Ladies and gentlemen, thank you for standing by and welcome to the Sally Beauty Holdings Fourth Quarter Conference Call. At this time, all lines are in a listen-only mode. [Operator instructions] And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Jeff Harkins. Please go ahead.

Thank you. Good morning everyone, and welcome to the Sally Beauty Holdings fourth quarter earnings conference call. Before we begin, I would like to remind everyone that we have made a presentation available for today's call that can be viewed from the link provided on our earnings press release this morning or on our investor site at sallybeautyholdings.com/investorrelations. I would also 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 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Many of these forward-looking statements can be identified by the use of words such as believe, project, expect, can, may, estimate, should, plan, target, intend, could, will, would, anticipate, potential, confident, optimistic and similar words or phrases. These statements 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' filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. 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 Chris Brickman, President and Chief Executive Officer; Aaron Alt, President of Sally Beauty Supply and Chief Financial Officer; and Marlo Cormier, Senior Vice President of Finance and Chief Accounting Officer. Chris will start by offering some thoughts on our very respectable fourth quarter. He will also touch on our thoughts about the current economic environment and our outlook on fiscal year 2021, and finish with our focus, our key focus and investments in fiscal year 2021 as we move towards the completion of our transformation plan. Aaron will then discuss our fourth quarter and full year financial results, touch on our cash liquidity, and also provide some perspective on fiscal year 2021. Finally, Chris, Aaron, Marlo, and I will be available to answer your questions. Now, I like to turn the call over to Chris.

Thank you, Jeff, and good morning, everyone. I want to start by thanking all of our SBH team members across the globe, whose dedication and hard work helped us deliver a great fourth quarter, your efforts to turn us into an agile operator with real strength in both digital and physical retail. And you've set us up well for the future. I could not be more proud of our team and what they accomplished in spite of the countless challenges we experienced in fiscal year 2020. During our last earnings call, we discussed the nimbleness and agility displayed by our teams and associates during the third quarter. As our business responded to store closures and consumer uncertainty, our teams quickly pivoted to launch new e-commerce capabilities and service models. In June, we saw strong sales as a majority of our stores reopened. As we moved into July and the fourth quarter, we continue to see strong sales with the business normalizing. Of course, the environment continued to evolve around us. As exemplified by California shutting down salons in many counties for parts of July and August. All-in we delivered enterprise positive same store sales of 1.3% with strength in retail helping to compensate for soft, but still positive same store sales in the wholesale business. Here are some of the key highlights regarding our fourth quarter. Our Sally Beauty retail business in the U.S. and Canada delivered same store sales growth of 3.7% for the quarter. We saw continued strength in our core category of hair color, where we continue to gain share in the retail and pro-channels. For the fourth quarter, hair color was up over 22% in Sally Beauty’s U.S. and Canadian retail business with unit growth and increased AUR. We also saw strength in the [nail] category…

Thank you, Chris, and good morning. I am delighted to be here to talk about the great work that the Sally Beauty Pro-Duo and Beauty Systems Group teams accomplished during the fourth quarter. Consolidated same store sales went up. They increased by 1.3%. Consolidated revenue was $958 million for the quarter, a decrease of less than 1% to the prior year. The increase in same store sales led by our Sally Beauty U.S. and Canadian retail business was offset by COVID-19’s modest impact on parts of our Beauty Systems Group business during the quarter, and a smaller store base with 23 fewer stores compared to the prior year. Finally, we saw a favorable impact from foreign currency translation of approximately 20 basis points on reported sales. During the quarter, brick and mortar traffic was choppy. It was down to the prior year due to the lingering impact of COVID-19, but average basket remained up due to an increase in units per transactions and an increase in average unit retail, which happened alongside an increase in units in our core differentiated category of hair color. As expected, customers are generally making fewer trips, but buy more when they do come in and shop. In contrast, we did see increased traffic through our digital channels. At the start of the quarter, even with the vast majority of our store network back open, our global e-commerce business grew rapidly. For the fourth quarter, e-commerce sales were $63 million, representing growth of 69% over the prior year, led by our Sally U.S. and Canadian e-commerce platform, which delivered growth of over 113%. Last quarter, we mentioned that during the peak of the COVID crisis, we had new e-commerce customers in our online U.S. retail channel that had signed up for our Sally Beauty rewards…

Thank you. [Operator Instructions] And our first question will come from the line of Steph Wissink with Jefferies. And your line is open.

