business profitably. While we strive to maintain robust succession planning to mitigate the negative impact associated with the loss of a key executive employee, an unplanned loss or unsuccessful transition or loss could significantly disrupt our operations and could have a material adverse effect on our business, financial condition and results of operations. We may similarly rely on other non-executiveprofessional personnel and associates across our business, including those working in our corporate functions, to facilitate our ongoing operations and support our strategic initiatives. The recruitment and retention of qualified individuals in these roles are vital elements of the success of our business.

We are also dependent on recruiting, training, motivating, managing and retaining our store employees that interact with our customers on a daily basis.daily. Many team members are in entry-level or part-time positions with historically high turnover rates. Competition for these types of qualified employees, especially in light of recent labor shortages among entry-level workers, is intense and the failure to attract, retainretain, and properly train qualified and motivated employees could result in decreased customer satisfaction, loss of customerscustomers, and lower sales. In addition, our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates, unemployment levels, and health and other insurance costs; the impact of legislation or regulations governing labor relations, immigration, minimum wage and healthcare benefits; changing demographics; and our reputation within the labor market. Our inability to control our labor costs could affect our results of operations and could result in lower margins in our two segments.

The 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.

We are in the early stages of integrating AI in our business, including machine learning AI and generative AI tools that collect and analyze data to support our business operations and customer-facing interactions. We also use products and services from third parties that use integrated AI technology. The use of AI tools and technology presents many challenges and risks to our business. Data sets used by AI may be overbroad, insufficient or contain flawed or otherwise biased information. AI tools that we use may include flaws in algorithms, which may create biased or inaccurate outcomes, and may generate offensive, illegal, malicious or otherwise harmful content that could adversely impact our brand, reputation, business, or customers. Since we use AI in customer-facing interactions, any inaccuracies in AI responses could affect customer satisfaction, lead to misinformation, and harm our brand's reputation. Unintended use of AI may lead to regulatory issues, reputational or financial harm, and operational disruptions. The use of AI may also increase the risks to us of data breaches, malware, ransomware, data loss and theft, or the improper handling of sensitive information, which could result in adverse financial and regulatory consequences. The rapid development and adoption of AI and AI-adjacent technology, and of AI’s competitive use cases, may make it more difficult for us to compete in our industry. Our competitors may have greater success implementing and using AI technology than us, which could harm our ability to compete effectively and could adversely affect our results of operations. Further, we may become increasingly reliant on AI technology and tools in the future. The legal, regulatory and compliance environmentenvironments surrounding the design and use of AI technology – involving federal, state and foreign regulators --– isare evolving and complex. Our obligation to comply with the evolving regulatory landscape could entail significant costs and negatively affect our business. In addition, there has been a significant increase in AI-related litigation and government regulatory actions targeting the design, deployment and other uses of AI, and claiming liability under numerous areas of the law, such as consumer protection, product liability, privacy, intellectual property, securities and defamation. Any of these risks could have an adverse effect on our business, reputationreputation, and results of operations.

The political, social and economic conditions in the geographieslocations that 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 conditioncondition, and results of operations.

Our results of operations may be materially affected by conditions in the global capital markets and the economy and regulatory environment generally, both in the U.S. and internationally. Concerns over inflation, rising interest rates, labor shortages, energy costs, geopolitical issues, and conflicts and wars, as well as uncertainty with respect to elections, terrorism, civil unrest, the availability and cost of credit, the mortgage market, and the real estate and other financial markets in the U.S. and Europe have contributed to increased volatility and diminished expectations for the U.S. and certain foreign economies. We appeal to a wide demographic consumer profile and offer an extensive selection of beauty products sold directly to retail consumers and salons and salon professionals. Continued uncertainty in the economy could adversely impact consumer purchases of discretionary items such as beauty products as well as adversely impact the frequency of salon services performed by professionals using products purchased from us. Factors that could affect consumers’ willingness to make such discretionary purchases include the following: inflation, general business conditions, levels of employment, interest rates, tax rates, the availability of consumer creditcredit, and consumer confidence in future economic conditions. A prolonged economic downturn or acute recession can adversely affect consumer spending habits and result in lower than expectedlower-than-expected net sales. The economic climate could also adversely affect our vendors. The occurrence of any of these events could have a material adverse effect on our business, financial conditioncondition, and results of operations.

