Welcome to the Sally Beauty Holdings Fiscal 2013 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. You will have an opportunity to ask questions after the presentation. Instructions will be given at that time. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Karen Fugate. Please go ahead.

Thank you. Before we begin, I would like to remind you that certain comments, including matters such as forecasted financial information, contracts or business and trend information made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934. Many of these forward-looking statements can be identified by the use of the words such as may, will, should, expect, anticipate, estimate, assume, continue, project, plan, believe and similar words or phrases. These matters are subject to a number of factors that could cause actual results to differ materially from expectations. Those factors are described in Sally Beauty Holdings’ SEC filings, including its most recent form – annual report on Form 10-K for the fiscal year ended September 30, 2012. The company does not undertake any obligation to publicly update or revise its forward-looking statements. The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. With me on the call today are Gary Winterhalter, Chairman, President, and CEO; and Mark Flaherty, Senior Vice President and Chief Financial Officer. Now I would like to turn the call over to Gary.

Thank you, Karen, and good morning everyone. Thank you for joining us for our fiscal 2013 first quarter earnings call. I’ll begin today’s discussion with a high-level review of our financial results and business initiatives. Mark will then take you through the fiscal 2013 first quarter in more detail. As you may have seen from our press release this morning, fiscal 2013 is off to a good start considering the difficult year-over-year sales comparisons. Consolidated sales in the first quarter grew 4.7% versus 9% in last year’s first quarter. This sales performance is attributed to net new store openings and consolidated same-store sales growth of 2.8%. Same-store sales growth was challenged by the record growth rate of 7.1% we achieved in the fiscal 2012 first quarter. Considering these difficult comparisons, we are pleased with our financial performance this quarter and remain confident we will achieve our objectives for the year. Gross profit margin in the first quarter expanded by 30 basis points to reach 49.1%, and SG&A as a percent of sales improved by 10 basis points. Both of these improvements led to operating margin expansion of 40 basis points. Net earnings in the first quarter were $59 million with earnings per share of $0.32. Our store base increased by 3.7%, or 162 stores, ending the quarter with a total store count of 4,525. Turning to segment performance, starting with Sally Beauty Supply: Same-store sales growth for Sally Beauty was 1.6% versus a record high of 8% in the prior year. Net sales grew 4.2% to reach $559 million. Sales growth at Sally was somewhat softer than we anticipated, primarily due to the handful of merchandise categories that continue to be a challenge. Our Beauty Club and customer acquisition programs performed well, driving traffic and higher average ticket in our…

Thanks, Gary. Consolidated net sales for the first quarter was $905.4 million, an increase of 4.7%. This increase was primarily driven by 162 net new store openings and 2.8% growth in same-store sales. As many are aware, we are comping against records same-store sales growth in the first half of fiscal 2012. Although we believe that we can deliver same-store sales growth for the year at the low-end of our 4% to 5% range, the comparisons for the first half of fiscal 2013 are likely to be in the range of 2.5% to 3%. Consolidated gross profit was $444 million, or 49.1% of sales, a 30 basis point improvement from the fiscal 2012 first quarter. First quarter SG&A expenses were $305.7 million and represented 33.8% of sales, a 10 basis point improvement from the 2012 first quarter. Unallocated corporate expenses, including share based compensation were $33 million, or 3.6% of sales, versus the fiscal 2012 first quarter expenses of $31.1 million and 3.6% of sales. For the fiscal year of 2013, unallocated corporate expenses including approximately $19 million in share-based compensation are expected to be in the previously stated range of $115 million to $125 million. Consolidated operating earnings in the first quarter increased 7.6% to reach $121.9 million. Operating margin was up 40 basis points to 13.5%. The first quarter’s performance was positively impacted by SG&A leverage and higher gross margins. Interest expense during the quarter totaled $26.7 million, a year-over-year decline of $37.2 million. If you recall in the fiscal 2012 first quarter, we closed on our senior notes offering of $750 million and used the proceeds to redeem our higher interest rate senior and senior sub-notes. As a result of these transactions, we incurred pre-tax charges of $39.9 million, which is the primary increase included in our…

Thank you, Mark. In summary, we had a good quarter considering the record sales growth we were up against from the prior year. We achieved 4.7% top-line growth, gross margin expansion of 30 basis points and SG&A leverage. We also executed on our stock repurchase program, which we continue to believe is an attractive return of capital to our shareholders. As always, thank you for your interest in Sally Beauty Holdings. And now we will turn it back to the operator to take your questions.

