Sally Beauty Holdings Inc. (SBH) 2021年年度報告「NYSE」.pdf

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1、2021 Annual ReportSALLY BEAUTY HOLDINGS,INC.2021 ANNUAL REPORTDenise PaulonisPresident and Chief Executive OfficerAs always,thank you for your support.Best Regards,DEAR SHAREHOLDERSI am excited to be writing you as the newly appointed Chief Executive Officer of Sally Beauty Holdings(SBH).Having serv

2、ed on the SBH board since 2018,I am fortunate to be bringing firsthand perspective and a deep working knowledge of the business from day one.As a Board member,I witnessed the retooling of virtually every aspect of the companys infrastructure,including our technology,marketing,merchandising,supply ch

3、ain,human resources,finance and talent.I am incredibly proud of our exceptional teams who took on this challenge and helped us evolve into a modern,dynamic omni-channel beauty retailer that is now set up for long-term success.Fiscal Year 2021 OverviewDuring fiscal 2021,we experienced continued disru

4、ptions from the impact of COVID-19 in the first half of the year,especially to our international operations in the United Kingdom,Europe and Canada.Despite the challenges we faced,we showed great agility and strong execution in delivering full year sales that were back to pre-pandemic levels.We also

5、 saw tremendous growth in our core category of hair color,which was accelerated by the growth in vivid colors as our customers demonstrated a continued strong desire for self-expression.Additionally,we accomplished the majority of the remaining elements of our transformation plan by rolling out new

6、fulfillment options of Buy Online/Pickup In-Store and rapid/2-hour delivery,re-platforming the Beauty Systems Group e-commerce site,optimizing our loyalty and CRM programs with loyalty membership exceeding pre-pandemic levels,and continued the rollout of JDA across our supply chain network.Financial

7、 Results in Fiscal Year 2021For fiscal year 2021,our consolidated net sales were$3.87 billion,an increase of 10.3%,as compared to the prior year,driven primarily by strong growth in our differentiated core of hair color,the rollout of new digital fulfillment options like Buy Online/Pickup In-Store a

8、nd rapid/2-hour delivery,fewer operating restrictions related to the impact of COVID-19,and higher operating capacities in salons.Global e-commerce sales were$281 million or 7.2%of net sales for the full-year.Diluted net earnings per share were$2.10,up from$0.99 in the prior year,as business operati

9、ons mostly normalized from the COVID-19 related disruptions that affected the prior year.We generated$382 million in cash flow from operations in fiscal year 2021,which allowed us to repay over$400 million in debt.We were particularly pleased to see ongoing momentum and consistency across the busine

10、ss despite the various impacts of the pandemic.Looking Ahead to Fiscal Year 2022As we embark on our new fiscal year,our mission to recruit and retain color customers remains a core component of our roadmap,and continued tailwinds around self-expression through hair,product sustainability and innovat

11、ion,and the growing number of independent stylists continue to reinforce the strength of our color and care business.Putting the customer first and enhancing their experience with us is critical to our success.Were continuing to prioritize the customer through personalization,inspiration,education a

12、nd training.Were also focusing on creating the easiest shopping experience for our customers.Through our robust,omni-channel platform and multiple fulfillment options,our customers can get product how they want it and when they want it,faster than ever before.In addition,we will continue to emphasiz

13、e and support sustainable and clean products,which are increasingly being selected and commanding a premium from consumers.Importantly,we believe our authority in color and care provides a logical path and powerful platform for standing up new brands that go beyond our four walls.Against that backdr

14、op,we will be focusing on four strategic growth pillars to drive the top line in fiscal 2022:Leveraging our digital platform Driving loyalty and personalization Delivering product innovation Advancing our supply chainWe believe our initiatives under these four growth pillars will allow us to drive s

15、trong top line growth and generate robust operating cash flows in fiscal 2022 and beyond.This reflects our ability to maintain strong gross margins,while mitigating inflationary pressures through careful cost controls,pricing levers and store optimization.As SBH pivots to growth,we do so with a new

16、purpose:To Inspire a More Colorful,Confident and Welcoming World.Our purpose is our North Star,our rallying cry,the reason we come to work every day.Its why we exist as a company,and what motivates us as a team.To me,our purpose is about bringing out the best in ourselves,in each other,and in our cu

17、stomers.Its about celebrating our differences and bringing our authentic selves to work every day.SummaryIn summary,we are entering fiscal 2022 with a solid infrastructure,a well-defined roadmap for growth and favorable industry dynamics that support the significant opportunity in front of us.In the

18、 coming months,I look forward to working with the team to build out additional growth opportunities that will fuel our business and create meaningful shareholder value.In addition,I would like to thank all of our associates across our store networks,field operations,distribution centers,and support

19、centers throughout the globe for their passion,dedication and hard work,which helped us finish a strong 2021.Thank you for everything you do each day to make us better and for serving our customers.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K ANNUAL REPORT PURSUANT TO

20、 SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED:SEPTEMBER 30,2021-OR-TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from _ to _Commission File No.1-33145SALLY BEAUTY HOLDINGS,INC.(Exact name of regist

21、rant as specified in its charter)Delaware36-2257936(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)3001 Colorado BoulevardDenton,Texas76210(Address of principal executive offices)(Zip Code)(940)898-7500(Registrants telephone number,including area code)S

22、ecurities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,par value$.01 per shareSBHNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a

23、 well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed

24、 by Section 13 or 15(d)of the Securities ExchangeAct of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has beensubject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant ha

25、s submitted electronically every Interactive Data File required to be submitted pursuant toRule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant wasrequired to submit such files).Yes No Indicate by check mark whether the regi

26、strant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reportingcompany,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Larg

27、e accelerated filer Non-accelerated filerAccelerated filerSmaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards

28、 provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of itsinternal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)

29、by the registered publicaccounting firm that prepared or issued its audit report.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act.)Yes No The aggregate market value of registrants common stock held by non-affiliates of the registrant,based upon the

30、 closing price of a share of theregistrants common stock on March 31,2021,was approximately$2,273,796,000.At November 12,2021,there were 113,046,139 shares ofthe registrants common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Proxy Statement relating to the regist

31、rants 2022 Annual Meeting of Stockholders are incorporated by referenceinto Part III of this Annual Report on Form 10-K where indicated.TABLE OF CONTENTSPagePART IITEM 1.BUSINESS.1ITEM 1A.RISK FACTORS.10ITEM 1B.UNRESOLVED STAFF COMMENTS.23ITEM 2.PROPERTIES.24ITEM 3.LEGAL PROCEEDINGS.26ITEM 4.MINE SA

32、FETY DISCLOSURES.26PART IIITEM 5.MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.27ITEM 6.RESERVED.29ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS.29ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES

33、 ABOUT MARKET RISK.38ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.39ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE.39ITEM 9A.CONTROLS AND PROCEDURES.39ITEM 9B.OTHER INFORMATION.41PART IIIITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.4

34、2ITEM 11.EXECUTIVE COMPENSATION.42ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS.42ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTORINDEPENDENCE.43ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES.43PART IVITEM 15.EXHIBITS AND FIN

35、ANCIAL STATEMENT SCHEDULES.44ITEM 16.FORM 10-K SUMMARY.47iIn this Annual Report,references to“the Company,”“Sally Beauty,”“our company,”“we,”“our,”“ours”and“us”refer to Sally Beauty Holdings,Inc.and its consolidated subsidiaries unless otherwise indicated or thecontext otherwise requires.CAUTIONARY

36、NOTICE REGARDING FORWARD-LOOKING STATEMENTSStatements in this Annual Report on Form 10-K and in the documents incorporated by reference herein which arenot purely historical facts or which depend upon future events may constitute forward-looking statements withinthe meaning of Section 27A of the Sec

37、urities Act of 1933,as amended,and Section 21E of the SecuritiesExchange Act of 1934,as amended,which we refer to as the Exchange Act.Words such as“anticipate,”“believe,”“estimate,”“expect,”“intend,”“plan,”“project,”“target,”“can,”“could,”“may,”“should,”“will,”“would,”“might,”“anticipates”or similar

38、 expressions may also identify such forward-looking statements.Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak onlyas of the date they were made and involve risks and uncertainties that could cause actual events or results todiffer materially

39、from the events or results described in the forward-looking statements.The most importantfactors which could cause our actual results to differ from our forward-looking statements are set forth in ourdescription of risk factors in Item 1A to this Annual Report on Form 10-K,which should be read in co

40、njunctionwith the forward-looking statements in this report.Forward-looking statements speak only as of the date they aremade,and we do not undertake any obligation to update any forward-looking statement.The events described in the forward-looking statements might not occur or might occur to a diff

41、erent extent or ata different time than we have described.As a result,our actual results may differ materially from the resultscontemplated by these forward-looking statements.iiPART IITEM 1.BUSINESSOur CompanySally Beauty Holdings,Inc.is an international specialty retailer and distributor of profes

42、sional beauty supplieswith operations in North America,South America and Europe.We are one of the largest distributors ofprofessional beauty supplies in the U.S.based on store count.At September 30,2021,we operated two businesssegments,Sally Beauty Supply(“SBS”)and Beauty Systems Group(“BSG”),with 4

43、,777 company-operatedstores,134 franchised stores and several e-commerce platforms.Within BSG,we also have one of the largestnetworks of distributor sales consultants(“DSCs”)for professional beauty products in North America,with 719sales consultants who sell directly to salons and salon professional

44、s.SBS targets retail consumers,salons andsalon professionals,while BSG exclusively targets salons and salon professionals.We provide our customers with a wide variety of leading third-party branded and owned-brand professionalbeauty supplies,including hair color and care products,styling tools,skin