In addition, the disruption to the global economy and to our business, along with any sustained decline in our stock price, could lead to triggering events that may indicate that the carrying value of certain assets – including inventories, accounts receivable, long-lived assets, intangiblesintangibles, and goodwill – may not be recoverable, which could lead to impairment or other asset write-downs in the future.

Price inflation for labor, materialsmaterials, and services could adversely affect our business, results of operationsoperations, and financial condition.

During the fiscal year, inflationary pressures have eased, but over the past few years, we experienced considerable price inflation in costs for labor, materials and services. While inflation is stabilizing, we may not be able to continue to pass through inflationary cost increasesincreases. and, ifIf inflationary pressures return, we may only be able to recoup a portion of our increased costs in future periods. Our ability to raise prices to reflect increased costs may also be limited by competitive conditions in the market for our products.

The occurrence of natural disasters (the severity and frequency of which may be exacerbated by climate change), acts of violence, conflicts, wars, terrorism or civil unrestunrest, or global health crises, including epidemics and pandemics, could result in physical damage to our properties, the temporary closure of stores or distribution centers, the temporary lack of an adequate work force, the temporary or long-term disruption in the supply of products (or a substantial increase in the cost of those products) from domestic or foreign suppliers, the temporary disruption in the delivery of goods to our distribution centers (or a substantial increase in the cost of those deliveries), the temporary reduction in the availability of products in our stores and/or the temporary reduction in visits to stores by customers. If one or more natural disasters or acts of violence, conflicts, warswars, or terrorism were to impact our business, we could, among other things, incur significantly higher costs and longer lead times associated with distributing products. Furthermore, insuranceInsurance costs associated with our business may rise significantly in the event of a large-scale catastrophe or crisis.

Many of our products are sold outside of the United States. As a result, we conduct transactions in various currencies, which increases our exposure to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Recently, these foreign currencies have weakenedstrengthened significantly against the U.S. dollar. Our international revenues and expenses are generally derived from sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations, including amounts recorded in foreign currencies and translated into U.S. dollars for consolidated financial reporting. Currency exchange rate fluctuations could also disrupt the business of the independent manufacturers that produce our products by making their purchases of raw materials, transportation and freight more expensive and more difficult to finance. Foreign currency fluctuations could similarly have an adverse effect on our results of operations and financial condition.

We operate on a global basis, and approximately 19%18% of our net revenues from continuing operations in fiscal year 20242025 were generated outside the U.S. Our non-U.S. operations are subject to many risks and uncertainties, including those resulting from ongoing instability or changes in a country’s or region’s economic, regulatoryregulatory, or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts, labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriersbarriers, or other restrictions on foreign businesses, our failure to effectively and timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions. The presence of non-U.S. operations also increases the risk of non-compliance with U.S. laws and regulations applicable to such non-U.S. operations, such as those laws and regulations relating to sanctions, boycottsboycotts, and improper payments.

A reduction in traffic to, or the closing of, other retailers in shopping areas where our SBSSally 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.

As a result of our real estate strategy, most of our SBSSally stores are located in strip shopping centers. These strip shopping centers are occupied by other high-traffic retailers such as grocery stores, mass merchants and home improvement centers. Because most of our SBSSally stores are located in strip shopping centers, our sales are derived,derived in part,part from the volume of traffic generated by the nearby high-traffic retailers. A reduction in customer traffic to these strip shopping centers, including as a result of the closure of stores in the strip shopping center, a regional or global economic downturn, an outbreak of flu or other viruses (such as COVID-19),viruses, a general downturn in the local area where our SBSSally store is located, or a decline in the desirability of the shopping environment of a particular strip shopping center, could reduce our sales and leave us with excess inventory, which could have a material adverse effect on our business, financial condition, profitabilityprofitability, and cash flows.

Regulatory, LegalLegal, and Cybersecurity Risks

Legal 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 conditioncondition, and cash flows.

From time to time, we are a party to claims, litigation, including single-plaintiff and class action litigation, and other legal proceedings that arise in the ordinary course of our business, including matters involving employment, premises, real estate, and product litigation. These matters could ultimately result in losses or liabilities to our business. Liabilities for loss contingencies, including those arising from such proceedings, are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There is inherent uncertainty in the assessment of the potential outcomes of these matters, and the ultimate resolution of these matters could differ from our predictions. Such outcomes may have a material adverse impact on our consolidated financial position, results of operationsoperations, or cash flows. See Note 10 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for more information on litigation and other legal proceedings.