Great. Thank you. (Operator Instructions) Okay. We have a question from the line of Simeon Gutman with Credit Suisse. Please go ahead. Simeon Gutman – Credit Suisse: Thanks and good morning.

Good morning, Simeon Simeon Gutman – Credit Suisse: Good morning, Gary. So I wanted to start with the sales outlook. Curious what’s in – pardon me if I missed it, but I believe you said still optimistic in achieving, I guess, longer-term outlook. And I’m curious what gives you the confidence in achieving it now that we do face tougher compares on the next quarter. And I think the business, all things considered with even the comp this quarter, performed quite fine against it. So I guess keeping the bar at that level for the year, what gives you that confidence?

Well, the bar is still 4% to 5%, and I think we’ve also said that we do expect it to be at the lower end of that for the full year. And as you know, Q3 and Q4, we are at much more moderate comps from the previous year and the categories we’ve been having some issues with, particularly the Nail category, is coming back nicely. We’ve got some nice introductions coming primarily in late Q3 and Q4 that I think will help us there. And that’s been a significant part of our comp issue. And also in the Hair goods, we – the latest craze seems to be the blend of human and synthetic hair, which kind of answers the cost issue that we’ve have had with human hair, and I’ve been telling you for at least a year that the costs on human hair went up significantly, and there was a supply issue. So now this seems to kind of be in the middle. The pricing is much less on this than it is on 100% human hair, and we think that’s going to help that category quite a bit. So I’m still comfortable and confident that we’ll be at the low end of that 4% to 5% for the year. Obviously, Q2 here is going to be a huge challenge. I mean, we’re up against a comp that I’ve never seen in this company from last year, which was over 9%. And we had a similar thing in December, the Q1 all hinged on December. December, if you look at the Sally comp, people are disappointed with the Sally comp for Q1, but when you look at last year for December for Sally, they were over a 11% and that’s just off the charts for us. So I was expecting the Sally comp to be a little better than it was, but not significantly trying to come up against that from Q1 of last year. Simeon Gutman – Credit Suisse: And with regard to sales, how much can you control, meaning with Beauty Club Card? Is there any ability to maneuver within a short period of time targeting customers and is that something that maybe fuels optimism or is it more just the category growth and how Sally’s positioned within it?

The answer to that is yes. We have some nice tools in the box regarding the Beauty Club Card customer, and being able to make offers to them. Now, what I don’t want us to get in is the roller coaster of chasing comps and driving down margin. And I think it’s best for us to do what we can without destroying our margins to bolster comps this quarter, but not get so hung up on trying to hit the low end of our comp guidance for this particular quarter, because it’s going to just set us up for the same kind of difficulties next year in Q2. So – and not to say that we wouldn’t, we won’t do some of that and we plan on doing some of that, but we’re just not going to chase comps at the expense of margin, because I think we pay for it the following year anyway. Simeon Gutman – Credit Suisse: Okay. And then on the payroll tax and the late tax refund issues, have you seen any impact to either of the businesses from those?

I don’t believe we have. I think it would be somewhat difficult to really measure that, but I don’t believe we have. Simeon Gutman – Credit Suisse: Okay. Thanks for the color.

Thank you.

Okay. Thank you. And we have a question from the line of Meredith Adler with Barclays. Please go ahead. Meredith Adler – Barclays: Hey, guys. Thanks.

Hi, Meredith. Meredith Adler – Barclays: I was tempted to ask similar questions about kind of what you feel is going on with the consumer because we have seen a slowdown at other retailers. But I think you covered that well, so maybe we’ll just talk a little bit about some of these IT initiatives. Specifically interested in knowing how the rollout of SAP is going or did you not do it in the fourth quarter? And the same with the expanding the point of – new point-of-sales system, did you also delay that and how’s it going? Have you started it up now?