45、and nail care products and other beautyitems.For each of the fiscal years ended September 30,2021,2020 and 2019,over 80%of our consolidated netsales were from customers located in the U.S.The breadth,depth and professional quality of our hair color and hair care assortment provides us with adifferen

46、tiated core business in an industry which is otherwise fragmented.Due to our long presence in thecategory,our brand heritage,our product and process-specific knowledge and our training of associates,weprovide unmatched hair color and hair care expertise to consumers.We also have strong positioning w

47、ithsuppliers given our focus and our economies of scale of purchasing.Because we service retail and professionalcustomers through a variety of channels,we are able to reach broad,diversified geographies and customersegments using a variety of product assortments and tactics.Operating StrategyOur mis

48、sion is to empower our customers to express themselves through hair.Our strategy is to be the expert inhair color and hair care for the consumer and the salon professional.We emphasize hair color and hair carethrough our strategic product assortment and compelling customer experiences,while also foc

49、using on ouroperating efficiency and increasing profitability.We believe that we offer our customers a strong and differentiated value proposition by providing salon-qualityproducts,including an extensive collection of owned and exclusive-label brands and solutions at attractive prices.Our focus and

50、 experiences with hair color include a strong emphasis on our sales force.We believe our approachto recruiting,training,and compensation results in a highly knowledgeable,engaged and effective sales force.Also,as the partner of choice for established brands,as well as product innovators,we offer our

51、 customers abroad strategic product assortment.Our stores are conveniently located and offer a wide selection of competitively priced beauty products,beautysolutions and expertise delivered by our knowledgeable sales associates.We also continue to expand ourselection of textured hair products,includ

52、ing over 50 Black-founded brands,and offer innovation in the nailscategory that we believe further differentiates us from our competitors.On the professional side of our business,we believe that our DSCs distinguish us from other full-service/exclusive-channel distributors by providing us with a bet

53、ter understanding of our professional customersneeds.In addition to placing orders through our DSCs,our customers have the ability to order through our websites( and and the CosmoProf mobile commerce-basedapp)and pick up the products they need between visits from our DSCs by visiting a nearby BSG st

54、ore.Webelieve that our differentiated customer value proposition and strong brands drive customer loyalty.-1-We continue to invest in initiatives that support our omni-channel strategies.Our goal is to deliver an easy,reliable shopping experience and deliver best-in-class customer service online and

55、 in stores.In connection withthese investments,we have robust omni-channel fulfillment capabilities such as parcel delivery,2-hour rapiddelivery,and buy online/pick up in-store(“BOPIS”).Additionally,we have recently relaunched mobile-optimized e-commerce websites and mobile apps.Professional Beauty

56、Supply Industry Distribution ChannelsThe professional beauty supply industry serves end-users through four distribution channels:Open-LineThis channel serves retail consumers and salon professionals through retail stores and e-commerce platforms.This channel is served by a large number of localized

57、retailers and distributors,with only a few having a regionalor national presence and significant channel share.We believe that SBS,with its nationwide network of retailstores,is the largest open-line distributor in the U.S.Our extensive store network allows us to service ourcustomers when and where

58、they want to shop with our in-store experience and omni service capabilities,including last-mile delivery.In addition,SBSs websites(including )and other e-commerceplatforms,including our new SBS mobile commerce-based app,provide retail consumers and salon professionalsaccess to product offerings and

59、 information beyond our retail stores.Full-Service/ExclusiveThis channel exclusively serves salons and salon professionals and distributes“professional-only”and otherproducts for use in salons and for resale to consumers in salons.Many brands are distributed through exclusivearrangements with suppli

60、ers by geographic territory.BSG is one of the leading full-service distributors in theU.S.and Canada,with its network of professional-only stores and DSCs.In addition,BSG offers its products forsale to salons and salon professionals through e-commerce platforms(including , and the CosmoProf mobile c

61、ommerce-based app).DirectThis channel focuses on direct sales to salons and salon professionals by large manufacturers.This is thedominant form of distribution in Europe but represents a smaller channel in the U.S.due to the highly fragmentednature of the U.S.salon industry,which makes direct distri

62、bution costs prohibitive for many manufacturers.Mega-Salon StoresIn this channel,large-format salons are supplied directly by manufacturers due to their significant purchaserequirements.Key Industry and Business TrendsWe believe the following key industry and business trends and characteristics will

63、 influence our business and ourfinancial results going forward:High level of marketplace fragmentation.The U.S.salon industry is highly fragmented with salons andbarbershops.Given the fragmented nature of the salon industry,we believe that salon operators will continue todepend on full-service/exclu

64、sive distributors and open-line channels for a majority of their beauty supplyproducts.Rapidly evolving consumer trends.Our industry is characterized by continuously changing fashion-related trendsthat drive new styles,including hair and nail styles,and continuing demand for beauty products.In addit

65、ion,we-2-expect millennials and the aging baby-boomer population in the U.S.to continue to drive sales growth in certainprofessional beauty product categories,including through an increase in the usage of hair color and careproducts.Our focus on hair color as a form of self-expression resonates with

66、 the Gen Z shoppers as theirindividualism is expressed through their hair journey.We know convenience is important to customers and shopping patterns have changed post-COVID.We havemade significant investments in projects to“meet them where they are”,including new capabilities and tools onour mobile

67、-native websites and mobile apps.In addition,we continue to optimize our delivery modalities(curbside and in-store pickup,2-hour/rapid delivery,as well as traditional delivery methods).Increasing use of owned and exclusive-label brand products.We offer an extensive range of owned andexclusive-label

68、brand professional beauty products.Our lines of owned and exclusive-label brand products havematured and become better known in our retail stores and e-commerce platforms,continuing to represent andever increasing percentage of our overall sales.Growth in chair renting and frequent stocking needs.Sa

69、lon professionals primarily rely on just-in-time inventorydue to capital constraints and limited warehouse and shelf space.In addition,chair renters and suite renters,whonow comprise a significant percentage of the total U.S.salon professionals,are often responsible for purchasingtheir own supplies.

70、The number of chair renters and suite renters has significantly increased as a percentage oftotal salon professionals in recent years,and we expect this trend to continue.Chair renters and suite renters,given their smaller and more frequent purchasing patterns,are dependent on frequent trips to prof

71、essional beautysupply stores.We expect that these factors will continue to drive demand for conveniently located professionalbeauty supply stores,like BSG and SBS.Business SegmentsWe operate in two business segments:(i)SBS,an open-line retailer of professional beauty supplies offeringprofessional be

72、auty supplies to both retail consumers and salon professionals,in North America,South Americaand Europe,and(ii)BSG,including its franchise-based business Armstrong McCall,a full-service beauty supplydistributor offering professional brands directly to salons and salon professionals through our own s

73、ales force andprofessional-only stores,many in exclusive geographical territories,in North America.SBS stores generallyoperate under the Sally Beauty banner,while BSG stores generally operate under the CosmoProf banner.Neither the sales nor the product assortment for SBS or BSG are generally seasona

74、l in nature.The following table sets forth the percentage of our sales attributable to each of our major sales channels:SBSBSGFiscal Year Ended September 30,Fiscal Year Ended September 30,202120202019202120202019Company-operated stores.94.1%91.8%96.9%69.1%68.9%69.4%E-commerce.5.9%8.0%2.8%9.2%8.7%4.8

75、%Franchise stores.0.2%0.3%7.5%7.1%7.6%Distributor sales consultants.14.2%15.3%18.2%Total.100.0%100.0%100.0%100.0%100.0%100.0%Store Design and LocationsSally Beauty SupplySBS stores are designed to highlight SBSs extensive product offering and differentiated position in hair colorand hair care.In the

76、 U.S.and Canada,SBS stores average approximately 1,700 square feet in size and are located-3-primarily in strip shopping centers,which are occupied by other high traffic retailers such as grocery stores,massmerchants and home improvement centers.SBS applies strong category management processes,inclu

77、ding storespecific planograms,to maintain consistent merchandise presentation across its store base.Store formats,including average size and product selection,vary by marketplace to meet the needs of the customer.SBS balances its store renewals,remodels and expansions between new and existing geogra

78、phies and regularlyevaluates each stores performance and strategically closes stores as necessary.In its existing marketplaces,SBSadds stores as necessary to provide additional coverage.In new marketplaces,SBS generally seeks to expand ingeographically contiguous areas to leverage its experience.SBS

79、 selects geographic areas and store sites on thebasis of demographic information,the quality and nature of neighboring tenants,store visibility and locationaccessibility.As of September 30,2021,SBS had 3,547 company-operated retail stores,2,685 of which are located in the U.S.(including Puerto Rico)

80、,with the remaining 862 company-operated retail stores located in Canada,Mexico,theUnited Kingdom,Ireland,Belgium,France,Germany,the Netherlands,Spain,Chile and Peru.SBS also suppliedtwo franchised stores located in the United Kingdom and Belgium.Beauty Systems GroupBSG stores,including its franchis

81、e-based Armstrong McCall stores,are designed to create a professionalshopping environment that highlights its extensive product offering and embraces the salon professional.Company-operated BSG stores average approximately 2,700 square feet and are located primarily in secondarystrip shopping center

82、s,since the stores are a destinationfor professionals not requiring a traffic-supportingneighbor retail location.BSG store layouts are designed to provide variety and options to the salon professional.Stores are segmented into distinctive areas arranged by product type,with certain areas dedicated t

83、o leadingthird-party brands.The selection of these and other brands varies by territory.As of September 30,2021,BSG operated 1,230 company-operated stores,with 1,100 located in the U.S.(including Puerto Rico)and the remaining 130 company-operated retail stores located in Canada.In addition,asof Sept