If products sold by us are found to be defective in labeling or content, ourthe credibility and thatreputation of our Company and 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.

The following section discusses management’s view of Sallythe Beauty’sCompany’s financial condition and results of operations for fiscal year 20242025 compared to fiscal year 2023.2024. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023,2024, for a discussion of the financial condition and results of operations for fiscal year 20232024 compared to fiscal year 2022.2023. This section should be read in conjunction with the audited consolidated financial statements of Sallythe BeautyCompany and the related notes included elsewhere in this Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations section may contain forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause results to differ materially from those reflected in such forward-looking statements.

Financial Results Summary offor the Fiscal Year Ended September 30, 20242025:

Consolidated net sales for the fiscal year decreased $11.1$15.6 million, or 0.3%,0.4%, to $3,717.0$3,701.4 million and included a positivenegative impact from changes in foreign currency exchange rates of $9.3$11.4 million, or 0.2%0.3% of consolidated net sales;

Consolidated gross profit decreasedincreased by $7.8$20.4 million, or 0.4%,1.1%, to $1,890.3$1,910.7 million. Gross margin wasincreased unchanged70 atbasis 50.9%points to 51.6% compared to the prior fiscal year;

Consolidated operating earnings for the fiscal year decreasedincreased $42.3$45.1 million, or 13.0%,15.9%, to $282.7$327.8 million. Operating margin decreasedincreased 110130 basis points to 7.6%8.9% compared to the prior fiscal year;

Consolidated net earnings for the fiscal year decreasedincreased $31.2$42.5 million, or 16.9%,27.7%, to $153.4$195.9 million;

Diluted earnings per share for the fiscal year were $1.43$1.89 compared to $1.69$1.43 for the prior fiscal year; and Cash provided by operations was $246.5 million for the fiscal year compared to $249.3 million for the prior fiscal year.

We continueremain tovigilant monitorin monitoring inflationary challenges and implementare actively implementing measures to help mitigate their impacts,impact. includingThese managinginclude driving operational efficiencies through our inventoryFuel levelsfor toGrowth reduceprogram, out-of-stock items, adjusting ouroptimizing promotional activities, optimizing our store basestrategies, and expanding our partnerships with delivery service providers,providers. including with DoorDash and Instacart marketplaces. AlthoughWhile these initiatives have helped mitigateoffset ongoingsome macro-headwinds,macroeconomic we cannot reasonably predictheadwinds, the long-term effects of inflation.inflation remain difficult to predict.

Unallocated expenses represent certain corporate costs, including share-based compensation expense, that have not been charged to our segments and are included in SG&A expenses in our consolidated statements of earnings. Additionally, unallocated includes certain costs related to our Fuel for Growth initiative.

SBS.Sally. The decrease in net sales for SBSSally was primarily driven by the following (in thousands):

Includes closed stores, including stores closed under the Plan,divesture of Spain, net of stores opened for less than 14 months.

BSG. The increasedecrease in net sales for BSG was driven by the following (in thousands):

BSG.Sally. BSG’sSally’s gross profit decreasedincrease slightly aswas a result of lowera higher gross margin, partially offset by higherlower net sales. BSG'sSally’s gross margin declineimprovement was primarily driven primarily by lowerhigher product marginsmargins, resulting from enhanced promotional strategies and favorablebenefits adjustments tofrom our expectedFuel obsolescencefor reserveGrowth relatedinitiative, tolower thedistribution Planand freight costs and lower shrink, partially offset by an inventory write-off in theour priorEuropean year.operations in connection with our Fuel for Growth initiative.

SBS.Sally. SBS’sSally’s SG&A expenses increased $16.4$22.3 million, or 1.8%,2.4%, to $923.6$945.9 million for fiscal year 2024,2025, which includes the unfavorablefavorable impact from foreign exchange rates of $3.8$12.9 million due to the weakening of the U.S. Dollar compared to currencies in our foreign operations. As a percentage of SBSSally net sales, SG&A for fiscal year 20242025 was 43.8%45.2% compared to 42.4%43.8% for fiscal year 2023.2024. This increase as a percentage of sales was primarily due to higherincreased labor and other compensation-related expenses, rentdeleveraging expense,resulting depreciationfrom lower net sales, and impairment charges related to certain trade names (non-cash expense andof advertising$4.5 expense.million), partially offset by cost savings from our Fuel for Growth initiative.