I think, I misunderstood you. Did you ask how the rollout of the SAP system was going? Meredith Adler – Barclays: Yeah.

Okay. First of all, we’re not using SAP. Meredith Adler – Barclays: Oh, I’m sorry. Keep talking.

Yeah. It’s okay, but I want to clarify that, because you say SAP to some people and they go into cardiac arrest. Meredith Adler – Barclays: That’s funny.

No, we – we’re introducing our international ERP system is Microsoft AX. We did introduce it in Mexico last summer. That’s up and running. Our plan is to introduce it in Europe. We have delayed that a little bit. Right now we plan on going live with it around the first of May. So some of the expense that we expected to have in Q2 regarding that hasn’t hit us yet. Regards to the Sally POS rollout, we did put that on hiatus only through the holidays. It’s just difficult to do that kind of thing during the month of December because the stores are busy. But we started that initiative again after the first of the year, and we’re quickly approaching 700 doors. And we also are still planning to have that completed or very, very close to being completed by the end of the fiscal year. Meredith Adler – Barclays: Okay. That’s great, and then I would just like to talk a little about what you’re seeing in some of the international markets. Has there been any change in the trends that you’re seeing?

No. The UK, as we said in the call and I think was in the press release, I’m really excited about getting that distribution issue behind us. That’s on plan. It’s doing very well. We will start shipping the end of the next month and be fully operational the end of April, which gives me a lot of confidence that all the costs and the issues that we’ve had with that for the last two years will be behind us before we get into fiscal 2014. And by the way, that was the total cause of Sally not getting SG&A leverage in the quarter. We got it for the total business, but Sally didn’t get it and it was not because of the comps in Sally USA, it was totally driven by the expenses in the UK. Meredith Adler – Barclays: Okay. Great. Thank you.

Thank you.

Oaky. We have a question from the line of Jason Gere with RBC Capital Markets. Please go ahead. Jason Gere – RBC Capital Markets: Okay. Thanks. Hey, guys.

Hi, Jason. Jason Gere – RBC Capital Markets: I guess I wanted to talk a little bit about just the cadence of sales, like, when you – I guess you reported last November 15, we already kind of knew that there was some Hurricane Sandy impact. So when you look at December, was that trend kind of flat? And I guess I’m just trying to see the sequence, like how December kind of pushed into January in terms of comp sales that gives you the confidence that you’ll do a similar comp in the second quarter as you did in the first quarter. That’s the first question.

Well, first of all, I think I’ve said back in the November call, that we really didn’t have a significant impact from the hurricane. We did have a couple 100 stores close, but I was actually fairly pleased with October comps, and I was pleased with November comps. They were actually well within our range. But as I said a few minutes ago, December on the Sally side, we were up against over an 11% comp from last year and it was a really difficult December because of that. I have not seen that softness flow into January. Now, I’m not commenting on January or Q2 specifically because, as you know from our comments, last year, February with the extra day is probably the biggest challenge month in Q2. And March, I think from a sales standpoint, March will be good with the earlier Easter being the last day of the month. However, we are closed on that day. So, that kind of offsets the benefit of the promotion because you lose millions of dollars of sales when you’re closed even on a Sunday for us. Jason Gere – RBC Capital Markets: Okay. And then, when you think about – I think you were saying same-store sales company-wide that would be 2.5% to 3% in the first half, so similar to that first quarter – you know. Well, I guess, break it down between BSG and in the Sally stores is – are you going to see Sally being that similar 1%-ish range and you’ll see another strong quarter out of BSG or how should we think about the composition between the two there?