84、ember 30,2021,BSG supplied 132 franchised stores.All SBS and BSG stores have implemented recommended practices and procedures within stores to ensure ourcustomers and employees experience a safe and healthy environment,including,but not limited to,increasedcleaning frequency and social distancing si

85、gnage.MerchandiseSally Beauty SupplySBS stores and websites carry an extensive selection of professional beauty supplies for retail customers,salonsand salon professionals,featuring an average of 7,000 SKUs of beauty products in our stores across a variety ofproduct categories including hair color a

86、nd care,skin and nail care,styling tools and other beauty products.SBSs stores and e-commerce platforms carry products from one or more of the leading manufacturers in eachcategory,including third-party brands such as Wella,Clairol,OPI,Conairand LOreal,as well as anextensive selection of owned and e

87、xclusive-label brand products.We believe that delivering an extensiveselection of leading third-party,owned and exclusive-label brand professional beauty products at attractive pricesthrough knowledgeable sales associates and convenient store locations is what differentiates SBS.Additionally,we beli

88、eve that carrying a wide selection of the latest premier branded merchandise is critical for SBS in buildinglong-term relationships with its customers and attracting new customers.As beauty trends continue to evolve,SBS will continue to offer the changing professional beauty product assortment neces

89、sary to meet the needs ofretail consumers and salon professionals.In addition,SBSs extensive selection of owned and exclusive-label brand professional beauty products are onlyavailable at SBS stores and through its e-commerce platforms.We believe that SBSs owned and exclusive-label-4-brand products

90、offer equal or better quality than higher-priced leading third-party brands,providing the customerattractive alternatives to those brands at lower prices.Generally,SBSs owned-brand products have higher grossmargins than the leading third-party branded products and,we believe,offer continued sales an

91、d profit growthpotential.During the fiscal year ended September 30,2021,owned and exclusive-label brand products accountedfor approximately 45%of SBSs product sales in the U.S.and Canada.SBS intends to continue to invest in thegrowth of its owned and exclusive-label brands and to actively promote th

92、ese products.Beauty Systems GroupBSGs stores and e-commerce platforms carry an extensive selection of third-party branded products,such asPaul Mitchell,Wella,Matrix,Schwarzkopf,Kenra,Goldwell,Joicoand Olaplex,for salons and salonprofessionals at competitive prices.We feature an average of 10,000 SKU

93、s in our BSG stores across a variety ofproduct categories including hair color and care,skin and nail care,styling tools and other beauty items.Additionally,BSG has exclusive and non-exclusive distribution rights for well-known brands in certaingeographies with several key vendors.As part of its gro

94、wth strategy,BSG continues to pursue the acquisition ofadditional distribution rights.We believe that carrying an extensive selection of branded merchandise is criticalto maintaining relationships with our professional customers.We believe BSG is the largest full-service distributor of professional

95、beauty supplies in North Americaexclusively targeting salons and salon professionals.Through BSGs large store base,e-commerce platforms andsales force,including Armstrong McCall,BSG is able to access a significant portion of the highly fragmentedU.S.professional beauty salon products industry.Market

96、ing and AdvertisingSBSs marketing programs are designed to drive customer traffic by differentiating SBS as a source ofprofessional advice,solutions and salon-quality products at competitive prices,all backed by our“Love It orReturn It”guarantee.We believe that recent initiatives have differentiated

97、 SBS through value added educationand content,such as launching DIY University by Sally Beauty last year and through our SallyCrew educators.These programs provide hands-on education on a wide range of topics from the latest trends in hair color,textured hair,hair styling,and nails.We continuously a

98、dapt our marketing initiatives and adjust our media and messaging mix to achieve a highreturn on our marketing and advertising dollars.We target existing and potential customers through an integratedmarketing approach designed to reach the customer through a variety of media,including digital advert

99、ising,email,social media,text messaging,direct mail and print advertising.We continue to refine the strategy for and our other e-commerce platforms,becoming a morepersonalized and content-rich experience that empowers and inspires customers to discover new styles and findthe confidence to try new pr

100、oducts.We are building more robust tools to help customers understand not just whatbut how,and to do so in a way that is fast,easy,and built for mobile devices,where our customers increasinglyare accessing us.Beyond generating e-commerce sales,we believe our website and new SBS mobile app areimporta

101、nt vehicles to reach consumers researching beauty products online who could potentially visit our storesas a result of their experience on our website or our SBS mobile app.Our customer loyalty and customer relationship management(“CRM”)programs in the U.S.and Canada helpgenerate loyalty through our

102、 Sally Beauty Rewards Program and our private label rewards credit card.In return,we are able to collect valuable point-of-sale customer data as a means of increasing its understanding ofcustomersneeds and enhancing its ability to market to them in more personalized,relevant ways.We continueto asses

103、s and update our customer loyalty and CRM programs in an effort to further enhance the customerexperience and promote repeat sales from both retail customers and salon professionals.Outside the U.S.andCanada,our customer loyalty and marketing programs vary by marketplace.-5-BSGs marketing programs a

104、re designed primarily to promote its extensive selection of brand name products atcompetitive prices and to educate,motivate and empower its customers to grow professionally.BSGcommunicates on a frequent basis with its customers and potential customers,and distributes promotionalmaterial through mul

105、tiple communication channels,including trade shows,educational events,store personnel,DSCs,print mail,e-mail,app push notifications and social media.In addition,we believe that BSGs websites( and )and the CosmoProf mobile commerce-basedapp enhance other efforts intended to promote awareness of BSGs

106、products by salons and salon professionals.Inaddition,we believe the redesign of ,the implementation of BOPIS,rapid delivery,and the upgrade of the CosmoProf mobile commerce-based app,which offers barcode scanning,updated ordertracking and a digital membership card,enhance efforts intended to promot

107、e awareness and adoption of BSGproducts and services for salons and salon professionals.As of September 30,2021,BSG had a network of 719 DSCs,which exclusively consult,support and sell directlyto salons and salon professionals.In order to provide a knowledgeable sales consultant team,BSG activelyrec

108、ruits and trains individuals with industry knowledge or sales experience.We believe that DSCs with broadproduct knowledge and direct sales experience are more successful in driving sales.Our sales commissionprogram is an important component of the compensation of our DSCs,which is designed to drive

109、sales and tofocus DSCs on selling products that are best suited to individual salons and salon professionals.Our CustomersWe appeal to a wide demographic consumer profile and offer an extensive selection of professional-grade beautyproducts sold directly to retail consumers,salons and salon professi

110、onals.Historically,these factors haveprovided us with reduced exposure to downturns in economic conditions in the countries in which we operate.Our CompetitionThe global beauty industry is highly competitive.SBS competes with domestic and international beauty productwholesale and retail outlets,incl

111、uding local and regional open-line beauty supply stores,professional-only beautysupply stores,mass merchandisers,online retailers,drug stores,department stores and supermarkets,as well assalons that sell hair care products.BSG competes primarily with domestic and international beauty productwholesal

112、e suppliers,including online retailers,and manufacturers selling professional beauty products directly tosalons and individual salon professionals.The primary competitive factors in the beauty products distributionindustry are the price at which branded and owned-brand products are sold to customers

113、;exclusive distributioncontracts;the quality,perceived value,consumer brand name recognition,packaging and variety of the productssold;customer service;the efficiency of distribution networks;and the availability of desirable store locations.We face competition from certain manufacturers that use th

114、eir own sales forces to distribute their professionalbeauty products directly or that align themselves with our competitors.Some of these manufacturers arevertically integrating through the acquisition of distributors and stores.We also face competition from authorizedand unauthorized retailers and

115、internet sites offering professional salon-only products.Our SuppliersWe purchase our merchandise directly from manufacturers through supply contracts and by purchase orders.Forfiscal year 2021,our five largest suppliers Wella Company,Henkel AG&Co.KGaA,the ProfessionalProducts Division of LOreal USA

116、 S/D,Inc.,or LOreal,John Paul Mitchell Systems,and Beauty Quest Group accounted for approximately 29%of our consolidated merchandise purchases.Products are purchased from theseand many other manufacturers on an at-will basis or under contracts which can generally be terminated withoutcause upon 90 d

117、ays or less notice or expire without express rights of renewal.-6-Our Company Purpose&ValuesIn late 2021,we released our new Company Purpose&Values,with the intent of establishing our rallying cryand focus our teams on the impact we intend to have in the world.Purpose:TO INSPIRE A MORE COLORFUL,CONF

118、IDENT,AND WELCOMING WORLDValues:BE YOURSELF.Come as you areeveryone is welcome here.BE AN INSPIRATION.Share your passion and knowledge with your team,your customers,the world.BE BOLD.Dive in.Move fast.Say yes.BE AN OWNER.Drive growth.Create your future.BE PART OF SOMETHING BIGGER.Take care of each o

119、ther,our community,and our planet.Our AssociatesAt September 30,2021,we had approximately 29,000 global associates and we believe they are our greatest assetwith their combined skills,knowledge,work/life experiences and capabilities.At the front line interacting withour customers or behind-the-scene

120、s supporting our field teams,our associates play a huge role in our business.While we often emphasize our technology-based transformation and our wide variety of amazing hair and beautyproducts as key attributes,nothing happens or succeeds without our people.In return for what they do for us,among m

121、any other things,we strive to:Ensure our associates work in a safe,healthy environment the importance of which has only risen inlight of COVID-19;Provide competitive total rewards packages that attract and retain talent in every facet of our business stores,direct sales,distribution centers and corp

