As of March, 2011 SALLYBEAUTY HOLDINGS, INC. 1

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1 As of March, 2011 HOLDINGS, INC. 1

2 Cautionary Notice Regarding Forward-Looking Statements Cautionary Notice Regarding Forward-Looking Statements Statements in this presentation and the schedules hereto which are not purely historical facts or which depend upon future events may be forwardlooking 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. Words such as anticipate, believe, estimate, expect, intend, plan, project, target, can, could, may, should, will, would, or similar expressions may also identify such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including, but not limited to, risks and uncertainties related to: the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry; anticipating changes in consumer preferences and buying trends or and managing our product lines and inventory; potential fluctuation in our same store sales and quarterly financial performance; our dependence upon manufacturers who may be unwilling or unable to continue to supply products to us; the possibility of material interruptions in the supply of beauty supply products by our manufacturers; products sold by us being found to be defective in labeling or content; compliance with laws and regulations or becoming subject to additional or more stringent laws and regulations; product diversion; the operational and financial performance of our Armstrong McCall, L.P. business; the success of our Internet-based business; successfully identifying acquisition candidates or successfully completing desirable acquisitions; integrating businesses acquired in the future; opening and operating new stores profitably; the impact of a continued downturn in the economy upon our business; the success of our cost control plans; protecting our intellectual property rights, specifically our trademarks; conducting business outside the United States; disruption in our information technology systems; natural disasters or acts of terrorism; the preparedness of our accounting and other management systems to meet financial reporting and other requirements; being a holding company, with no operations of our own, and depending on our subsidiaries for cash; our substantial indebtedness; the possibility that we may incur substantial additional debt; restrictions and limitations in the agreements and instruments governing our debt; generating the significant amount of cash needed to service all of our debt and refinancing all or a portion of our indebtedness or obtaining additional financing; changes in interest rates increasing the cost of servicing our debt ; the potential impact on us if the financial institutions we deal with become impaired; the representativeness of our historical consolidated financial information with respect to our future financial position, results of operations or cash flows; our reliance upon Alberto-Culver for the accuracy of certain historical services and information; the share distribution of Alberto-Culver common stock in our separation from Alberto-Culver not constituting a tax-free distribution; actions taken by certain large shareholders adversely affecting the tax-free nature of the share distribution of Alberto-Culver common stock; the voting power of our largest stockholder discouraging third party acquisitions of us at a premium; and the interests of our largest stockholder differing from the interests of other holders of our common stock. Additional factors that could cause actual events or results to differ materially from the events or results described in the forward-looking statements can be found in our most recent Annual Report on Form 10-K for the year ended September 30, 2010, as filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this presentation are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements. HOLDINGS, INC. 2

3 Company Highlights Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty products Sally Beauty Supply in business for 50 years Annual revenue of $2.9 billion Strong cash flow generation 4,178 stores located in 10 countries (1) Experienced and motivated leadership team Industry leading position with ~31% channel share Proven resilience in recessionary cycles Well-positioned for long-term growth (1) As of December 31, 2010 HOLDINGS, INC. 3

4 Overview Who We Are Fiscal Year 2010 ($ in millions) SALES: $2,916.1 EBITDA: $404.9 Operating Income: $340.9 (2) Profit Margin: 11.7% Cash Flow from Ops: $217.1 Segments Distribution Channel Customers 2010 Financial Highlights 3,061 stores (1) 1,117 stores (1) Retail consumers (73% of sales) Professional stylists (27% of sales) Sales SSS growth Operating income Profit margin Note: Financial results from Fiscal Year End 2010, September 30, 2010.(1) As of December 31, 2010 (fiscal 2011 first quarter) (2) Operating income is net Unallocated Expenses and Share Based Compensation $1, % $ % 1,141 sales consultants (1) Stores - booth renting stylists (65% of sales) Full Service sales small to medium sized salons (35% of sales) Sales SSS growth Operating income Profit margin $1, % $ % HOLDINGS, INC. 4