Well, I fully expect the softness to be more on the Sally side, again, because of the comps last year. Now, if you look at BSG, Q1 last year, they were 5%. This year, they were a little above that. So, it’s well within our range, but they weren’t up against the wild comps, which obviously is primarily driven by the retail business and they don’t sell retail. So that’s a big factor with BSG. I would expect and fully anticipate BSG to be within the range that they’ve been. I think our softness, again, will be on the Sally side in Q2, but – you know, I’ll tell you the same thing I said in the November call. Obviously, in November, we didn’t have December completed yet. And obviously, today, we don’t have March completed yet. March will be the determining factor of Q2 because we know February with the – with the day – I mean, the extra day in February is 3% right there. So we know that’s going to be extremely challenging. If March comes back nicely, I believe we’ll be in the range you just discussed for Q2. But again, having said that, our comps were up 2 percentage points more in Q1 last year – in Q2 rather – than they were in Q1, from 7% to 9%, ballpark. So, now granted, that 1% of that in Q2 is completely due to the extra day. It’s 3% for the month, but it’s 1% for the quarter. So I believe that, again, if given what we’ve seen in January, given we believe we’ll have some significance softness due to the calendar in February. If March is strong for us, we could still fall in the range of what you just described and what we said earlier. Jason Gere – RBC Capital Markets: Okay. Great. Just a second question, if you look at the inventory up 10%, can you break out how much of that is because of the UK warehouse initiative and some of the promotions? So as that kind of cycles through, should we go back to seeing sales growth faster than inventory trends?

I don’t know this year whether it will get to that point, primarily because, as I just said, the UK issue will be through – will be with us through the end of Q2. The inventory burn off from that whole issue will take this well into Q3. So I think about roughly half of the inventory build had to do with the UK. The other half had to do with opening new stores. So what I would say to you is by Q4, we should be – should be through most of the inventory burn – excess inventory burn from the UK. Now, also consider that we planned to have the inventory to hit the low range of our comps, and we fell a little below that, so that gives you a little extra inventory as well. But inventory has never been a big problem for us. So I would tell you, going into next year, we should be back to our more normal inventory trends relative to sales. Jason Gere – RBC Capital Markets: Okay. And then the last question and I’ll hop off is just on the buyback. It sounds like the buyback was really through December, so I think you said you had a $159 million left – unless I did my math wrong, but there wasn’t any buying in January?

No. We said that – I gave that number in the prepared remarks. It was through January 31, the numbers that we gave you. Jason Gere – RBC Capital Markets: Okay. So I guess the thought is how do you have those internal discussions about taking on more leverage, and I know 2.5 is the kind of the number you – from 6.5 down to 2.5. But right now with the confidence in the business, the second half getting better. What are those thoughts in terms of going to maybe three times, three and half times over the next year or so?

Jason, I think we feel very comfortable with the 2 to 2.5 times. If you look at just kind of our normal trajectory and given the $1.6 million of debt is fixed, you should – you should just through the nature of the business de-lever down beyond 2.5 times. So in terms of operating within that band, we’re still very comfortable with that band, and we could see opportunistic activity in terms of either some of our shareholder-friendly activity or acquisitions or the growth of the business, where we might go above that for a very short period of time. But I think we still believe that we’re very comfortable with the range with which we can operate the business at 2 to 2.5 times. Jason Gere – RBC Capital Markets: Okay, great. Thanks for taking all my questions.

Thank you.

Okay. Thank you. And we have a question from the line of Taposh Bari with Goldman Sachs. Please go ahead. Taposh Bari – Goldman Sachs: Good morning, guys.

Taposh, how are you? Taposh Bari – Goldman Sachs: Good. Thank you. I wanted to ask about SG&A. So when you gave guidance for the year last quarter, you had said that you were expecting flat to slight deleverage on SG&A for the year on the 4% to 5% comp. Now, I would have expected some deleverage in the first quarter given the comparisons, but you actually got leverage. So can you just talk to us about your ability to kind of flex that line going forward as you face some of these challenges on the comparison side?