122、orate headquarters;Provide meaningful,engaging learning and development that grows our associatesknowledge andcapability with respect to our business and skills that will help them in business and life;andCreate an environment and culture where everyone can bring their true self to work,because ourd

123、ifferences are what make us beautiful.At SBH,we believe our focus on Diversity,Inclusion&Belonging are crucial to improving how we interact with and influence our associates,customerenvironments and broader communities.We are committed to being a force for change.Associate Health&SafetyWe strive to

124、create a safe and healthy work environment for all associatesSBH places a high value on the health and safety of our associates,customers,suppliers and vendors.Thiscommitment is evidenced,in part,by our background check policy for new hires,training and policyimplementations related to handling both

125、 associate and customer incidents,partnerships to maintain the storesand make necessary repairs,as well as ongoing support in the field and at the support center.Additionally,SBH values our partnerships with suppliers and vendors and understands the impact they can haveon our associates.Thus,SBH has

126、 included rules governing their conduct,both with respect to expectations whileinteracting with our associates,and,with our foreign suppliers,assurances that they too are providing a safe andhealthy working environment for their associates.-7-Over the course of our fiscal year 2021,we have continued

127、 to adapt and respond to the various impacts ofCOVID-19 across our business.As mentioned above,our main focus has been on health and safety.Such effortsincluded various safety protocols such as detailed cleaning protocols,personal protective equipmentrequirements,and visual cues regarding social dis

128、tancing,mask-wearing,etc.At times of peak case counts or theemergence of the new variants,we have instituted rolling,rapid testing for COVID-19 at a number of ourdistribution centers.We have continued to maintain and update these protocols,monitor for compliance andmake improvements and adjustments

129、where needed throughout fiscal year 2021.We have also managed throughclosures and capacity restrictions where required by local law,and sought to provide as much notice and supportto our teams as reasonably possible.Labor PracticesWe provide competitive wages and benefits in a positive work environm

130、ent where we focus on doing what is rightWe are an Equal Opportunity Employer with up-to-date policies,procedures and practices with respect to suchimportant issues as safety,discrimination,harassment and retaliation.We provide focused training on theseissues to our associates and managers.We clearl

131、y communicate that any concerns related to issues such as discrimination,harassment,retaliation andother issues such as wage law compliance and fraud should be reported immediately.We also communicate theavenues available to our associates to do so through our“SBH CARES”communications and posters.Th

132、ereporting avenues include options to do so by phone or online through our“Employee Concern Line”,and to doso anonymously if an associate prefers to take that approach.We ensure compliance with other important labor and employment law issues through a variety of processes andprocedures,using both in

133、ternal and external expertise and resources.We also emphasize the importance of taking care of our associates in our Companys Code of Business Conductand Ethics,which is the standard of conduct that applies to all of our associates,executive officers and Board ofDirectors.The Code reflects the core

134、principles of conducting our business as a good corporate citizen incompliance with all laws,rules and regulations applicable to us and the conduct business with regard for thewelfare of our associates and providing equal opportunity to all associates and job applicants.You can reviewthis important

135、document at http:/.Associate Engagement,Development and CultureWe live our values,listen to our associates and take actionWe make significant efforts to ensure our associates are engaged and excited about the work they are doing andcontributions they are making to our Company and our customers.We ar

136、e committed to providing associateswith what they need to thrive and grow their career.We significantly invest in our talent processes and set clear expectations around leadership competencies and ourcultural values at all levels in the organization.At SBH,we consider the whole end-to-end talent cyc

137、le of anassociate to ensure we select exceptional people to represent our business and best serve our customer.Thisincludes,robust interviewing processes as well as comprehensive onboarding programs to ensure new hires areset up to succeed in their early stages of joining SBH.There is also a strong

138、cadence on completing regularcycles of performance management,linked to our Company values and leadership competencies,as well asregular reviews of our talent and succession pipelines.Importantly,we devote significant effort and resources to the development of our associates,including providingalmos

139、t all of our associates access to state-of-the-art learning management systems.We use these platforms toprovide specifically designed and interactive e-learning courses in sales and service,product and hair knowledge,compliance training,and health and safety.-8-We also place significant value and at

140、tention on responding to feedback and input from associates.This includessurveys regarding issues such as Diversity,Inclusion&Belonging and our annual engagement survey.Wereview our teams input and comments,identify common themes and set out action plans to respond.We believelistening is crucial,but

141、 taking action and making commitments are even more important.A core focus of our associate engagement and culture are our efforts focused on Diversity,Inclusion&Belonging,discussed below.Diversity,Inclusion&BelongingAt Sally Beauty we celebrate differences,inclusivity and self-expression.This funda

142、mental aspect of SBH isrooted in our belief that beauty is for everyone and everyone should find their own path to beauty.Our associatesand our customers care about celebrating diversity and self-expression.We want our company and our stores tobe places where all of our associates and customers feel

143、 valued for who they are,and experience a sense ofbelonging.We come together to create a culture for“One&All”Diversity,Inclusion&Belonging are at the heart of who we are as a Company at the Board level,throughoutour global workforce,and in our shared commitment to serving a diverse customer base and

144、 their communities.Our Diversity,Inclusion&Belonging Mission Statement:We find beauty in YOU!Finding beauty in diversity is in our DNA because our differences are what make us beautiful.Our diversity,inclusivity,and self-expression are what fuel our innovation and growth.At SBH,we come together to c

145、reate a culture for ONE&ALL.At the Board Level:Our Boards composition leads the Companys commitment to Diversity,Inclusion andBelonging.Having diverse voices on our Board enhances the Boards expertise,broadens its viewpoint and setsthe tone to encourage leaders at all levels of the Company to listen

146、 to the concerns of our associates andcustomers alike.Our Compensation&Talent Committee provides hands-on oversight and guidance of ourDiversity,Inclusion&Belonging initiatives.Our Board believes listening and responding to diverse voices iscrucial to the Companys success and long-term sustainabilit

147、y.In Our Workforce:Our SBH Team in the U.S.&Canada is over 91%female and over 50%racially/ethnicallydiverse.In 2019 and 2020,Forbes named our Company one of Americas Best Employers for Diversity.In 2021,Forbes named SBH as one of Americas Best Employers for Women.We recognize and celebrate the bedro

148、ckvalues of workforce diversity,inclusion,belonging and engagement within our teams.For us,these are keydrivers of the success of the business,as our associates should and do reflect the various qualities of ourcustomers and what they desire and expect from SBH.In Our Customer Base:Our customers spa

149、n the entire continuum of gender and ethnic diversity.We sellproducts to treat and style every kind of hair;we deliver a tailored assortment of beauty products that serve thelocal communities where our over 4,200 U.S.and Canadian stores are located.Serving the diverse demographicsand needs of our cu

150、stomers drives a culture and workforce that embraces and reflects the communities we serve.We will continue to develop and evolve how we enhance Diversity,Inclusion&Belonging throughout SBH.Werecognize the value these initiatives bring to our Company,our associates,our customers and the communitiesw

151、e serve.-9-RegulationWe are subject to a wide variety of laws and regulations,which historically have not had a material effect on ourbusiness.For example,in the U.S.,most of the products sold and the content and methods of advertising andmarketing utilized are subject to both federal and state regu

152、lations administered by a host of federal and stateagencies,including,in each case,one or more of the following:the Food and Drug Administration,or FDA,theFederal Trade Commission and the Consumer Products Safety Commission.The transportation and disposal ofmany of our products are also subject to f

153、ederal and state regulation.State and local agencies regulate manyaspects of our business.We also face comprehensive regulation outside the U.S.,focused primarily on productlabeling and safety issues.As of September 30,2021,SBS and BSG supplied franchised stores located in the U.S.and certain countr

154、ies inEurope.As a result of these franchisor-franchisee relationships,we are subject to regulation when offering andselling franchises in the applicable countries.The applicable laws and regulations affect our business practices,as franchisor,in a number of ways,including restrictions placed upon th

155、e offering,renewal,termination anddisapproval of assignment of franchises.To date,these laws and regulations have not had a material effect uponour operations.Access to Public FilingsOur Annual Report on Form 10-K,our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K,and amendments

156、to such reports are available,without charge,on our website,assoon as reasonably possible after they are filed electronically with the Securities and Exchange Commission,orSEC,under the Exchange Act.The SEC maintains an internet site that contains our reports,proxy andinformation statements,and othe

157、r information we file electronically with the SEC at www.sec.gov.We willprovide copies of such reports to any person,without charge,upon written request to our Investor RelationsDepartment at our principal office.The information found on our website shall not be considered to be part ofthis or any o

158、ther report filed with or furnished to the SEC.ITEM 1A.RISK FACTORSImportant risk factors that could materially affect our business,financial condition or results of operations infuture periods are described below.These factors are not intended to be an all-encompassing list of risks anduncertaintie

159、s and are not the only risks and uncertainties we face.Additional risks not currently known to us orwe currently deem to be immaterial also may materially adversely affect our business,financial condition orresults of operations in future periods.Operational,Strategic and General Business RisksThe b

160、eauty products distribution industry is highly competitive and is consolidating.The beauty products distribution industry is highly fragmented and competitive,with few significant barriers toentry into the marketplaces for most of the types of products we sell.We face significant competition from ot

161、herbeauty stores and outlets,salons,mass merchandisers,online retailers,drug stores and supermarkets.Theprimary competitive factors in the beauty products distribution industry are price,quality,perceived value,consumer brand name recognition,packaging and variety and availability,customer service,a

162、nd desirable storelocations.Competitive conditions may limit our ability to maintain prices or may require us to reduce prices inefforts to retain business or channel share,particularly because customers are able to quickly and convenientlycomparison shop and determine real-time product availability