Hi, good morning, everyone. Chris and Aaron, my first question for you is just related to the color and nail strength that you saw which would imply that the other categories within your product mix were down pretty sharply. So, if you can just help us contextualize how the composition of the category performance was across your chains that would be great? And then secondly, I recall on the last quarterly conference call you talked about July being up in the mid-single digits, and with the full quarter kind of up just a little under 2% would imply a pretty sharp deceleration in August and September. So, if you can maybe help us think about the cadence, and then, if you've seen any change in that cadence as we have rolled into the first fiscal quarter, that would be very helpful as well? Thank you.

Good morning. I'll address the questions in reverse order. What we saw from the quarter was a barbell quarter where we saw strong July, much softer August, as for reasons we've talked about, and then, September, recovered, as you carry forward, so it's the barbell quarter. With respect to your categories, you're right, it's actually the case that we had some real strength in our defensible core and hair color care and nail, but we did see weakness in other categories. Part of its driven by the consumer, for instance, we don't sell a lot of cosmetics, it's not a core [trip driver] for us, but we did see a decline in the cosmetics category and some categories like hair extensions, offset by, you know, the growth we saw in hair color in particular, which was both consumer driven and strategy driven as we've increasingly focused our assortment and inventory spend, you know, in those areas around hair color and hair care. Chris?

And Steph, just to point you back to – you know, Sally finished with a 3.7 comp for the quarter, which, you know, was very strong, a little bit of the barbell impact [indiscernible] less of it. But remember that BSG dealt with significant salon closures throughout the network. As an example, California reclosed for approximately six weeks during that period. And obviously, that was a significant hit. And, you know, we expect there'll be more volatility like that, where regions or areas of the country may close salons again.

That's great. And then, just one follow-up on your e-commerce business. I’m wondering – I know it's only about $60 million to $65 million, but as you look at that percentage of the sales, what do you expect that to be as you look ahead? And then, are you learning anything about the composition of online orders versus your in-store orders or in-store transactions? Is there a unique composition? Are they very similar across both channels?

Well, our aspiration continues to be what it was, which is, we want to get to the 10% penetration figure for our categories. We're not there yet. We have more opportunity, although we are seeing nice increases in penetration across the entire business. And with respect to the basket, you know, our answer now is different than it would have been, you know, a year ago. You know, a year ago, the answer would have been that the online consumer is typically very deal-driven and is looking for, you know, more commodity categories like appliances. Now, what we're seeing is real strong presence in color helping to drive, you know, that growth and nail as well as care. We drive a lot of those categories for the digital channels. We're quite pleased with that. It's in part also though, driven by a change in strategy where we are far less promotional online than we were, and far more focused on, you know, content, the how to, right, in the world in which we're operating where the consumer is not as willing to go out the door, go to a stylist, [even], the retail business is responding by making it easier for her to try it or understand it or evolve it or fix it, right, that's really the strategy.

And on the wholesale side, Steph, I'll add that in general, it has been much more like our retail business all along. But Aaron's right, on the retail side, those two businesses are converging and becoming much more similar and that's what we should be in an omni-channel business.

That’s great. Last one for us is just on inventory. I think, Aaron, you mentioned that it was a bit lower than you would have expected. So, maybe just help us think about remediation of buying back into inventory and planning into more stability in the business going forward?

Yes. Well, what I can tell you is that we're at, I think, a six-year low from inventory. We were in Q3 and we were in Q4, even though we have been aggressively buying inventory back into the fleet for both Sally Beauty and BSG. And while that activity started in Q4, right, it’s certainly carried into Q1 and we believe that we have sales upside resulting from being back in stock in color in BSG and in particular brands, as well as in key categories, like clippers in retail. Some of it was driven, as I called out, by our efforts to manage cash given the crisis earlier in the year. Some of it was driven by a very thoughtful and purposeful set of assortment changes driven by our merchandising organization. And some of it was driven by, you know, some supplier disruption as our suppliers also deal with, you know, COVID-19. So, we're confident we're back on the right track. It will, however, be a use of cash for the first quarter in particular, as we carry forward, but we think it results in upside.