5 Industry Channels of Distribution (U.S.) 33% Direct Manufacturer direct to manufacturer owned salons or high end salons. Open Line Distributes professional product to the public via retail stores Mega Salon Manufacturer direct to large format salons. 12% (2) 13% (2) $0.5B 12% Professional $0.5B Beauty Products ~$4.0 billion (1) Distribution Channels 34% (2) $1.4B 41% (2) $1.6B Exclusive/Full Service Third party distribution to salons and beauty professionals via sales force and professional only stores Competition: L Oreal s Competition: Local and regional operators Source: Professional Consultants & Resources, 2010 Study. (1) Professional beauty supply channel size based upon a 2010 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2010 manufacturer-level sales for professional beauty supplies were approximately $4.0 billion. (2) Represents an estimated breakdown of salon haircare product sales in 2010 by channel of distribution.

6 Stable & Consistent Industry Growth ($ bn) $ $1.6 $1.7 $1.8 Recession Resistant Industry $2.0 $2.1 $2.2 $2.3 $3.3 $2.9 $2.9 $3.0 $3.1 $2.6 $2.7 $2.4 At manufacturer dollars $3.4 $3.8 $3.8 $3.7 $ growth of 1.5% growth of 4.4% $ U.S. Beauty Supply Industry has experienced steady growth with a CAGR of ~5% (1) Source: Professional Consultants & Resources, 2010 Study. (1) Based on manufacturer sales of professional beauty supplies in the U.S. HOLDINGS, INC. 6

7 Our Leading U.S. Industry Position U.S. professional beauty supply marketplace, in retail dollars, was roughly $7.8 billion in 2010 (1) Sally Beauty Holdings estimated channel share 31% Estimated 12% channel share (2) Leading full service/exclusive distributor in North America 1.2x sales of next largest competitor Estimated 19% channel share (2) Largest open-line retailer/distributor in U.S. based on store count Competition is limited (1) Professional beauty supply channel size is a management estimate, based upon a 2010 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2010 manufacturer-level sales for professional beauty supplies were over $4.0 billion. Retail sales of $7.7 billion is calculated using gross margin of 48.9% (from SBH s actual gross margin in the U.S. for FY2010) as the spread between manufacturer cost and retail sales. (2) Estimated U.S. channel share calculated as follows: (i) Sally Beauty Supply s U.S. net sales for the fiscal year ended September 30, 2010 divided by estimated marketplace size of $7.8 billion and (ii) BSG s U.S. net sales for the fiscal year ended September 30, 2010 divided by estimated marketplace size of $7.8 billion. HOLDINGS, INC. 7

8 Drivers of Stable, Positive Comp Trends for SBH Sally s control brands are higher margin and increasing as a percent of sales Increasing sales of DIY products as customers delay trips to salons and increase more at-home maintenance care purchases Higher traffic levels and higher average ticket driven by roll-out of CRM marketing efforts Improving international markets providing growth opportunities HOLDINGS, INC. 8

9 Sales and EBITDA growth Sales/Gross Margin Adjusted EBITDA Sales ($ in millions) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $2,098 $2,254 $2,373 $2,514 $2,648 $2,637 $2,916 Sales: +10.6% GM: +100 bps FY04 FY05 FY06 FY07 FY08 FY09 FY10 (1) Includes a negative impact from unfavorable foreign currency exchange of $86 million or 3.2% of sales. (1) 48.5% 48.0% 47.5% 47.0% 46.5% 46.0% 45.5% 45.0% 44.5% 44.0% 43.5% Gross Margin Adjusted EBITDA ($ in millions) $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $405 $342 $353 $294 $310 $247 $ % FY04 FY05 FY06 FY07 FY08 FY09 FY10 HOLDINGS, INC. 9