163、 using digital tools,which can lead to decisionsdriven solely by price,the functionality of the digital tools,or a combination of these and other factors.Some ofour competitors have greater financial and other resources than we do and are less leveraged than our businessand may therefore be able to

164、spend more aggressively on advertising and promotional activities and respondmore effectively to changing business and economic conditions.We expect existing competitors,business-10-partners and new entrants to the beauty products distribution industry to constantly revise or improve theirbusiness m

165、odels in response to challenges from competing businesses,including ours.If these competitorsintroduce changes or developments that we cannot address in a timely or cost-effective manner,our business maybe adversely affected.In addition,our industry is consolidating,which may give our suppliers and

166、our competitors increasednegotiating leverage and greater marketing resources.For instance,we may lose customers if those competitorswhich have broad geographic reach attract additional salons(individual and chain)that are currently BSGcustomers,or if professional beauty supply manufacturers align t

167、hemselves with our competitors or begin sellingdirect to customers.Not only does consolidation in distribution pose risks from competing distributors,but it mayalso place more leverage in the hands of certain manufacturers,resulting in smaller margins on products soldthrough our network.If we are un

168、able to compete effectively in our marketplace or if competitors divert our customers away from ournetworks,it would adversely impact our business,financial condition and results of operations.We may be unable to anticipate and effectively respond to changes in consumer preferences and buying trends

169、in a timely manner.Our success depends in part on our ability to anticipate,gauge and react in a timely manner to changes inconsumer spending patterns and preferences for specific beauty products.If we do not timely identify andproperly respond to evolving trends and changing consumer demands for be

170、auty products in the geographies inwhich we compete,our sales may decline significantly.Furthermore,we may accumulate additional inventoryand be required to mark down unsold inventory to prices that are significantly lower than normal prices,whichwould adversely impact our margins and could further

171、adversely impact our business,financial condition andresults of operations.Additionally,a large percentage of our SBS product sales come from our owned andexclusive-label brand products.The development and promotion of these owned and exclusive-label brandproducts often occur well before these produ

172、cts are sold in our stores.As a result,the success of these owned andexclusive-label brand products is largely dependent on our ability to develop products that meet future consumerpreferences at prices that are acceptable to our customers.Furthermore,we may have to spend a significantamount on the

173、advertising and marketing of our owned and exclusive-label brands to drive customer awarenessof these brands.There can be no assurance that any new owned and exclusive-label brand will meet consumerpreferences,gain acceptance among our customer base or generate sales to become profitable or to cover

174、 thecosts of its development and promotion.We expect continuously changing fashion-related trends and consumer tastes to influence future demand forbeauty products.Changes in consumer tastes and fashion trends can have an impact on our financialperformance.If we are unable to anticipate and respond

175、to trends in the marketplace for beauty products andchanging consumer demands,our business could suffer.Our future success depends in part on our ability to successfully implement our strategic initiatives to improvethe customer experience,attract new customers and improve the sales productivity of

176、our stores.We are continuing the implementation of a significant number of strategic initiatives designed to play to winbyfocusing on our hair color and hair care business,improving our retail fundamentals,enhancing our digitalcapabilities and balancing our cost structure.There can be no assurance t

177、hat these or future strategic initiativeswill be successful.Furthermore,we are investing significant resources in these initiatives and the costs of theinitiatives may outweigh their benefits.If these strategic initiatives are not successful,our same store sales willsuffer and our growth prospects,f

178、inancial results,profitability and cash flows will also be adversely impacted.-11-Our restructuring program may not be successful or we may not fully realize the expected cost savings and/oroperating efficiencies from our restructuring plans.Our ability to grow profitably depends in large part on ou

179、r ability to successfully control or reduce our operatingexpenses.In furtherance of this strategy,we have engaged in ongoing activities to reduce or control costs,someof which are complicated and require us to expend significant resources to implement.Over the past severalyears,we have implemented,a

180、nd plan to continue to implement,restructuring plans to transform the Companyfor the future and support long-term sales growth and profitability.These programs are intended to touch allaspects of the business,enhance operating capabilities,create greater efficiencies and take advantage of ourconside

181、rable scale.Restructuring plans present significant potential risks that may impair our ability to achieveanticipated operating enhancements and/or cost reductions,or otherwise harm our business,including higher thananticipated costs in implementing our restructuring plans,as well as management dist

182、raction.The restructuringprogram and workforce changes may negatively impact communication,morale,management cohesiveness andeffective decision-making.Despite these cost control plans,our costs may continue to increase for theforeseeable future.We depend upon manufacturers who may be unable to provi

183、de products of adequate quality or who may beunwilling to continue to supply products to us.We do not manufacture any products we sell,and instead purchase our products from recognized brandmanufacturers and private label fillers.We depend on a limited number of manufacturers for a significantpercen

184、tage of the products we sell.Since we purchase products from many manufacturers and fillers under at-will contracts and contracts which canbe terminated without cause upon 90 daysnotice or less,or which expire without express rights of renewal,manufacturers and fillers could discontinue sales to us

185、immediately or upon short notice.Some of our contractswith manufacturers may be terminated if we fail to meet specified minimum purchase requirements.If minimumpurchase requirements are not met,we do not have contractual assurances of continued supply.In lieu oftermination,a manufacturer may also ch

186、ange the terms upon which it sells,for example,by raising prices orbroadening distribution to third parties.For these and other reasons,we may not be able to acquire desiredmerchandise in sufficient quantities or on acceptable terms in the future.Changes in SBSs and BSGs relationships with suppliers

187、 occur often and could positively or negatively impactthe net sales and operating earnings of both business segments.Some of our suppliers may seek to decrease theirreliance on distribution intermediaries,including full-service/exclusive and open-line distributors like BSG andSBS,by promoting their

188、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-providedproducts were to diminish relative to our competitors or we were not able to purchase products at the same p

189、ricesas our competitors,our business could be materially and adversely affected.Also,consolidation among suppliersmay increase their negotiating leverage,thereby providing them with competitive advantages that may increaseour costs and reduce our revenues,adversely affecting our business,financial c

190、ondition and results of operations.Therefore,there can be no assurance that the impact of these developments,if they were to occur,will notadversely impact revenue or margins or that our efforts to mitigate the impact of these developments will besuccessful.Any significant interruption in the supply

191、 of products by manufacturers and fillers or disruptions in oursupply chain infrastructure could disrupt our ability to deliver merchandise to our stores and customers in atimely manner,which could have a material adverse effect on our business,financial condition and results ofoperations.Manufactur

192、ers and owned and exclusive-label brand fillers of beauty supply products are subject to certain risksthat could adversely impact their ability to provide us with their products on a timely basis,including inability to-12-procure ingredients,industrial accidents,environmental events,strikes and othe

193、r labor disputes,union organizingactivity,disruptions in logistics or information systems,loss or impairment of key manufacturing sites,productquality control,safety,licensing requirements and other regulatory issues,as well as natural disasters,pandemicsand other external factors over which neither

194、 they nor we have control.In addition,we directly source many of our owned and exclusive-label brand products,including,but not limitedto,styling tools,salon equipment,sundries and other promotional products,from foreign third-partymanufacturers and many of our vendors also use overseas sourcing to

195、manufacture some or all of their products.Any event causing a sudden disruption of manufacturing or imports from such foreign countries,including theimposition of additional or increased import restrictions,duties or tariffs,political instability,local businesspractices,legal or economic restriction

196、s on overseas suppliersability to produce and deliver products or acts ofwar or terrorism or pandemics,could materially harm our operations to the extent they affect the production,shipment or receipt of merchandise.Our operating results depend to some extent on the orderly operation of ourreceiving

197、 and distribution processes,which depend on manufacturersadherence to shipping schedules and oureffective management of our distribution facilities and capacity.We distribute products to our stores without supplementing such deliveries with direct-to-store arrangementsfrom vendors or wholesalers.We

198、are a retailer carrying beauty products that change on a regular basis inresponse to beauty trends,which makes the success of our operations particularly vulnerable to disruptions in ourdistribution infrastructure.Any significant interruption in the operation of our supply chain infrastructure,such

199、asdisruptions in our information systems,disruptions in operations due to fire or other catastrophic events,labordisagreements or shipping and transportation problems,could drastically reduce our ability to receive andprocess orders and provide products and services to our stores,full service custom

200、ers or e-commerce customers.Fluctuations in the price,availability and quality of inventory may result in higher cost of goods,which wemay not be able to pass on to the customers.Our suppliers frequently attempt to pass on higher production costs,which may impact our ability to maintain orgrow our m

201、argins.The price and availability of raw materials may be impacted by demand,regulation,weatherand other factors.Additionally,manufacturers have and may continue to have increases in other manufacturingcosts,such as transportation,labor and benefit costs.These increases in production costs result in

202、 highermerchandise costs to us.We may not always be able to pass on those cost increases to our customers,whichcould have a material adverse effect on our business,financial condition and results of operations.Our e-commerce businesses may be unsuccessful or,if successful,may redirect sales from our

203、 stores.We offer many of our beauty products for sale through our e-commerce businesses in the U.S.(such , and mobile commerce-basedapps)and abroad.We have recently undertaken a number of initiatives,including as part of our TransformationPlan and in response to COVID-19,to significantly advance our

204、 digital commerce capabilities and grow oure-commerce businesses.As a result,we are more susceptible to risks and difficulties frequently experienced byinternet-based businesses,including risks related to our ability to attract and retain customers on a cost-effectivebasis and our ability to operate

205、,support,expand and develop our e-commerce operations,websites and softwareand other related operational systems.Although we believe our participation in both e-commerce and physical store sales is a distinct advantage for usdue to synergies and the potential for new customers,supporting product off

206、erings through both of these channelscould create issues that have the potential to adversely affect our results of operations.For example,growth inour e-commerce business relative to in-store sales may result in dilution of operating margin and profit due tohigher delivery expenses incurred in our

207、e-commerce sales.Furthermore,if our e-commerce businessessuccessfully grow,they may do so in part by attracting existing customers,rather than new customers,whochoose to purchase products from us online rather than from our physical stores,thereby reducing the financial-13-performance of our stores.