Yeah. Well, part of the reason is what I said earlier, we’ve kind of pushed back the international ERP system by a few months and some of those expenses probably would have started hitting in Q1 had we been moving forward a little quicker with it. And again, the UK had a great deal to do with not getting that leverage. But I’d still, with the things we have planned, I would not expect a lot of SG&A leverage on a full-year basis. I will also tell you that when we realize we’re having a little more difficult time than we may have expected or budgeted for, we pull down expenses. I mean, we have a fairly good control of labor hours in the store, labor hours in our distribution centers. Obviously, payroll’s one of our biggest expenses. So it’s not all fixed costs where we just have to sit here and take the punches, we can react. Taposh Bari – Goldman Sachs: Okay. That’s helpful. And the second question that I had was obviously lot of focus on Sally Beauty, but I wanted to ask about BSG. So good comps there, 5.5% comps, you’re growing square footage 4%; yet the sales growth at BSG is closer to 5%. I’m assuming that’s because you’re bringing down your consultant business. Can you just talk about the dynamics there? And secondarily to that question, is that having any impact on your SG&A dollar growth as well?

Yes and yes. The full service business actually had a very nice quarter. They were up, the stores were up more than the full service business. So that’s why the overall growth rate is a little less than the store comps. But BSG is kind of running on all eight right now. They’re doing extremely well. Everything’s just happening right. We continue to get distribution with new brands, and they’re executing extremely well. Taposh Bari – Goldman Sachs: Okay. Thanks a lot. Good luck.

Thank you.

Thank you. And we have a question from the line of Joe Altobello with Oppenheimer. Please go ahead. Joe Altobello – Oppenheimer: Thanks. Hey, good morning, guys.

Hi, Joe. Joe Altobello – Oppenheimer: Hi. Most of my questions have been answered. I did want to go back to the Sally segment for a second. The gross margin of 50 bps despite the – as you may call it, a bit of a disappointing comp, it sounded like most of that leverage you got from customer mix. Could you give us more color there? Was that all there was or was there other things that were driving the margin expansion on the Sally side? Thanks.

The margin on the Sally side, as we’ve always kind of explained to people, it almost naturally grows by that 50 basis points every year, and it has to do not only with the customer mix but also with the private label, the product mix, as well as the LCC program. All three of those things with the customer mix and the product mix being the bigger of the two add to the margins. So even if comps were basically flat or negative that shouldn’t affect the margin increase because all the other things are still in play. The only thing that would ever significantly impact the margin is that we did something promotionally and got very aggressive and tried to buy business with margin. Joe Altobello – Oppenheimer: Okay. Great. And just secondly, in terms of the December comp, you mentioned you were obviously up a very – up against a very difficult base period plus 11% or actually higher than 11% in a year ago on the Sally side. So it sounds like holiday wasn’t necessarily that bad or the consumer didn’t necessarily trend downward, it was simply the fact that you guys were up against very daunting comparisons this quarter?

I would say that’s a good analysis of it. Joe Altobello – Oppenheimer: Okay. Great. Thanks, guys.

Thank you, Joe.

Thank you. And we have a question from the line of Erika Maschmeyer with Robert W. Baird. Please go ahead. Erika Maschmeyer – Robert W. Baird: Thanks. Good morning.

Hi, Erika. Erika Maschmeyer – Robert W. Baird: Hello. So just to go back to Sally and some clarifications, how big is December for you? And I know that heading into the quarter you were excited about some of the – some of the opportunities you had on the appliance side. That’s generally a big holiday gift-giving category. How did that pan out? And I guess when you – when you mentioned that you were disappointed at Sally, was that more of a traffic issue or a ticket issue?

Well, first of all, being up against those kind of comps, it obviously becomes a traffic issue I think more than a ticket issue. To answer your first question, our December is not like most retailers. It is a little bit better month, but if you take out the fact that we’re closed Christmas day and closed the last few hours of Christmas Eve and New Years’ Eve, on a normalized basis, December is not significantly bigger than other months. It’s just more concentrated in – the couple of weekends before Christmas and things like that. So fortunately, we are not so dependent on December. But as I said earlier, we just blew it out of the park in the first – in December of 2011, and it’s just the nature of our business. Other than the appliance category, which remains a little soft, that is the only category that really excels in December. So when that’s soft, that has an impact on it. Although our ticket wasn’t down, which tells me we did have some softness in appliances, but we also did well in other categories. Bottom line is we just were up against a comp. And, you know, if I look at the comps for December and I average them out over both years, they are well within if not on the high side of our range. Erika Maschmeyer – Robert W. Baird: That makes sense. One of the things that other retailers have mentioned is that the season was more compressed this year, you know, and with the extra time between Thanksgiving and Christmas towards the later part of December, is that something that you saw as well?