BSG. BSG’s SG&A expenses increaseddecreased $2.8$12.2 million, or 0.6%,2.7%, to $454.0$441.9 million for fiscal year 20242025 and includes a favorable impact from foreign exchange rates of $2.5$0.8 million. As a percentage of BSG net sales, SG&A for fiscal year 20242025 was 28.2%27.5% compared to 28.4%28.2% for fiscal year 2023.2024. This decrease was driven primarily bydue higherto netlower salesdepreciation and lower delivery expense.expenses, and savings generated from our Fuel for Growth initiative.

Unallocated. Unallocated SG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, increaseddecreased $32.6$34.9 million, or 16.5%,15.2%, to $230.1$195.2 million, primarily due to expensesa $26.6 million gain on the sale of our corporate headquarters and lower costs in connection withto our Fuel for Growth initiativeinitiative, inpartially theoffset currentby year.increased compensation-related expenses.

Our principal sources of liquidity are cash from operations, cash and cash equivalents, and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures and debt-servicing. Additionally, under our share repurchase program (see below for more details) we willwill, from time-to-timetime-to-time, repurchase shares of our common stock on the open market to return value to our shareholders. At September 30, 2024,2025, we had $590.5$631.6 million in our liquidity pool, which includes amounts available for borrowings under our ABL facility of $482.5$482.4 million and cash and cash equivalents of $108.0$149.2 million. Based upon the current level of operations and anticipated growth, we anticipate existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), as well as cash expected to be generated by operations and funds available under the ABL facility, will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures (including information technology investments and store projects) and service our debt obligations over the next 12 months and beyond.

Our working capital (current assets less current liabilities) increased $63.9$12.9 million to $725.5 million at September 30, 2025, compared to $712.6 million at September 30, 2024, compared to $648.7 million at September 30, 2023.2024. The increase in our working capital was driven by a higher inventory balances, as a result of expanded distribution rights in BSGcash and vendorcash priceequivalents increases, the impacts of assets held for sale,balance, and the timing of account payables, income tax payables,payable and vendorreceivable, receivables,including includedcontingent lease incentives recognized in accountsconnection receivable,with other.our new headquarters. These impacts were partially offset by lower inventory, as a decreaseresult of a strategic focus on inventory optimization and productivity, the disposal of assets held for sale previously included in cashother current assets as a result of the sale of our corporate headquarters, and cash equivalents andthe timing of lease renewals.renewals and new leases. The ratio of current assets to current liabilities was 2.26 to 1.00 at September 30, 2025, compared to 2.20 to 1.00 at September 30, 2024, compared to 2.12 to 1.00 at September 30, 2023.2024.

During the fiscal years 20242025 and 2023,2024, we repurchased and subsequently retired approximately 5.15.0 million shares and 1.55.1 million shares of our common stock under our share repurchase program at a cost of $60.0$53.5 million and $15.0$60.0 million, respectively, excluding the impact of excise taxes on share repurchases. Share repurchases are funded primarily with cash from operations and, occasionally, with borrowings under the ABL facility. As of September 30, 2024,2025, we had approximately $520.8$467.3 million of additional share repurchase authorization remaining under our Share Repurchase Program,Program. whichSee expiresNote September4, 30,Accumulated 2025.Stockholders’ Equity, for more information about our share repurchase program.

The slight decreaseincrease in net cash provided by operating activities for fiscal year 2024,2025, compared to fiscal year 2023,2024, was primarily driven by higherincreased net earnings, lower inventory purchases, fewer cash receipts from customers,purchases and thelower timinginterest ofpaid vendoron andour manufacturing allowances,debt, partially offset by the timing of taxaccounts payable and interestincome paymentstax payments, and thelower impactcash ofreceipts leasefrom contract termination and severance payments in connection with the Plan in the prior year.customers.

