After more than 27 years with Sally Beauty, a.k.a. Sally Beauty Holdings (SBH), Gary is hanging it up within the year to enjoy life. As the CEO, President and Chairman of the Board, one can only wonder the responsibilities Gary has had to tackle including those dreaded quarterly conference calls in which analysts ask questions they shouldn’t be asking.
I’ve had lunch with Gary and he has always been an affable type of guy that enjoyed running the business. Although SBH is one of our biggest competitors, Gary always had the vision that the beauty business is like all others and the bottom line is the most important. It’s all about numbers and basis points.
From a 30,000 foot view, this is the perfect time for Gary to exit. He already oversaw the acquisitions of many independent distributors to create Beauty Systems Group and Cosmoprof, now with more than 1000 stores and nearly as many DSC’s. Sally itself has ventured overseas but its been the USA business that has kept the machine running. With the low hanging fruit wiped out, the next CEO is going to have to spend his life in airplanes to grow the business. And I am certain that is not Gary’s desire.
With Gary’s announcement of retirement, he also announced his successor, Christian Brinkman. What is telling about this hire is that Brinkman is from outside the industry and was most recently a VP at Kimberly Clark (known for Huggies and Kleenex) on the international side. No doubt his hire was to grow the Sally business overseas. The press release stated that Gary would “train” Brinkman for up to one year. For sure Brinkman will need to learn the difference between nail polish and gel polish which could take at least a couple months. My biggest take-away from this hire is that Sally no longer needs a merchant to run its business, the days of merchants are over (and that is another commentary), and the focus must be on new growth. And the only place to grow is international.
Love him or hate him, Winterhalter and before him, Michael Renzulli (photo below in 1972), got their nails dirty in the business.
On one hand, I am thrilled for Gary to leave on a high note. On the other hand, it’s another tipping point for the pro beauty industry as the industry continues to evolve into the retail community. For us, it’s good news because no matter how much Winterhalter mentors Brinkman, Brinkman’s focus will never replace Winterhalter’s. Looking forward, salon professionals top 3 choices for buying products include:
- SBH focused on international expansion and run by an ex-Kimberly Clark VP
- L’Oreal (owns Salon Centric, Kerastase, Maybelline and a slew of brands), a $28 billion French empire
- THE INDUSTRY SOURCE, independent and family owned since 1985 still focused on the customer and being a merchant.
So long Gary and enjoy retirement (although you still have a few more years to offer your valued insight). Perhaps you can have lunch with George, Bill, Max, Essie and a few others one day. I wonder who would buy.
Desperate times call for desperate measures. It doesn’t take a rocket scientist to understand the professional hair product business is dead in the water. Even L’Oreal masters of the universe with their Kerastase brand among others just reported negative growth in the USA. Regis the largest operator of salons in the USA continues to report declining retail sales numbers. TIGI resorted to selling an off-label to Sally. It’s no secret either that Ulta continues to enjoy healthy growth in its business (albeit they sell a whole bunch more than hair care products). Ulta’s arch enemy, Sally Beauty Holdings (SBH), thinks it has the answer to Ulta: Loxabeauty.com.
According to SBH’s CEO Gary Winterhalter, loxabeauty will be BSG’s (they own more than 1000 Cosmoprof stores and employ nearly as many DSC’s) solution to helping salons compete against Ulta and retailers. The premise which has yet to be unveiled goes something like this: BSG gets sign-off from its major vendors to sell goods to consumers. Winterhalter already has Paul Mitchell, Kenra and a host of others lined up. The BSG DSC goes into a salon and most likely has the salon owner complete an application for the website including stylists names, name of salon and other vital facts.
The client goes into a salon, gets the service wanted and then the front desk manager gives the client a business card or such and the pitch, “We can offer you more than 3000 salon products and have them shipped directly to your front door. Just go to loxabeauty.com and enter this code on the card (the code is the salon code). All products will be shipped to you from our supplier and we endorse everything.” If the client goes home and makes a purchase, both the salon and stylist will receive commission.
For the salon owner, no more inventory to stock and a full assortment of products for their clients. Win-win, right? At least that is what Winterhalter thinks.
In the real world, Amazon has more than 10,000 salon products available at discount prices with free 2-day shipping to its Prime customers. And customers can buy any brand including brands BSG doesn’t sell such as Kerastase, Oribe, Bumble and Bumble and virtually every brand under the sun. And there are hundreds of other sites to buy beauty products. But alas, BSG is more concerned with Ulta than anyone else and Ulta cannot sell pro hair care products online (yet).
The other thing wrong here is that virtually every mass retailer has a full selection of pro beauty products. CVS, Walgreens and Rite Aid alone have more than 20,000 stores crammed with pro beauty. And they have virtually every brand BSG sells.
Bottom line is that this concept is as old as Ivory Soap. Some vendors today have their own consumer websites and give commissions back to salons. None of them work.
You at least have to give Winterhalter credit for thinking about the problem. But when it comes to hair care products for retail, it’s only a problem for BSG because that is their business. For every other business it is just one of hundreds of product categories.
I have a better idea and the timing is right. In fact, it’s perfect for the next generation of salons. I’ll talk more about it in my next blog.
In the meantime, there is one line that loxabeauty.com won’t have on its website and it’s the same brand not available at Ulta: Moroccanoil. Thank God for small miracles.
Happy President’s Day!