Again, because our business is not all retail, I think it’s a little harder for us to see things like that. And when everybody does their Black Friday and they depend so much on that Thanksgiving weekend, we’re just not like that. I mean we have a good day and a good weekend that weekend, but it’s certainly isn’t what other people experience. And I really don’t know how to comment on that because I don’t think we have the same dynamics as a lot of the retailers do. Erika Maschmeyer – Robert W. Baird: No, that – that is fair enough. And then, you had a bit more gross margin expansion at Sally than I would have expected, but then a little bit less at BSG given that you’re running on all cylinders. Is there anything to call out there? And I guess kind of what – what – if you could talk on a category basis or give any color around your account drivers at BSG?

Well, keep in mind, BSG, as you know, is not a retail business. So there wasn’t anything in particular category wise with BSG. Mostly with BSG sales, again, is sold into salons and a great deal of that is consumed and used in the salon, especially hair color, which is a huge piece of BSG’s business. So BSG, when it’s not being affected by acquisitions and new line additions, is a more predictable comp business than Sally because it doesn’t have the retail piece. Erika Maschmeyer – Robert W. Baird: So did new line additions contribute to the comp at BSG? Was that a bigger factor?

Yeah. But, you know, it wasn’t – it wasn’t nearly as big a factor as we’ve had in some cases in the past. So I would tell you it was a little factor in it, but as I said a few minutes ago, BSG is just executing extremely well right now. Erika Maschmeyer – Robert W. Baird: That’s great. So clearly taking market share?

Yes, I believe so, because the industry isn’t growing anywhere near those rates in – to my belief. Erika Maschmeyer – Robert W. Baird: And then just a clarification around some of the benefit to SG&A. So is it – is it that last year, we – you excluded the charge and then this year included the pre-tax credit from the litigation reversal?

Last year. We took the charge in – Erika Maschmeyer – Robert W. Baird: Oh, I’m sorry. Last quarter. Sorry.

Yeah. We took the charge in Q4 of last year, and we took the charge based on what our expectations of the settlement were. It actually settled right at the end of the quarter or early in this quarter. So we reversed a little of it because it settled for a little less than the expectation was. Erika Maschmeyer – Robert W. Baird: Okay. That makes sense and is helpful. Thank you.

Okay. Thank you, Erika.

Thank you. And we have a question from the line of Olivia Tong with Bank of America Merrill Lynch. Please go ahead. Olivia Tong – Bank of America Merrill Lynch: Oh, thanks very much. Apologies in advance, I got on the call a little late, so apologies if you’ve already answered this. But are you expecting Sally Beauty sales comps to be up year-over-year in Q2?

Up year-over-year in Q2? Well, you’re right; you missed the first part of the call. What I said in the first part of the call is as I think all of you know, we’ve never had a negative comp in our business for a quarter. And if there was ever a quarter where it could happen, it’s probably Q2 given the 9% comp we had and all of the things that played into that last year. Having said that, I’m not expecting that, but I am expecting the Sally comps, particularly for Q2 because that’s where the strength was last year, to be very soft in Q2. Olivia Tong – Bank of America Merrill Lynch: Got it. And then obviously the share repurchase levels were quite substantial this quarter. How – and this was obviously – this was an 18-month program, so how do you think about share repurchase as we go forward?

We’ve been very pleased at progress. I think Gary said very well in his -in his remarks in terms of this is certainly a – we feel a very good use of cash in terms of the shareholder-friendly activity. We continue to monitor very closely with the board our activity and our progress, but there’s no additional action at this point beyond the execution of the current plan that’s been taken by our board. So we’re just continuing to execute on the program, and we’ll continue to monitor it going forward. Olivia Tong – Bank of America Merrill Lynch: Great. Thanks a bunch.

Thank you.

Thank you, Olivia.

And we have a question from the line of Linda Bolton-Weiser with B Riley Caris. Please go ahead. Linda Bolton-Weiser – B Riley Caris: Hi.