10 Drivers of Earnings Growth Revenue Organic growth Same store sales growth Acquisitions Gross Margin Expansion Sally s exclusive label sales growing as a % of sales Customer mix shifting in both businesses Low cost sourcing (brushes, electricals, etc) Debt Reduction Historically paid down debt Consistently use portion of cash flow to pay down debt Taken leverage ratio down 2 turns since going public (1) Calculated over 6 year period HOLDINGS, INC. 10

11 Strong Earnings Growth Strong performance since going public in late Operating Income (in millions) 15% growth EPS (GAAP) 44% growth $0.78 $283 $297 $341 $0.54 $229 $0.42 $

12 Strong Performance in FY 2010 Fiscal Year 2010, ending September 30, 2010 FY2010 % Change Same Store Sales +4.6% +280 bps Sales $2,916.1m 10.6% Gross Profit Margin 48.2% 100 bps Operating Earnings $340.9m 14.9% GAAP EPS $ % Adjusted EBITDA $404.9m 14.9% HOLDINGS, INC. 12

13 Fiscal First Quarter 2011 Results Strong YoY performance across the Company Consolidated net sales of $794 million, up 12.6% YoY Same store sales growth of 6.8% compared to 3.8% in 1Q10 Traffic and average ticket up in both segments Gross profit margin of 47.8%, expansion of 50 bps over prior year Sally Beauty Supply +70 bps; Beauty Systems Group +90 bps Operating margin expansion of 160 bps, to 11.6% Sally Beauty Supply +120 bps; Beauty Systems Group +160 bps Realized SG&A leverage and acquisition synergies Net earnings of $41 million, up 57% YoY EPS of $0.22 vs. $0.14 in the fiscal 2010 first quarter HOLDINGS, INC.

14 Solid Balance Sheet No near-term maturities Completed prepayment of Term loan A in 3Q10 November, 2010 refinanced the ABL with market-leading terms Term loan B matures FY 2014 Covenant light Consolidated leverage ratio ~3.7x s (as 9/30/10) Lowered by over 2 turns in four years Proven ability to operate with leverage Ample liquidity Strong cash flow ABL of $400 million (refinanced 11/10) HOLDINGS, INC. 14

15 Current Debt Structure Debt As of December 31, 2010 ($ In Millions) Amount 63% fixed / 37% variable Maturity Rate (Fiscal Year) ABL ($400mm) $43.2 Prime +1.25% to 1.75% or LIBOR +2.25% to 2.75% 2015 (1) Other % to 7% 2010 to 2014 Term Loan B Prime to 1.5% or Libor to 2.5% (2) 2014 Senior Notes % 2015 Senior Sub. Notes % 2017 Total Debt, excl cap leases $1,598.3 Prepaid $120 million in long term debt in FY2010 (1) In November 2010 (fiscal year 2011) the Company replaced the ABL facility with a new ABL facility which has a 5-year maturity, contains substantially the same commitments for additional borrowing as the previous ABL facility and provides for interest at Prime plus 1.25% to 1.75% or LIBOR plus 2.25% to 2.75%. (2) $300 million fixed by Interest Rate Swaps which expire May 2012 HOLDINGS, INC. 15

16 Strategies for long-term growth Continue to build out organically Acquisitions both domestic and international Use capital & liquidity to build long-term shareholder value HOLDINGS, INC. 16

17 Appendix HOLDINGS, INC.

18 Sally Beauty Supply Sally Beauty Supply global footprint 3,061 (1) stores worldwide 2,651 stores in US, Canada, Mexico 410 stores throughout Europe & Chile Average store size 1,700 sq. ft., 90% selling space Sales mix approximately 27% professional and 73% retail Professional open-line business - merchandise assortment not available through mass retailers. 42% exclusive-label merchandise in the U.S. (private/control label) Driving Unit Growth is a Strategic Focus (1) As of December 31, 2010 HOLDINGS, INC. 18