Thank you.

Thanks, Steph.

Thank you. Our next question comes from the line of Oliver Chen with Cowen. And your line is open.

Hi, the gross margin performance has been impressive. What do you see ahead for what's driving that? And also in the context of managing inventories, and the composition and freshness of inventories, some of the supply disruption may or may not be, you know, out of your control. I’d love your thoughts there.

I'll take a first shot, and then, hand it over to Aaron. You know, listen, I think, you know, as we said and as we've stated, Oliver, we've really made a big focus on, you know, fewer, deeper, bigger promotions, and much more focus on content and education is how we want to serve our customers as opposed to using promotions to drive volume. And as a result of that, that's translating into much higher margins. There is some geography shift in the P&L as well associated with delivery expense falling down lower. And as Aaron mentioned in his comments, that'll be a major focus for us. And obviously, we expect buy-online, pick-up in-store to be – to play a major role in helping us address that. In terms of freshness of inventory, I do think we can address most of the issues we have in terms of out of stocks ourselves. It's within our control. There are a few vendors that are struggling to keep up or get back into full stock and that'll take longer just because that's out of our control. But I would say the majority of it, we can fix and we are in the process of fixing right now. And Aaron, I don’t know if you want to add anything to that?

No, I think it's well said. At its core, Oliver, on the gross margin side and the retail side, we believe that we have a differentiated core that we're conveying value and that we don't need to over promote in those categories. And we've been gradually moving in that direction and Q4 saw us get to a real turning point on that.

And a final question, the engagement of new customers was impressive in some of the statistics you mentioned. On the e-commerce front, what are your thoughts on generating incrementality relative to cannibalization of retail? And also what's ahead in terms of managing margins in that segment? Thank you.

I believe your question is on retail, Oliver. What I would tell you is, we believe there is opportunity for incrementality. As I’ve said on prior calls, you know, once we can get the consumer to in our store or buy from us online, the quality of our products and the different experience speaks for itself. And so, once we've got it, we've really got them. And so, we believe that we have the opportunity to continue to build those baskets with them and drive, you know, more trips. With respect to your question on gross margin, what I would say is, this is part of a concerted strategy in the retail business. We believe that we will have continued strength in gross margin as we carry forward, particularly as we manage through, you know, the holiday season here, we're not [a certainly] holiday-focused business, and so, I expect good things to continue.

And, Oliver, just to add to that real quick, I mean, with now we shift from store scaled up across the network and with Buy Online/Pickup In-Store scaling up now, the stores are integrally, you know, are fully integrated into our e-commerce business. It's all one. It truly is an omni-channel business and the stores are going to serve a major part of our e-com business. And, you know, what we're excited about is that allows us to really leverage the expertise in store, leverage recommendations, add to the basket, and, you know, we see that as how we want to grow the business long-term, it's one seamless way of interacting. Whichever way the consumer wants to interact, we’ll interact with them and we'll offer both our expertise and our products through those.

Thank you. Very helpful. Best regards.

You bet.

Thank you. Our next question will come from the line of Rupesh Parikh with Oppenheimer. And your line is open.

Good morning. Thanks for taking my question. So, I guess I want to start out just at a high level. Just curious, as you look at the categories you compete in, you know, what type of growth rates do you think you saw -- sorry, what type of declines you think you saw during the last quarter? And then, any sense whether you’ve gained market share during this period on both the Sally Beauty supply and the BSG side?

Rupesh, good morning. Great question. I'm not going to give you category specific decline numbers, but what I can tell you broadly is this. We did see growth in hair color. We saw growth in nails as we called out. We saw good business in care and these are the three core categories for us. We saw declines in sales in most of the rest of the portfolio, not all of it, where – and in particular, I would point to cosmetics. We don't have prestige or even masstige, right, in the business, and so, we weren't terribly surprised by that. We also saw some declines in areas like hair extensions, right, where we have not, for the last couple of years, played heavily there. And so, on balance, as I think about the portfolio, we're winning, where we're focused, and we have work to do in the basket filled categories that are around the core.