Hi, Linda. Linda Bolton-Weiser – B Riley Caris: Hi. I was wondering if you could just kind of review a little bit. I know you don’t really compete directly in that many areas with ULTA, but there are a few areas, I guess, like, in the appliance area. And I think ULTA mentioned on their last call that they had sort of said some kind of high-tech flat iron from Europe was actually a positive driver of the business. They actually mentioned that. So I kind of wonder if do you think ULTA might be gaining share from you in the electrical appliances? And then secondly, the part of their store where they do sell the salon-only products, just what is the trend there? Do you feel that they could be gaining a little bit of share from your BSG business? Or can you just kind of comment on the dynamics there, just to kind of get a handle on how the competitive landscape is? Thanks.

Sure. Well, first of all keep in mind that ULTA in their salon professional area is competing in the brands that BSG carries. So if there is any share transfer, it would be from salons in those brands and it would affect BSG’s comps, not Sally. So obviously, with the strength of BSG comps, I really don’t think a lot of that is happening. As to the electrical appliances, they do an excellent job with electrical appliances. The brands that they carry are a little more to the high-end than what Sally carries. So I’d probably be naïve to think that they weren’t taking a little bit of share from a higher-end customer on electrical appliances, but ULTA’s been around long time, and we’ve competed with them a long time. And up until this last year, appliances have been a strong category for us. So I’m not ready to say that our appliance category issues are because of ULTA. Linda Bolton-Weiser – B Riley Caris: Can I – thanks. And can I also ask about the dividend? I don’t think you’ve mentioned it in a while and yet you have been kind of alluding to a possible initiation of a cash dividend for a while. What are your current thoughts on that? And I know that there used to be the idea that you might have wanted an initial dividend yield to be in line with that of the S&P 500, but I believe that has risen and it’s become a higher dividend yield. So are you still thinking along those lines, or can you just kind of tell us your updated thoughts on that?

Sure, Linda. You know I think right now as it stands is just that our focus has been on a share repurchase program, and the board has not made any mandate to indicate anything structurally different than that. And certainly, if you were to initiate some sort of dividend program, we certainly would follow those type of textbook guidelines. But there is no mandate right now in the near-term for any kind of additional shareholder-friendly activity outside what we’re already doing. Linda Bolton-Weiser – B Riley Caris: Okay. And then, just finally, just a little question on the numbers, just to clarify, your statement that there would be, I guess, a flattish SG&A ratio relative to the unadjusted FY 2012, which I think the adjusted FY12 SG&A ratio is about – is 33.2% and the unadjusted is higher, 33.5%. So if you’re flattish against the unadjusted, then that’s really a higher ratio against the adjusted ratio in 2012. Is that – do I have that right?

Yes. Linda Bolton-Weiser – B Riley Caris: Okay. So then, we should be modeling, if we’re using adjusted figures, we should be modeling it up SG&A ratio for FY 2013 according to your comment.

That’s correct. Linda Bolton-Weiser – B Riley Caris: Okay. Thank you very much.

Thanks, Linda.

Okay. Thank you. And we have a question from the line of William Reuter with Bank of America Merrill Lynch. Please go ahead. William Reuter – Bank of America Merrill Lynch: I’m curious whether there are any products where you believe that some Internet competitors might be gaining share from you guys on the Sally side and that might be one of the contributors of the same-store sales aren’t quite as strong as we’ve seen in the past?

No, I don’t believe that’s the case. I think it’s truly all just lapping significant comps. I still, I’m not aware of any site that is first of all doing that well in our type of product, and it remains a very small part of our business, ULTA’s business and even the business we get through our Amazon connection is a – is very, very minor. So I don’t think that that’s the case. And when you look at it, it would probably affect you across most categories if you were feeling that kind of – if you were being Amazon so to speak. And our hair care, hair color, all those categories are still performing extremely well. William Reuter – Bank of America Merrill Lynch: Okay. And then, my second one is I’m curious whether the UK distribution project whether that was any of the cause of the inventory increase we saw in the quarter and if you could quantify that?