The increasedecrease in net cash used by investing activities for fiscal year 2024,2025, compared to fiscal year 2023,2024, was primarily duethe toresult higherof capitalreceiving expenditures,$43.6 partiallymillion offsetfrom bythe lowersale of our corporate headquarters, a decrease in cash used for acquisitions.acquisitions Duringby fiscal$4.9 yearmillion, 2024,and wereceiving had$3.1 totalmillion capitalrelated expendituresto the divesture of approximatelyour $94.7 million, excluding amounts paidoperations in connection with the prior year, primarily in connection with investments in technology and store leasehold improvements.Spain.

Our 2032 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments or otherwise transfer assets to Sally Beauty.us. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.

Long-term debt obligations include future interest payments on our debt outstanding as of September 30, 2024.2025. The amounts shown above do not include deferred debt issuance costs reflected in our consolidated balance sheets, nor do they include the impact of any interest paid or received from the impact of our interest rate swap.

Assessment of Long-Lived Assets for Impairment and Restructuring

When we commit to an exit plan of scale that we believe will result in the disposal of long-lived assets prior to the end of their useful lives, the approval of such plan may be considered a triggering event and therefore require a reassessment of asset carrying values for recoverability, based on projected cash flows. If the carrying values are not recoverable, write-downs or impairment charges may be required to bring carrying values of certain long-lived assets, including operating lease asset,assets, to fair value. In connection with facility and store closures, we typically will also incur charges for employee severance, disposal costs and other expenses incurred with closures. These charges are accrued and estimated based on facts and circumstances at the time. Actual cash flows and expected payments could be significantly different from our estimates. No material impairment losses were recognized for fiscal year 2025, 2024 or 2023.

During fiscal year 2024,2025, we determined that no triggering events had occurred, as both internal and external facts and circumstances, including revenues in fiscal year 20242025 versus prior projections and prior weighted-average cost of capital, continued to see improvement from the end of September 2023.2023, the last time we performed a quantitative analysis. At the end of September 2023, we determined that a triggering event had occurred, due to the decline in the Company's share price and market capitalization at the end of fiscal year 2023, among other factors. As a result, we conducted a quantitative assessment at September 30, 2023 and determined that no impairment existed for our SBSSally or BSG reporting units.

Like goodwill, our indefinite-lived intangible assets are tested for impairment by comparing the fair value of each asset to its carrying value, but only if a triggering event exists. As of September 30, 2024,2025, our indefinite-lived assets were comprised of only trade names. To determine the fair value of each trade name, we use the relief-from-royalty method, which estimates what a third-party would be willing to pay in royalties to receive a benefit from the use of the asset. If it is determined the asset’s fair value is less than its carrying value, then an impairment charge is recorded to reduce the carrying value down to its fair value. During fiscal year 2025, certain trade names within Sally were fully impaired due to the decrease in projected revenues from a specific product line and we recognized an impairment loss of $4.5 million. No impairment losses were recognized in fiscal years 2024, 2023,2024 or 2022.2023.

ThisThe sectionfollowing discussesdiscussion management’sand viewanalysis of theour financial condition,condition and results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual2025 Report on Form 10-K for the fiscal year ended September 30, 2025,10-K, including the Risk Factors sectionssection therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and related notes toincluded thoseelsewhere financialin statements.this Quarterly Report.

Financial Summary for the Three Months Ended MarchJune 31,30, 2026 (the “Quarter”)

•Consolidated net sales for the three months ended March 31, 2026,quarter increased $20.2$2.2 million, or 2.3%,0.2%, to $903.4$935.5 million, compared to the three months ended MarchJune 31,30, 2025.2025 (the “prior year quarter”). Consolidated net sales for the quarter included a positive$4.7 million favorable impact from changes in foreign currency exchange rates of $12.8 million;

•Consolidated comparable sales were 1.3%flat forcompared to the threeprior monthsyear ended March 31, 2026quarter;

•Consolidated gross profit for the three months ended March 31, 2026, increased $17.0$9.3 million, or 3.7%,1.9%, to $475.8$490.2 million, compared to the threeprior monthsyear ended March 31, 2025.quarter. Consolidated gross margin increased 7090 bps to 52.7% for the three months ended March 31, 2026,52.4% compared to the threeprior monthsyear ended March 31, 2025quarter;

•Consolidated operating earnings for the three months ended March 31, 2026, increased $2.6$8.2 million, or 3.7%,10.5%, to $71.9$86.4 million, compared to the threeprior monthsyear ended March 31, 2025.quarter. Operating margin increased 1080 bps to 8.0% for the three months ended March 31, 2026,9.2% compared to the threeprior monthsyear ended March 31, 2025quarter;

For the three months ended March 31, 2026, our consolidated•Consolidated net earnings increased $3.5$8.4 million, or 8.9%,18.3%, to $42.7$54.1 million, compared to the threeprior monthsyear ended March 31, 2025quarter;

We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and from e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludesexclude the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquired stores is excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailersretailers, as the calculation varies across the retail industry.