I think the other thing I would add, Rupesh, is some of this is just tied to changes in consumer behavior and lifestyle right now, right. So, we're seeing declines in appliances like curling irons, and styling tools. We're seeing declines in things like hairsprays. You know, if you're not going out as much, whether that be to dinner or to events and things like that, then your need to, you know, significantly style your hair and purchase styling tools and styling aids is going to decline. So, as Aaron pointed out, we're really excited about the strength that we're seeing in our core. We assume those other things will come back as the consumer returns to normal behavior sometime later next year.

And I would be a bad CFO if I did not point out, Rupesh, that the areas where we are seeing our growth are our higher margin categories.

Okay, great. And Aaron, that’s a good segue into my next question. So, really strong gross margin improvement this quarter, as you look for like, any sense of the improvement that we're seeing now that any portion that could be like, you know, more of a sustainable improvement, you know, I guess longer-term?

We do believe it's a sustainable improvement carrying forward, particularly in the retail business. Now, at some point, you know, probably Q4, next year, we will [lap] where we are, but as we think about the year ahead, we do believe that we have continued opportunity and this is not a one-off quarter on the gross margin line. We've rationalized, you know, our inventory. We’ve rationalize our promotional structure. The merchandising team and the planning and allocation team is working better together between themselves and the rest of the organization than they ever have. And so, we view it as a real opportunity.

Okay, great. And my last question, and maybe I guess this one is for Chris, as you look at salon demand out there, any sense of where we are in salon demand versus pre-pandemic? Like, I don’t know, are we down 20% or I’m just curious as you look at the industry? Maybe we're on the BSG side like – you know, when you talk to salon owners and stylists like, you know, where you think the industry is from versus pre-pandemic levels?

Yes. And I don't have a lot of data to share [indiscernible]. I do believe it is down. I don't think it's down as 20%. You know, I think the reality is there is disruption in the market. There are restrictions in some markets. Salons often can't operate at the same capacity. A great example is our chain business where we use handle distribution to large chains that are, you know, focused on lots of volume, high volumes of clients. They're down more significantly because they just can't process as many clients in a day given the restrictions. So, I do believe it is down. We're not – we're down just a little bit. And as you saw, BSG actually had positive same-store sales overall, which is great. And I think that, you know, the net result of that is I'm hoping we're gaining share. We're certainly working hard at it and we've seen a lot of color conversions, where we've been able to pick up new accounts. But I expect that it's going to take some time before the salon business returns to normal. It'll be the back half of the year or even later.

Okay, great. Thank you for all the color.

You bet.

Thank you. Our next question comes from the line of Mark Altschwager with Baird. And your line is open.

Hi, good morning. Thanks for taking my questions. I guess to start out, and I apologize if I missed it, but is there any color you can share on the quarter-to-date comp trends you're seeing?

Mark, during our last earnings call, we announced that we would not be providing monthly updates thereafter.

Okay, okay. Fair enough. And then, you know, on the gross margin, not to kind of keep beating on it here, but, you know, you just concluded, I guess, a very volatile year on the gross margin front. You know, I think in Sally Beauty there is, nearly 900 basis points spread between kind of Q3 and Q4 rate. You know, understanding a lot of kind of one-time factors at play. You outlined a lot of the, you know, positive changes here with inventory and, you know, what you're doing with promotions. I guess, you know, how do you feel about kind of just the ability to deliver kind of steadier gross margin trends in the future? Do you think we're kind of past some of this volatility? And then, just as you kind of think higher level, I mean, how should we be thinking about kind of the normalized, you know, baseline gross margin rate kind of Sally Beauty supply and consolidated basis as all these changes take hold?

You raised a series of great questions, Mark. Let me attempt to address them best I can. What I would tell you is, you're right, we had a very significant difference in Q3 and Q4 from a gross margin rate perspective in Sally Beauty. If you look back at our transcript from Q3, you'll see I walked through a very detailed bridge of the one-time actions we were taking in connection with our inventory at that time. Q4 reflects more of a steady state margin structure for Sally Beauty in the U.S. and Canada, right. We saw particular strength there. Look, in the European business, we believe we have some more opportunity to work on our gross margin structure there. We had, of course, a little bit different business. It's more of a mix of professional and retail. And then, in BGS, we continue to look to optimize, you know, for that as well. So, I take a fair amount of comfort from where Sally Beauty in the U.S. and Canada is at 80% of the segment sales as a carry forward, and we're not anticipating additional one-time actions to what we saw in Q3.