Yeah. I was exactly – a few minutes ago, we stated that half of the inventory gain was directly related to the UK distribution issue. The other half was new stores. William Reuter – Bank of America Merrill Lynch: Sorry. I missed that. All right. Thank you very much.

Thank you.

Okay. Thank you. And we have a question from the line of Jill Caruthers with Johnson Rice. Please go ahead. Jill Caruthers – Johnson Rice: Good morning. I think you just touched on it, but just wanted to kind of talk about the hair color categories that usually dictate a loyal repeat customer at Sally. Is it still kind of comping above the divisional comps and you seeing continued strength there?

Oh, definitely. Yeah, it definitely comped about Sally’s overall comp for the quarter. Jill Caruthers – Johnson Rice: Okay. And then just clarify five for annual gross margin guidance you gave on the November call of 50 basis points to 60 basis points expansion, do you still feel like that’s attainable?

Yes. Jill Caruthers – Johnson Rice: All right. Thank you so much.

Thank you.

Thank you. And we have a question from the line of Karru Martinson with Deutsche Bank. Please go ahead. Pat Dimeglio – Deutsche Bank: Hi. It’s Pat Dimeglio stepping in for Karru. Most of my –

Hi, Pat. Pat Dimeglio – Deutsche Bank: Most of my questions were already answered, but just following up on the acquisition front. How’s the pipeline look? Is anything active or anything in the direct pipeline or are you just actively looking?

We’re always actively looking. There are a few small things in the pipeline. Nothing significant at this point. Pat Dimeglio – Deutsche Bank: Okay, great. That’s it for me. Thank you.

Thank you.

Thank you. And we have a question or a follow-up question from Meredith Adler with Barclays. Please go ahead. Meredith Adler – Barclays: Yeah. I just – I actually want to go back a little bit to talk about appliance sales in December. When I think about the buyer of appliances or just the purchase of appliances it is a gift. It may be considered a kind of discretionary item. Would you interpret the weakness in that category is saying anything to you about the health of your customer, the financial health of your customer?

No. And let me clarify a couple of things. Appliances do X amount of volume month-in and month-out for us. I think the piece that’s a gift is incremental to that. And again, right now there’s – you know, even though ULTA talked about some new technology in a flat iron from Europe, they’re really – a flat iron is still a flat iron. There isn’t any new exciting technology in the appliance category right now, which is part of the problem. And I don’t really look at that as dictating the health of our retail consumer. I would look more at our overall retail sales to tell us more about the health of the consumer. And again, so much of what our retail consumer buys from us is just part of their beauty routine. It’s not what I would call highly discretionary. So I think the answer to that is no. Meredith Adler – Barclays: Okay. Great. Thank you.

Thank you.

Okay. Thank you. (Operator Instructions) And we have a question from the line or a follow-up question from Erika Maschmeyer with Robert W. Baird. Please go ahead. Erika Maschmeyer – Robert W. Baird: Hi. Thanks. Just wanted to ask you to touch on booth renting, are you continuing to see accelerating growth for that trend?

Yes. Erika Maschmeyer – Robert W. Baird: That’s great. So –

Not only here, but in Europe as well. Erika Maschmeyer – Robert W. Baird: Fabulous. That is helpful. Thanks so much.

Thank you.

Thank you. And there are no further questions at this time. Please continue.

Thanks, operator. To summarize, fiscal 2013’s off to a good start. We delivered consolidated sales growth of 4.7% and same-store sales growth of 2.8% versus the 7.1% in the first quarter of fiscal 2012. Gross profit margin expanded 30 basis points and we did achieve SG&A leverage, which contributed to an 8% EBITDA growth. So thank you again for your interest in Sally Beauty Holdings and we look forward to seeing you soon.

Thank you. And ladies and gentlemen, this conference will be available for replay after 12 o’clock p.m. today through February 14, 2013 at midnight. You may access the AT&T Executive Playback Service at any time by dialing 1-800-475-6701 and entering the access code 280171. International participants may dial 1-320-365-3844. Again, those numbers are 1-800-475-6701 and 1-320-365-3844, entering the access code 280171. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.