The following table sets forth, for the periods indicated,forth information concerning key measures on which we rely to evaluate our operating performance (dollars in thousands):

(a)Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrativeSG&A expenses in our condensed consolidated statements of earnings. Additionally, unallocated expenses include certain costs associated with our “Fuel for Growth” initiative as well as the $26.6 million gain related to the sale of our corporate headquarters during the sixnine months ended MarchJune 31,30, 2025. See Note 7, Property and Equipment, Net, for more information related to the sale of our corporate headquarters.

TheComparison of Three Months Ended MarchJune 31,30, 2026, compared2026 to the Three Months Ended MarchJune 31,30, 2025

(a)Includes closed stores, net of stores opened for less than 14 months.

Sally's net sales increase was primarily driven by an increase in comparable sales and positive impacts from foreign exchange rates, partially offset by net storesstore closedclosures during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces, partially offset by softness in our hair care category and the strategic exit of the majority of our full service operations across Europe. Sally’s comparable sales reflect increases in our number of transactions and average unit retail.

(a)Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

BSG's net sales decrease was primarily fromdriven by a decreasedecline in comparable sales, partially offset by positive impacts from foreign exchange rates.sales. The decrease in comparable sales was drivenprimarily byattributable externalto factors that impacted stylist purchasing behavior, partially offset by strong performancesoftness in ourthe colorhair care category. BSG's comparable sales were slightly down withreflect a decrease in the number of transactions and a lower average number of units per transaction, partially offset by a higher average unit retail.

Sally. Sally’s gross profit increased $10.1 million for the three months ended MarchJune 31,30, 2026,2026 primarily as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins,margins resulting from benefits fromassociated with our Fuel for Growth initiative, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of all our low-margin full servicefull-service operations in Europe in connection with our Fuel for Growth initiative.Europe.

Sally. Sally’s selling, general and administrative (“SG&A”) expenses increased $12.1$4.0 million, or 5.3%,1.7%, for the three months ended MarchJune 31,30, 2026, and included an unfavorable impact from foreign exchange rates of $5.5$2.1 million. As a percentage of SallySally’s net sales, selling, general and administrativeSG&A expenses for the three months ended MarchJune 31,30, 2026,2026 were 46.3%,44.9%, compared to 45.8%45.1% for the three months ended MarchJune 31,30, 2025. The increasedecrease as a percentage of sales was primarily due to increased labor and other compensation-related expenses, higher commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impactspartially ofoffset anby impairmentincreased charge related to a trade name (non-cash expense of $1.8 million) in the prior year,labor and Fuelother forcompensation-related Growthexpenses benefits.and commission costs from digital marketplaces.

BSG. BSG’s selling, general and administrativeSG&A expenses increased $0.6$0.9 million, or 0.5%,0.8%, for the three months ended MarchJune 31,30, 2026. As a percentage of BSG net sales, selling, general and administrativeSG&A expenses for the three months ended MarchJune 31,30, 2026,2026 were 28.5%27.8% compared to 28.4%26.9% for the three months ended MarchJune 31,30, 2025. The increase asin aBSG’s percentageSG&A of salesexpenses was primarily due to higherincreased labor and other compensation-related expenses and rent expense, partially offset by lower depreciation and amortization expenses.expense.

Unallocated. Unallocated selling, general and administrativeSG&A expenses, which represent certain corporate costs that have not been charged to our reporting segments, increaseddecreased $1.7$3.9 million, or 3.3%,6.9%, for the three months ended MarchJune 31,30, 2026,2026 primarily due to an increasedlower labor and other compensation-related expenses, higher information technology expense,expenses and lower expenses in connection with our Fuel for Growth initiative, partially offset by higher facility expenses related to our new corporate headquarters, partially offset by lower expenses related to our Fuel for Growth initiative.headquarters.