208、In addition,offering different products through each channel could cause conflicts andcause some of our current or potential internet customers to consider competing distributors of beauty products.In addition,offering products through our e-commerce channels(particularly directly to consumers throu

209、gh ourprofessional business)could cause some of our current or potential vendors to consider competing internetofferings of their products either directly or through competing distributors.As we continue to grow oure-commerce businesses,the impact of attracting existing rather than new customers,of

210、conflicts between productofferings online and through our stores,and of opening up our channels to increased internet competition couldhave a material adverse impact on our business,financial condition and results of operations,including operatingmargin,profit,future growth and same store sales.Furt

211、hermore,our recent initiatives to upgrade our e-commerceplatforms 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.Diversion of professional products sold by BSG could have an adverse impact on our re

212、venues.The majority of the products that BSG sells,including those sold by our Armstrong McCall franchisees,aremeant to be used exclusively by salons and individual salon professionals or sold exclusively to their retailconsumers.However,despite our efforts to prevent diversion,incidents of product

213、diversion occur,whereby ourproducts are sold by these purchasers(and possibly by other bulk purchasers such as franchisees)to wholesalersand ultimately to general merchandise retailers,among others.These retailers,in turn,sell such products toconsumers.The diverted product may be old,tainted or dama

214、ged and sold through unapproved outlets,all ofwhich could diminish the value of the particular brand.In addition,such diversion may result in lower net salesfor BSG should consumers choose to purchase diverted products from retailers rather than purchasing from ourcustomers,or choose other products

215、altogether because of the perceived loss of brand prestige.Furthermore,inmany instances,BSG is subject to certain anti-diversion obligations under these manufacturerscontracts,that ifviolated may result in the termination of such contracts.In addition,our investigation and enforcement of theseanti-d

216、iversion obligations may require us to cease selling to customers suspected of diversion which could impactBSGs net sales.BSGs financial results are affected by the financial results of BSGs franchised-based business(ArmstrongMcCall).BSG receives revenue from its sale of products to Armstrong McCall

217、 franchisees.Accordingly,a portion ofBSGs financial results is dependent upon the operational and financial success of these franchisees,includingtheir implementation of BSGs strategic plans.If sales trends or economic conditions worsen for ArmstrongMcCalls franchisees,their financial results may wo

218、rsen.Additionally,the failure of Armstrong McCallfranchisees to renew their franchise agreements,any requirement that Armstrong McCall restructure its franchiseagreements in connection with such renewals,or any failure of Armstrong McCall to meet its obligations underits franchise agreements,could r

219、esult in decreased revenues for BSG or create legal issues with our franchisees orwith manufacturers.Furthermore,our franchisees may not run the stores and sales teams according to our standards,which couldhave a material adverse effect on our brand reputation and our business.We may not be able to

220、successfully identify acquisition candidates or successfully complete desirableacquisitions,and any acquisition could prove difficult to integrate,disrupt our business or have an adverseeffect on our results of operations.In the past several years,we have completed multiple acquisitions and we inten

221、d to pursue additionalacquisitions in the future.We actively review acquisition prospects we believe would complement our existinglines of business,increase the size and geographic scope of our operations or otherwise offer profitable growthand operating efficiency opportunities.There can be no assu

222、rance we will continue to identify suitableacquisition candidates.Furthermore,due to,among other things,increasing competition for suitable acquisition-14-candidates,our ability to reach agreement with acquisition candidates or finance such acquisitions on favorableterms,we may not be able to consum

223、mate such acquisitions on favorable terms or at all.Any acquisitions we do make may be difficult to integrate profitably into our business and may entail numerousrisks,including:difficulties in assimilating acquired operations,stores or products,including the loss of key employeesfrom acquired busin

224、esses;diversion of managements attention from our core business,including loss of management focus onmarketplace developments;operating inefficiencies and negative impact on profitability;entering geographic areas or channels in which we have limited or no prior experience;andunknown liabilities of

225、the businesses that we acquire.As a result,we may not realize the anticipated benefits of our acquisitions.If we are unable to optimize our store base by profitably opening and operating new stores and closing lessprofitable stores,our business,financial condition and results of operations may be ad

226、versely affected.Our future growth strategy depends in part on our ability to optimize and profitably operate our stores in existingand additional geographic areas,including in international geographies,and to close underperforming stores.While the capital requirements to open an SBS or BSG store,ex

227、cluding inventory,vary from geography togeography,such capital requirements have historically been relatively low in the U.S.and Canada.Despite theserelatively low opening costs,we may not be able to open all the new stores we plan to open and we may beunable to optimize our store base by closing st

228、ores that are unprofitable or open stores that are profitable,any ofwhich could have a material adverse impact on our business,financial condition and results of operations.In addition,as we continue to open new stores,our management,as well as our financial,distribution andinformation systems,and o

229、ther resources will be subject to greater demands.If our personnel and systems areunable to successfully manage this increased burden,our business,financial condition and results of operationsmay be materially affected.Use of social media may adversely impact our reputation.There has been a substant

230、ial increase in the use of social media platforms,including blogs,social media websitesand other forms of digital communications,and the influence of social medial influencers in the beauty productsindustry.Negative commentary regarding us or the products we sell may be posted on social media platfo

231、rms orother electronic means at any time and may be adverse to our reputation or business.Customers value readilyavailable information and often act on such information without further investigation and without regard to itsaccuracy.Any harm to us or the products we sell may be immediate without all

232、owing us an opportunity forredress or correction.We also use social media platforms as marketing tools.For example,we maintain Facebook,Twitter,Instagramand Pinterest accounts.As laws and regulations rapidly evolve to govern the use of these platforms and devices,the failure by us,our employees,or t

233、hird parties acting at our direction to abide by applicable laws andregulations in the use of these platforms and devices could adversely impact our business,financial condition,profitability,and cash flows.In addition,we have agreements with a variety of industry influencers,and we feature industry

234、 influencers in ouradvertising and marketing efforts and may include them in some of our branding.Further,many industry-15-influencers use our products and feature our products through their own platforms.Actions taken by theseindividuals could harm our brand image,net revenues and profitability.Our

235、 marketing efforts through socialmedia platforms and influencers may not be successful and the availability of these platforms may make it easierfor smaller competitors to compete with us.If we fail to attract and retain highly skilled management and other personnel,our business,financialcondition a

236、nd 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 seniorexecutives who possess extensive knowledge,experience and managerial skill applicable to our business.Significant leadership changes or executive manag

237、ement transitions involve inherent risk and any failure toensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning,executionand future performance.In addition,from time to time,key executive personnel leave our Company and we maynot be successful in attr

238、acting,integrating and retaining the personnel required to grow and operate our businessprofitably.While we strive to mitigate the negative impact associated with the loss of a key executive employee,an unsuccessful transition or loss could significantly disrupt our operations and could have a mater

239、ial adverseeffect on our business,financial condition and results of operations.We are also dependent on recruiting,training,motivating and managing our store employees that interact withour customers on a daily basis.Competition for these types of qualified employees is intense and the failure toat

240、tract,retain and properly train qualified and motivated employees could result in decreased customersatisfaction,loss of customers,and lower sales.In addition,our ability to meet our labor needs while controllinglabor costs is subject to numerous external factors,including market pressures with resp

241、ect to prevailing wagerates,unemployment levels,and health and other insurance costs;the impact of legislation or regulationsgoverning labor relations,immigration,minimum wage,and healthcare benefits;changing demographics;andour reputation within the labor market.Our inability to control our labor c

242、osts could affect our results ofoperations and result in lower margins in our two segments.Our associates or others may engage in misconduct or other improper activities,including noncompliancewith our policies and procedures.We are exposed to the risk of misconduct or other improper activities by o

243、ur associates and third parties such asindependent contractors or agents.Misconduct by associates,independent contractors,or agents could includeinadvertent or intentional failures to comply with our policies and procedures,the laws and regulations to whichwe are subject,and/or ethical,social,produc

244、t,labor,and environmental standards.Our current and formerassociates or independent contractors may also become subject to allegations of sexual harassment,racial andgender discrimination,or other similar misconduct,which,regardless of the ultimate outcome,may result inadverse publicity that could s

245、ignificantly harm our brand,reputation,and operations.Associate misconduct couldalso involve improper use of information obtained in the course of the associates prior or current employment,which could result in legal or regulatory action and harm to our reputation.Regulatory,Legal and Cybersecurity

246、 RisksIf products sold by us are found to be defective in labeling or content,our credibility and that of the brands wesell may be harmed,marketplace acceptance of our products may decrease,and we may be exposed to liabilityin excess of our products liability insurance coverage and manufacturer inde

247、mnities.We do not control the production process for the products we sell.We may not be able to identify a defect in aproduct we purchase from a manufacturer or owned and exclusive-label brand filler before we offer such productfor resale.In many cases,we rely on representations of manufacturers and

248、 fillers about the products we purchasefor resale regarding the composition,manufacture and safety of the products,as well as the compliance of ourproduct labels with government regulations.Our sale of certain products exposes us to potential product liability-16-claims,recalls or other regulatory o