Okay, that's very helpful. And I guess just finally, I was hoping to also just kind of ask a big picture question on sort of the state of the pro-stylist market. I guess do you have a sense of how many salons have closed? Maybe how many have permanently closed? And I would think the pressure on salons is maybe just accelerated the shift to booth renting. You know, is that something you're seeing? And if so, is that a headwind to BSG, but tailwind to Sally Beauty or, you know, things not quite that simple? So, you know, obviously a very volatile period, you know, we went through and are continuing to go through. So, we just love, you know, your high-level thoughts on some of the more structural shifts in the market that are going on versus some of the factors that might kind of normalize here in the coming months?

Yes. I mean, Mark, I think you're right. There is – it is a disrupted market. It's disrupted most in high volume change as I mentioned. It's also disrupted in large urban salons that, you know, obviously have tried to put a lot of people through in a very tight space. Those are the most disruptive, but even salons that might have had 12 chairs in a more mid-market city, you know, maybe you're operating eight now in order to maintain space restrictions, and then, those stylists are displaced. What that does mean is, you're exactly right, it does mean that there probably will be a surge in booth renting, a surgeon suite rentals, as well as small salons starting up in maybe six months as stylists go out on their own. In general, that's probably good for the BSG business because it supports the retail side of BSG. Some of the largest salons and larger accounts are often served directly by brands and manufacturers. And so, fragmentation over time should help our store business, but I think it's going to take time for all that to shake out.

That's very helpful. Thanks for all the color.

You bet.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. And your line is open.

Hey, good morning, everyone. I wanted to ask again, on gross margin in SBS. If you look at the roughly 200 basis point improvement year-over-year, can you talk about how much roughly helped lower promotions? And then, Aaron, you mentioned better mix of product, can you talk about those buckets?

You know, we have not historically disclosed a, you know, mix analysis that way. And so, I think what [I observe] is, most of the benefits, I'm not going to quantify further, it comes from rationalizing our price and promotional structure. Second aspects of that would be mix.

Got it, okay. And when we're speaking to sustainability of these things, I don't know if you want to, you know, pin a number to it, but, you know, the gross was at that 57, I think, level and I think the U.S. was even stronger. That is the right way to think, so what we saw in the fourth quarter is a fair gauge of sustainable gross margin for that business going forward?

Yes.

Great. Okay. And then, look, we wanted to ask Chris, I know we've known this well or may have been, you know, separated Cody for some time. Curious if there's any implications, you know, good, bad, indifferent to think about, you know, for one of your programs moving – changing hands?

The reality is that separation hasn't occurred yet. I believe it occurs early next year, so it's coming soon. I don't expect that it'll change much. We [re-signed] a long-term contract with them earlier this year. And obviously, we're focused on growing their color brand – their professional color brand exclusively through BSG. And then, obviously, we sell color brands on a non-exclusive basis through Sally that they also own. So, you know, our plan is to work with the new management team there to grow their brands and to work together to continue to expand the business and grab market share where we can. And so at this point, I don't see any change in operating strategy other than I'm hoping we'll see more innovation from that business over time with more focus.

Right. Okay. Thanks, guys.

Thank you. Our next question comes from the line of Jonathan Keypour with Bank of America. And your line is open.

Hi, good morning, everybody. Thanks for the question. Just wanted to get a little bit of information on how you guys are thinking about the holiday season coming up. I know, you mentioned that it's not usually, you know, it's not a very big part of the year, but I just wanted to know how you were seeing demand, you know, into that quarter, how you're thinking about how it might play out and whether or not there'll be any even small incremental promotion compared to what we saw this quarter? And then after that, if you could touch on, given the strength of your e-commerce business so far, is there a longer-term change in how you're viewing store footprints, and maybe thinking about the ability to sort of translate those in-store purchases more online and then you have a smaller cost and footprint and all that? Thank you.