The decrease in interestInterest expense wasdecreased due primarily ato result of athe lower average outstanding principal balance on our Term Loan B.B compared to the prior year quarter. See Note 10, Short-termShort-Term and Long-termLong-Term Debt, in Item 1 of this quarterly report for more information on our debt.details.

The effective tax raterates waswere 26.1%25.6% and 26.8% for the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively. The decrease in the effective tax rate remained unchanged,was primarily dueattributable to athe decreasetax relatedimpact toof foreignthe divestiture of the Spain operations in the currentprior-year quarter, offset by the unfavorable tax impact of executive compensation.quarter.

TheComparison Sixof Nine Months Ended MarchJune 31,30, 2026, compared2026 to the SixNine Months Ended MarchJune 31,30, 2025

(a)Includes closed stores, net of stores opened for less than 14 months.

Sally's net sales increase was primarily driven by positive impacts from foreign exchange rates and an increase in comparable sales, partially offset by net storesstore closedclosures during the past twelve months. The increase in comparable sales was primarily driven by strong growth in hair color and digital marketplaces,marketplaces. These increases were partially offset by external factors that impactedsofter consumer spending,spending includingassociated with the U.S. government shutdown duringearly in the beginning of our fiscal year, softness in ourthe hair care category, and the impact of our strategic exit of the majority of our full servicefull-service operations across Europe. Sally’s comparable sales reflect increases in our average unit retail and number of transactions, partially offset by fewer average number of units per transaction.transactions.

(a)Includes closed stores, net of stores opened for less than 14 months and sales from acquired stores.

BSG's net sales decrease was primarily fromdriven by a decreasedecline in comparable sales. The decrease in comparableComparable sales wasreflect drivenpressure by external factors that impactedon stylist purchasingspending behavior,associated includingwith the U.S. government shutdown duringearly in the beginning of our fiscal year,year and softness in the hair care category, partially offset by strong performance in ourthe color category. BSG's comparable sales decrease was primarily a result ofreflect a decrease in the number of transactions and a lower average number of units per transaction, partially offset by ana increase inhigher average unit retail.

Sally. Sally’s gross profit increased for the sixnine months ended MarchJune 31,30, 2026,2026 as a result of an increase in net sales and a higher gross margin on units sold. Sally’s gross margin improvement was driven primarily by higher product margins,margins resultingin fromthe benefitsfirst fromhalf ourof Fuelthe forfiscal Growth initiative,year, partially offset by impacts of the write-off of certain inventory related to the strategic exit of the majority of our low-margin full service operations in EuropeEurope, inboth connectionas witha result of our Fuel for Growth initiative.

BSG. BSG’s gross profit increased for the sixnine months ended MarchJune 31,30, 2026,2026 as a result of a higher gross margin on units sold, partially offset by athe decreaseimpact infrom netthe sales.lower sales volume. BSG’s gross margin improvement was driven by higher product margins,margins resulting from benefits fromassociated with our Fuel for Growth initiative.

Sally. Sally’s selling, general and administrativeSG&A expenses increased $18.8$22.8 million, or 4.1%,3.3%, for the sixnine months ended MarchJune 31,30, 2026,2026 and included an unfavorable impact from foreign exchange rates of $3.5 million. As a percentage of SallySally’s net sales, selling, general and administrativeSG&A expenses for the sixnine months ended MarchJune 31,30, 2026,2026 were 45.7%,45.4%, compared to 45.1% for the sixnine months ended MarchJune 31,30, 2025. The increase as a percentage of sales was primarily due to higher labor and other compensation-related expenses, higherrent, commission costs from digital marketplaces, and higher rent and advertising expenses, partially offset by leveraging as a result of higher net sales, impacts of an impairment charge related to a trade name (non-cash expense of $1.8 million) in the prior year, and Fuel for Growth benefits.advertising.

BSG. BSG’s selling, general and administrativeSG&A expenses decreased $1.1$0.3 million, or 0.5%,0.1%, for the sixnine months ended MarchJune 31,30, 2026. As a percentage of BSGBSG’s net sales, selling, general and administrativeSG&A expenses for the sixnine months ended MarchJune 31,30, 2026,2026 were 27.8% compared to 27.9%27.6% for the sixnine months ended MarchJune 31,30, 2025. The decreaseincrease as a percentage of sales was primarily due to higher rent, partially offset by lower depreciation and amortization expenses, partially offset by higher labor and other compensation-related expenses and rent expense.expenses.