249、r enforcement actions initiated by federal,state or foreign regulatoryauthorities or through private causes of action.Such claims,recalls or actions could be based on allegations that,among other things,the products sold by us are misbranded,contain contaminants or impermissible ingredients,provide

250、inadequate instructions regarding their use or misuse,or include inadequate warnings concerningflammability or interactions with other substances.Claims against us could also arise as a result of the misuse bypurchasers of such products or as a result of their use in a manner different than the inte

251、nded use.We may berequired to pay for losses or injuries actually or allegedly caused by the products we sell and to recall any productwe sell that is alleged to be or is found to be defective.Furthermore,such claims could have an adverse impacton our reputation.Any actual defects or allegations of

252、defects in products sold by us could result in adverse publicity and harm ourcredibility or the credibility of the manufacturer,which could adversely affect our business,financial conditionand results of operations.Although we may have indemnification rights against the manufacturers of many of thep

253、roducts we distribute and rights as an“additional insured”under the manufacturersinsurance policies,it is notcertain that any manufacturer or insurer will be financially solvent and capable of making payment to any partysuffering loss or injury caused by products sold by us or if all losses would be

254、 covered by such indemnificationrights or insurance policies.If we are forced to expend significant resources and time to resolve such claims or topay material amounts to satisfy such claims,it could have an adverse effect on our business,financial conditionand results of operations.We could be adve

255、rsely affected if we do not comply with current laws and regulations or if we become subjectto additional or more stringent laws and regulations.We are subject to a number of federal,state and local laws and regulations in the U.S.,as well as applicable lawsand regulations in each foreign marketplac

256、e in which we do business.These laws and regulations govern thecomposition,packaging,labeling and safety of the products we sell,as well as the methods we use to sell andimport these products and other aspects of our business.Non-compliance with applicable laws and regulations ofgovernmental authori

257、ties,including the FDA and similar authorities in other jurisdictions,by us or themanufacturers and fillers of the products sold by us could result in fines,product recalls and enforcement actions,and otherwise restrict our ability to market certain products,which could adversely affect our business

258、,financialcondition and results of operations.In addition,the laws and regulations applicable to us or manufacturers of the products sold by us may becomemore stringent.Failure to comply with these new and existing regulations could result in significant fines ordamages,in addition to costs and expe

259、nses to defend claims related thereto.Legal compliance could also lead toconsiderably higher internal regulatory costs.Manufacturers may try to recover some or all of any increasedcosts of compliance by increasing the prices at which we purchase products,and we may not be able to recoversome or all

260、of such increased cost in our own prices to our customers.We are also subject to state and local lawsand regulations that affect our franchisor-franchisee relationships.Increased compliance costs and the loss ofsales of certain products due to more stringent or new laws and regulations could adverse

261、ly affect our business,financial condition and results of operations.The risks associated with climate change and other environmental impacts and increased focus bystakeholders on environmental issues,including those associated with climate change,could adversely affectour business,financial conditi

262、on,and operating results.Climatologists predict the long-term effects of climate change and global warming will result in the increasedfrequency,intensity,and duration of weather events,which could significantly disrupt supply chains,potentiallyimpacting our vendorsraw material costs and the product

263、ion of products sold at our stores.These weatherevents could also lead to an increased rate of temporary store closures and reduced customer traffic at our stores.-17-In addition,concern over climate change may result in new or increased regional,federal or global legal andregulatory requirements to

264、 reduce or mitigate the effects of greenhouse gases.These requirements may lead to anincrease in tax,transportation,and utility expenses.Lastly,there is increased focus,including by governmental and non-governmental organizations,investors,customers and consumers on these and other environmental sus

265、tainability matters,including deforestation,landuse,climate impact and recyclability or recoverability of packaging,including plastic.Our reputation could bedamaged if we or others in our industry do not act,or are perceived not to act,responsibly with respect to ourimpact on the environment.If we f

266、ail to protect our intellectual property rights or if our products are found to infringe on the intellectualproperty rights of others,it could materially and negatively impact our business.We rely upon trade secrets and know-how to develop and maintain our competitive position.Our trademarks,certain

267、 of which are material to our business,are registered or legally protected in the U.S.,Canada and othercountries in which we operate.The success of our business depends to a certain extent upon the value associatedwith our intellectual property rights.We protect our intellectual property rights thro

268、ugh a variety of methods,including,but not limited to,applying for and obtaining trademark protection in the U.S.,Canada and othercountries throughout the world in which our business operates.We also rely on trade secret laws,in addition toconfidentiality agreements with vendors,employees,consultant

269、s and others who have access to our proprietaryinformation.While we intend to vigorously protect our trademarks against infringement,we may not besuccessful.In addition,the laws of certain foreign countries may not protect our intellectual property rights to thesame extent as the laws of the U.S.The

270、 costs required to protect our intellectual property rights and trademarksare expected to continue to be substantial.Furthermore,the industry in which we operate is characterized by the need for a large number of copyrights,trade secrets and trademarks and by frequent litigation based on allegations

271、 of infringement or other violations ofintellectual property rights.A third-party may at any time assert our products violate such partys intellectualproperty rights.Successful intellectual property claims against us could result in significant financial liabilitiesand/or prevent us from selling cer

272、tain of our products.In addition,the resolution of infringement claims mayrequire us to redesign our products,to obtain licenses to use intellectual property belonging to third parties,which may not be attainable on reasonable terms,or to cease using the intellectual property altogether.We may be ad

273、versely affected by any disruption in our information technology systems.Our operations are dependent upon our information technology systems,which encompass all of our majorbusiness functions.A substantial disruption in our information technology systems for any prolonged time period(arising from,f

274、or example,system capacity limits from unexpected increases in our volume of business,outagesor delays in our service)could result in delays in receiving inventory and supplies or filling customer orders andadversely affect our customer service and relationships.In addition,our information technolog

275、y systems may bevulnerable to damage or interruption from circumstances beyond our control,including,without limitation,fire,natural disasters,power outages,systems disruptions,system conversions,security breaches,cyberattacks,phishing attacks,viruses and/or human error.In any such event,we could be

276、 required to make a significantinvestment to fix or replace our information technology systems,and we could experience interruptions in ourability to service customers.Such delays,problems or costs may have a material adverse effect on our business,financial condition and results of operations.We co

277、ntinuously need to improve and upgrade our systems and infrastructure while maintaining their reliabilityand integrity.The expansion of our systems and infrastructure will require us to commit substantial financial,operational and technical resources before the volume of our business increases,with

278、no assurance the volume ofbusiness will increase.The development and implementation of new systems and any other future upgrades toour systems and information technology may require significant costs and divert our managements attention and-18-other resources from our core business.There are also no

279、 assurances these new systems and upgrades willprovide us with the anticipated benefits and efficiencies.Many of our systems are proprietary,and as a result ouroptions are limited in seeking third-party help with the operation and upgrade of those systems.There can be noassurance the time and resour

280、ces our management will need to devote to operations and upgrades,any delays dueto the installation of any upgrade(and customer issues therewith),any resulting service outages,or the impact onthe reliability of our data from any upgrade or any legacy system,will not have a material adverse effect on

281、 ourbusiness,financial condition,control environment or results of operations.Unauthorized access to confidential information and data on our information technology systems and securityand data breaches could materially adversely affect our business,financial condition and operating results.As part

282、of our operations,we receive and maintain information about our customers,employees and other thirdparties.We have physical,technical and procedural safeguards in place that are designed to protect informationand protect against security and data breaches as well as fraudulent transactions and other

283、 activities.Despitethese safeguards and our other security processes and protections,we cannot be assured that all of our systemsand processes are free from vulnerability to security breaches(through cyber-attacks,which are evolving andbecoming increasingly sophisticated,physical breach or other mea

284、ns)or inadvertent data disclosure by thirdparties or us.A significant data security breach,including misappropriation of our customersor employeesconfidentialinformation,could result in significant costs to us,which may include,among others,potential liabilities topayment card networks for reimburse

285、ments of credit card fraud and card reissuance costs,including fines andpenalties,potential liabilities from governmental or third-party investigations,proceedings or litigation,legal,forensic and consulting fees and expenses,costs and diversion of management attention required forinvestigation and

286、remediation actions,and the negative impact on our reputation and loss of confidence of ourcustomers,suppliers and others,any of which could have a material adverse impact on our business,financialcondition and operating results.Further,we are subject to an evolving body of federal,state and non-U.S

287、.laws,rules,regulations,guidelines andprinciples regarding data privacy and security.Several governments,including the EU,have regulations dealingwith the collection and use of personal information obtained from their citizens,and regulators globally are alsoimposing greater monetary fines for priva

288、cy violations.As of May 2018,the European privacy regulationGeneral Data Protection Regulation(“GDPR”)went into effect,strengthening and expanding the rules pertainingto how organizations are required to handle the personal data of individuals located in the EU at the time the datais collected.GDPR

289、establishes new requirements regarding the handling of personal data,and non-compliancewith the GDPR may result in significant monetary penalty.In addition,the State of California recently enacted adata privacy law applicable to entities serving or employing California residents(the“CCPA”)that requi

290、redcompliance by January 2020.Any potential inability to comply with such laws,rules,regulations,guidelines andprinciples or to quickly adapt our practices to reflect them as they develop,could potentially subject us tosignificant fines,damages,liabilities and reputational harm,which could have a ma

291、terial adverse effect on ourbusiness,prospects,results of operations,financial condition and cash flows.In response to prior data security incidents,we have taken and are continuing to take actions to further strengthenthe security of our information technology systems,including adopting payment ter