Great questions. Let me attempt to address the first, and Chris will take the second. With respect to Sally Beauty and our second quarter, which is already underway, the difference I would point you to is the difference not versus Q4 – our fiscal Q4, but rather versus prior year. We are not a terribly holiday oriented enterprise. That said, if you walked into a Sally Beauty store, or if you went on to SallyBeauty.com or sallybeauty.ca, what you would see is a very tailored merchandise assortment to actually speak to gifting, right. Our merchants have taken a much more selective cut at what goodness looks like there. And so while we will have holiday offers, they’ll be narrower than they were in previous years. Similarly, from a promotional cadence, and the say, may be going to the gross margin questions that folks have been asking, we're going to be very careful about it, right. We are not participating in a race to the bottom that a lot of retailers have underway right now as they think about, you know, not Black Friday, but rather, you know, black November, right? We will – there will be promotions. Right? We are focused on what the right promotions are, but we have moved to a strategy, which is much more content focused, helping our consumer emphasizing the categories in which we have a differentiated core and going from there, that would be our consistent strategy [as we go forward].

Yeah, on a broader basis, if you just think about holiday, from what I've seen, and I have a circle of retail CEOs that I talk to regularly, you know, obviously it's going to be spread out, right. Rather than being concentrated in specific days or weeks it's going to be much more spread out. I actually don't think it's going to be as promotional as people are worried about, because I believe a lot of retailers did not buy as heavily into inventory during the summer months and before as they were conserving cash as they went to the crisis. And I've heard that from a number of my peers, that because they don't have as much inventory, you know, even if demand is a little soft, they don't have a lot to get rid of. So I just don't think you're going to see quite the level of clearance sales or panic sales in previous years, because I just don't think the inventory sitting in the stores or in warehouses that needs to be sold off.

Right. Thank you.

You bet.

Thank you. Our next question comes from the line of William Reuter with Bank of America. And your line is open.

Hi. I know there's been a lot of questions about this, but I'm just going to ask one more, and it kind of reverts to a comment you just made there. You mentioned, you're going to continue to remain fewer and deeper. I would have expected that many competitors and other channels where customers could shop for these products that they would have been pulling back on promotions to and that this may be a permanent opportunity. But then your last comment sounded like you believe that other retailers may not be pulling back in the same way on promo, I guess what are you seeing in the promotional environment from any other competitors and expectations for that?

Great question. I want to thank you for asking me to clarify that. My comment was speaking to retail broadly, not necessarily to retailers with which we directly compete. And of course we have a very diverse competitive set as we carry forward. I agree with your observation that there is a structural opportunity in the industry, but it is the case that some for those retailers that are not as well situated as we are that don't have stronger financial foundations that that they will be tempted to promote more heavily.

That's very helpful. And then just one big picture question in terms of the moves online, and I guess I'm wondering how you view particularly given the store closures in Europe, industry, moving online may change behavior of stylists permanently. And I guess how you are making sure that you are well-positioned for any of those changes? And that's it. Thanks.

Yeah, I mean, we think stylists are going to want more convenient to service options. Actually, not unlike consumers. So, we've already launched same day delivery in our BSG stores, we're going to be bringing Buy Online/Pickup In-Store, you know in Q3 after we re-platform the BSG website around the pro and make it much more pro friendly. So, I think they want many of the same thing consumers want, because convenience is going to be key, and obviously safety plays a role in this too now. So, we're investing in those delivery options, we will make it easier for them to do business with no matter how they do. That being said, I think our stores will continue to play a very valuable role as will our DSCs. So our stores, there's many stylists who – and I was in stores this week watching it come in the morning before they go to work and buy to their schedule for the day. And that's how they manage cash, obviously. And if our store is perfectly suited for that, because we open at 8 a.m. in our pro stores and they can come in and buy the days services, the colors needed for each customer, and then turn around and turn that immediately into cash for themselves through services. So, I don't think that's going to change. And I think the fragmentation that's going on in the industry is going to make that even more necessary as more stylists end up becoming independent. And obviously, there's also then going to be an increasing role for our DSCs, but in a more digitally enabled way. They're going to be visiting more and more accounts through virtual visits, they're going to be pushing. More of those orders are going to actually happen online than previously might have happened in a handwritten way. And we think that actually will drive both efficiency, as well as effectiveness of our full service teams as well.