Unallocated. Unallocated selling, general and administrativeSG&A expenses, which represent certain corporate costs that have not been chargedallocated to our reporting segments, increased $27.6$23.7 million or 33.7%,17.2%, for the sixnine months ended MarchJune 31,30, 2026,2026 primarily due to a $26.6 million gain on the sale of our corporate headquarters in the prior year, higher facility expenses related to our new corporate headquarters, higher labor and other compensation-related expenses, and an increase in information technology expenses, partially offset by lower costs in connection with our Fuel for Growth initiative.

The decrease in interestInterest expense wasdecreased primarily adue result ofto a lower average outstanding principal balance on our Term Loan B.B in 2026. See Note 10, Short-term and Long-term Debt, in Item 1 of this quarterly report for more information on our debt.

The effective tax rates were 25.9%25.8% and 26.3%26.4% for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in the effective tax rate was primarily attributable to foreign operations and a more favorablethe tax impact of share‑basedthe compensationdivestiture inof the currentSpain year, offset by higher federal tax creditsoperations in the prior year.

Our principal sources of liquidity are cash from operations, cash and cash equivalentsequivalents, and borrowings under our ABL Facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debtand payments of interest and principal payments.on our debt. Additionally, under our share repurchase program (see below for more details) we will from time to timemay repurchase shares of our common stock on the open market to return value to our shareholders. At MarchJune 31,30, 2026, we had $639.7$655.5 million of available liquidity, which includesincluded $482.3$482.4 million available for borrowing under our ABL Facility and cash and cash equivalents of $157.4$173.1 million.

Our working capital (current assets less current liabilities) increased $13.8$31.8 million, to $739.3$757.3 million at MarchJune 31,30, 2026, compared to $725.5 million at September 30, 2025. The increase was primarily driven by the timing of accrued compensation and benefit expenses within accrued expenses and an increase in cash and cash equivalents, partially offset by the timing of landlord receivables related to our new corporate headquarters within accounts receivable, other.other and the timing of interest payments on our long-term debt.

The increase in cash provided by operating activities was primarily driven by the timing of the settlement of accounts payable, an increase in cash receipts from customers, lower income taxes paid, and the receipt of landlord receivables related to our new corporate headquarters, partially offset by a strategic reduction in slower movingslower-moving inventory in the prior year while maintaining consistent inventory levels this year.

Net Cash (Used) Provided by Investing Activities

At MarchJune 31,30, 2026, we had $835.0$815.0 million in outstanding debt principal, excluding unamortized debt issuance costs and debt discounts, in the aggregate, of $7.9$7.4 million. Our debt consists of $600.0 million in 2032 Senior Notes outstanding, and $235.0$215.0 million remaining on our Term Loan B.

We utilize our ABL Facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operationaloperating cash flow. In that regard, we may from time to time draw funds under the ABL Facility for general corporate purposes including funding of capital expenditures, acquisitions, payingdebt down other debtrepayments and share repurchases. Amounts drawn on our ABL Facility are generally paid down with cash provided by our operating activities. During the sixnine months ended MarchJune 31,30, 2026, there were no borrowings under the ABL Facility.

The following table presents the summarized balance sheetssheet information for the Issuers and the Guarantors as of March 31, 2026, and September 30, 2025:

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for the sixnine months ended MarchJune 31,30, 2026 (in thousands):

Under our current share repurchase program, we may from time to time repurchase our common stock on the open market. During the sixnine months ended MarchJune 31,30, 2026 and 2025, we repurchased 3.04.9 million shares and 1.83.3 million shares of our common stock for $46.0$71.4 million and $20.0$33.0 million, respectively, under our share repurchase program, excluding the impact of excise taxes. See Note 5, Stockholders’ Equity, for more information about our share repurchase program.Equity.

Other than our debt,voluntary debt repayments, as discussed above, there have been no material changes outside the ordinary course of our business to our contractual obligations since September 30, 2025.

At MarchJune 31,30, 2026,2026 and September 30, 2025, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.