292、minals with end-to-endencryption technology in order to enhance the security of our credit card payment systems.Nevertheless,therecan be no assurance our security upgrades will be effective,we will not suffer a similar criminal attack in thefuture,unauthorized parties will not gain access to confide

293、ntial information,or any such incident will bediscovered promptly.In particular,we understand that the techniques used by criminals to obtain unauthorizedaccess to sensitive data change frequently and often are not recognized until launched against a target;accordingly,we may be unable to anticipate

294、 these techniques or implement adequate preventative measures.Thefailure to promptly detect,determine the extent of and appropriately respond to a significant data security breachcould have a material adverse impact on our business,financial condition and operating results.-19-General Economic,Marke

295、t and Foreign RisksThe political,social and economic conditions in the geographies we serve may affect consumer purchases ofdiscretionary items such as beauty products and salon services,which could have a material adverse effect onour business,financial condition and results of operations.Our resul

296、ts of operations may be materially affected by conditions in the global capital markets and the economyand regulatory environment generally,both in the U.S.and internationally.Concerns over the COVID-19pandemic and future pandemics,inflation,employment,tax laws,energy costs,geopolitical issues,uncer

297、taintywith respect to elections,terrorism,civil unrest,the availability and cost of credit,the mortgage market,sovereign and private banking systems,sovereign deficits and increasing debt burdens and the real estate andother financial markets in the U.S.and Europe have contributed to increased volat

298、ility and diminishedexpectations for the U.S.and certain foreign economies.We appeal to a wide demographic consumer profile andoffer an extensive selection of beauty products sold directly to retail consumers and salons and salonprofessionals.Continued uncertainty in the economy could adversely impa

299、ct consumer purchases ofdiscretionary items such as beauty products,as well as adversely impact the frequency of salon servicesperformed by professionals using products purchased from us.Factors that could affect consumerswillingnessto make such discretionary purchases include:general business condi

300、tions,levels of employment,interest rates,tax rates,the availability of consumer credit and consumer confidence in future economic conditions.As we haveexperienced and continue to experience with the COVID-19 pandemic,a prolonged economic downturn or acuterecession,can adversely affect consumer spen

301、ding habits and result in lower than expected net sales.Theeconomic climate could also adversely affect our vendors.The occurrence of any of these events could have amaterial adverse effect on our business,financial condition and results of operations.The occurrence of natural disasters or acts of v

302、iolence or terrorism could adversely affect our operations andfinancial performance.The occurrence of natural disasters or acts of violence,terrorism or civil unrest could result in physical damage to ourproperties,the temporary closure of stores or distribution centers,the temporary lack of an adeq

303、uate work force,thetemporary 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 asubstantial increase in the cost of those delive

304、ries),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 orterrorism were to impact our business,we could,among other things,incur significantly higher costs and lo

305、nger leadtimes associated with distributing products.Furthermore,insurance costs associated with our business may risesignificantly in the event of a large scale natural disaster or act of violence or terrorism.Currency exchange rate fluctuations could result in higher costs and decreased margins an

306、d earnings.Many of our products are sold outside of the United States.As a result,we conduct transactions in variouscurrencies,which increase our exposure to fluctuations in foreign currency exchange rates relative to the U.S.dollar.Our international revenues and expenses generally are derived from

307、sales and operations in foreigncurrencies,and these revenues and expenses could be affected by currency fluctuations,including amountsrecorded in foreign currencies and translated into U.S.dollars for consolidated financial reporting.Currencyexchange rate fluctuations could also disrupt the business

308、 of the independent manufacturers that produce ourproducts by making their purchases of raw materials,as well as transportation and freight,more expensive andmore difficult to finance.Foreign currency fluctuations could have an adverse effect on our results of operationsand financial condition.The C

309、OVID-19 pandemic has had and may continue to have an adverse effect on our business and results ofoperations.In March 2020,the World Health Organization declared COVID-19 a global pandemic,and governmentalauthorities around the world implemented various measures to reduce the spread of COVID-19,incl

310、uding-20-shelter-in-place and quarantine orders.As a result of COVID-19 and these measures,for part of fiscal year 2020we temporarily closed all U.S.and Canadian retail and wholesale store fronts to customers and temporarily idleda number of our distribution centers.While our stores have remained op

311、en for fiscal year 2021,there is noguarantee that we will not have to close stores in the future as a result of COVID-19 or its variants,or measuresdesigned to reduce the spread of COVID-19,and any such store closures or related business disruptions mayhave a material and adverse effect on our resul

312、ts of operations.We have taken and continue to take decisive actions across our businesses to help protect employees,customers,and others in the communities we serve in response to the impact of COVID-19.These actions include increasedsanitization and social distancing practices in our stores and re

313、mote work arrangements for a significant numberof our corporate employees.These actions have the potential to increase our operating costs and decreaseconsumer traffic in our stores.While the COVID-19 pandemic did not have a material impact on our supply chain,it has the potential to have ameaningfu

314、l impact on our supply chain if the factories that manufacture our products,the distribution centerswhere we manage our inventory,or the operations of our logistics and other service providers are disrupted,temporarily closed or experience worker shortages.We may also see disruptions or delays in sh

315、ipments andnegative impacts to pricing of certain products as a result of such disruptions.In addition,the disruption to the global economy and to our business,along with a sustained decline in our stockprice,may lead to triggering events that may indicate that the carrying value of certain assets i

316、ncludinginventories,accounts receivables,long-lived assets,intangibles and goodwill may not be recoverable,whichcould lead to impairment or other asset write-downs in the future.Changes in consumer behavior as a result of COVID-19 may materially and adversely affect our business.Consumer fears about

317、 becoming ill with COVID-19 will continue in the near-term and consumer behavior mayfundamentally change as a result of COVID-19 in both the near and long term.As a result,traffic in retail stores,including our stores,in the short term has been and in the long term may be materially and adversely af

318、fectedwith more consumers relying on e-commerce to purchase beauty products.Consumer spending may also benegatively impacted by general macroeconomic conditions and consumer confidence,including the impacts ofthe recession which resulted from the COVID-19 pandemic.All of this could materially and ad

319、versely impactsales at our retail stores.While we have accelerated the roll-out of our digital programs in response to thetemporary closure of our stores and potential changes in consumer behavior,there is no guarantee we will besuccessful in growing our e-commerce sales or materially offsetting low

320、er sales at our retail stores.We haveexpended and plan to continue to expend significant resources to strengthen our digital platforms and we arere-designing our supply chain to focus more on e-commerce sales and fulfillment in the future,each of whichhave resulted in additional unexpected capital e

321、xpenditures,business disruption and lower margin sales.A reduction in traffic to,or the closing of,other retailers in shopping areas where our SBS stores are locatedcould significantly reduce our sales and leave us with excess inventory,which could have a material adverseeffect on our business,finan

322、cial condition,profitability,and cash flows.As a result of our real estate strategy,most of our SBS stores are located in strip shopping centers.These stripshopping centers are occupied by other high traffic retailers such as grocery stores,mass merchants and homeimprovement centers.As a consequence

323、 of most of our SBS stores being located in strip shopping centers,oursales are derived,in part,from the volume of traffic generated by the other high traffic retailers where our storesare located.Customer traffic to these strip shopping centers may be adversely affected by the closing of stores int

324、he strip shopping center,or by a reduction in traffic to such stores resulting from a regional or global economicdownturn,an outbreak of flu or other viruses(such as COVID-19),a general downturn in the local area whereour SBS store is located,or a decline in the desirability of the shopping environm

325、ent of a particular stripshopping center.Such a reduction in customer traffic could 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.-21-Financial RisksOur same store sales and quarterly fi

326、nancial performance may fluctuate for a variety of reasons.Our same store sales and quarterly results of operations have fluctuated in the past and we expect them tocontinue to fluctuate in the future.A variety of factors affect our same store sales and quarterly financialperformance,including:chang

327、es in our merchandising strategy or mix;a portion of a typical new stores sales(or sales we make over our e-commerce channels)coming fromcustomers who previously shopped at other existing stores;the timing and effectiveness of our marketing and promotional activities and those of our competitors;the

328、 effects of severe weather events or other natural disasters;the number of shopping days in a quarter;fluctuations in the cost to us of products we sell;store closures in response to state or local regulations due to the COVID-19 pandemic or other healthconcerns;andworldwide economic conditions and,

329、in particular,the retail sales environment in the North Americaand EuropeAccordingly,our results,including same store sales,for any one fiscal quarter are not necessarily indicative ofthe results to be expected for any other quarter,and may even decrease,which could have a material adverseeffect on

330、our business,financial condition and results of operations.A portion of our indebtedness is subject to floating interest rates.Borrowings under our ABL facility and the variable portion of our term loan B are at variable rates of interestand expose us to interest rate risk.If interest rates were to

331、increase,our debt service obligations on the variablerate indebtedness referred to above would increase even if the principal amount borrowed remained the same,and our net income and cash flows will correspondingly decrease.We are currently party to,and in the future,wemay enter into additional,deri

332、vative instruments,such as interest rate caps,to reduce our exposure to changes ininterest rates.However,we may not maintain derivative instruments with respect to all of our variable rateindebtedness,and any instruments we enter into may not fully mitigate our interest rate risk.In addition,amounts

333、 drawn under our ABL facility and the variable portion of our term loan B may bear interestrates in relation to the London Interbank Offered Rate(“LIBOR”).It is unclear if LIBOR will cease to exist atthe end of 2021,when it is intended to be phased out,or if new methods of calculating LIBOR will be establishedsuch that it continues to exist after 2021.While both the ABL facility and the variable