I want to add on one thought. Really for us it’s – we have an increasingly digitally savvy customer on both the retail side and the professional side. Our effort is to match that with a much more digitally savvy partner within Sally Beauty Holdings whether it be in the form of [CosmoProfBeauty] Sally Beauty Supply. One, while our business is, you know, relatively small compared to some, you know, one piece of uncertainty that we don't have to address that some e-commerce retailers are having to address these days is our ability to ship. So, just signed a new agreement with UPS, you know, ensuring that we have the shipping capacity that we need for our growing e-commerce businesses as we carry into our fiscal Q1. So, we're delighted with that as well.

Thank you very much.

Thank you.

Thank you. And we will go to the line of Carla Casella with J.P. Morgan. And your line is open.

Hi, just a couple clarifications on some of the prior questions. On the BSG side, how much of that business overall is the national accounts versus the [booth renter]? Have you broken that out?

We don't break it out, but it's not particularly large.

Okay, it's primarily booth renting then?

The stores tend to serve the smaller independent stylists, the booth renter, the sweet renter and the small salon, and then we have a full service business that serves you know, larger independent salon.

Okay. And then, on the vendor side, and the lower vendor allowances, I'm assuming that's mostly related to the promotional environment, but I'm wondering if there is – if it's a signal or a change based on just the vendor mix that you have today versus the mix in the past? [Indiscernible] lot of new vendors.

No, it's 100% tied to less promotions.

Okay. And then any thoughts on, you talked about your capital allocation, any thoughts on refinancing the 2023 notes since it's a relatively short maturity?

I think we are very focused on our [thoughts]. Right. And we'll take the right action at the right time. As we see – as we're going to get through this quarter, we'll see where we go. Hopefully you can take from the proactive actions we took in March, April, and May that our finance and treasury teams are always looking to optimize that.

Okay. You know, I just forgot one question related to the vendors, given the changes you've made in terms of bringing new vendors has your top five vendor mix changed and can you provide those?

No, it hasn't changed. I don't know if we have released that previously, but you know, it's all the big ones you would know. So, it's Henkel, it's L'Oreal, it's Cody and Paul Mitchell, it’s that crew.

Okay, great. Thank you.

Thank you. We will go to Rupesh Parikh from Oppenheimer. Your line is open.

Good morning. Thanks for taking my follow-up question. I’ve been getting this question from a few investors. So, there's commentary in your prepared comments, just that you would expect sales in, I believe, FY 2021 to be higher than FY 2019, I’m just curious, what gives you that confidence, just given, obviously the volatility out there and you're seeing store closures in some of your different markets?

Thank you Rupesh for the clarification. My remarks were purposely – they purposely said, you know, unadjusted for COVID, right. We can't predict what COVID is. But the point we're trying to make is, we have made such great progress on the transformation and we've driven so much change. Our capabilities, our talents, our process, our technology, everything is in such a different place that unadjusted for COVID. Even with the smaller fleet, we would have expected sales to be higher in 2021 than 2019. I can't predict COVID none of us can, but we are going to manage with the better capabilities and assets that we have.

Okay, great. Thank you. I'm happy I asked that question.

Thank you. And I'm showing no further questions in queue. Please continue.

Right. Well, thank you all for your questions today. In summary, as we begin fiscal year 2021, we are focused on completing our transformation plan, while maintaining stringent financial discipline and ample liquidity as uncertainty remains as to the duration and severity of the pandemic. Our strategic initiatives will involve capitalizing on strong consumer interest in DIY hair color, building and refining our digital customer experience including the addition of Buy Online/Pickup In-Store, growing our new Private Label Rewards Credit Card Program, expanding the rollout of JDA to the rest of our distribution centers, and growing our partnerships with Female-owned and Black-owned brands. This will provide our company with a strong platform as we navigate past COVID-19 and achieve our goal of sustained long-term profitable growth. Thank you very much.

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.