19 Sally s Historical Sales Results Net Sales ($ in Millions) $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,047 $1,567 $1,419 $1,359 $1,296 $1,132 $1,208 $1,835 $1,673 $1,696 $ Q11 Growth of 9.7% Same Store Sales 8.0% 6.0% 4.0% 2.0% 2.6% 2.7% 6.8% 6.0% 5.7% 2.7% 3.8% 2.4% 2.4% 2.7% 1.2% 2.1% 4.1% 6.4% 0.0% Q11 Note: Fiscal Year-end December 31, 2010 HOLDINGS, INC. 19

20 Sally s Customer Profile Retail customers represent 73% of shoppers; professional customers 27% ~90% of customers are women Professional customers work in small salon or booth renter Retail customer household income primarily $50k to $80k 34 to 65 years old is the primary customer age range HOLDINGS, INC. 20

21 Sally s Merchandise Offering Other Beauty Items Ethnic Products 8% 7% 21% Hair Care We offer a diversified mix of beauty products Brushes, Cutlery and Accessories 15% 12% 23% Hair Color Electrical Appliances 14% Skin and Nail Care Leading Third-Party Brands Clairol Wella Zotos Conair Helen of Troy L Oreal Exclusive Label Brands Ion Beyond the Zone Finger Paints Silk Elements FY2010 exclusive label brands were 42% of U.S. segment sales. Note: Percentage of sales by merchandise category for fiscal year HOLDINGS, INC. 21

22 Sally Beauty Supply Worldwide Sally Net New Store Openings Organic U.S. Sally Beauty Supply stores: Low capital required $60k Average inventory of $85k Acquisition Organic Positive contribution margins within four months Approximately two year cash payback on the initial investment Minimal staffing requirements and low rent expense As of September 30, 2010 HOLDINGS, INC. 22

23 Growth Initiatives Expand store base organically and through acquisitions Drive gross margin expansion Increase mix of exclusive label Continue mix shift to retail Low cost sourcing Increase customer traffic through loyalty programs and customer relationship management (CRM) Further expand Internet channel HOLDINGS, INC. 23

24 International Footprint Total of410 International Stores (1) Stores located in the UK, Ireland, Belgium, France, Germany, Spain & Chile Sales mix differs from U.S. ~80-85% professional ~15-20% retail Late FY2009, entered South America through acquisition of InterSalon in Santiago, Chile Large opportunity to expand organically and via acquisitions (1) Fiscal Year-end December 31, Sally Beauty Supply Net sales: $1,835 mm International (Europe/Chile) $312 mm U.S., Canada and Mexico $1,523 mm HOLDINGS, INC. 24

25 Beauty Systems Group Beauty Systems Group 1,117 professional stores & distributor sales consultants (1) 959 company-operated / 158 franchised stores (Armstrong McCall) 1,141 distributor sales consultants (1) Average store size 2,700 sq. ft. Sells to salons and salon professionals Professional exclusive/full service business includes merchandise assortment of premium brands sold through salons and not available in mass or at Sally stores. (1) As of December 31, 2010 (1) BSG operates stores under the CosmoProf service mark. HOLDINGS, INC. 25

26 Historical Sales Results ($ in Millions) Net Sales $1,200 $1,000 $800 $600 $400 $200 $405 $535 $616 $802 $895 $954 $946 $975 $941 $1,081 $313 Growth of 17.3% $ Q11 Same Store Sales 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0%) 15.5% 14.4% 10.1% 8.3% 8.5% 5.8% 4.4% 4.6% 4.1% 6.9% 6.2% 7.8% 1.0% (0.6%) Q11 Note: Fiscal Year-end December HOLDINGS, INC. 26

27 BSG s Merchandise Offering Electrical Appliances Other Beauty Items We offer a diversified mix of beauty products not carried in Sally stores or mass retail Skin and Nail Care Promotional Items 8% 13% 5% 7% 30% Hair Care 37% Hair Color Leading Third-Party Brands Paul Mitchell Wella JOICO/ISO Goldwell Graham Webb TIGI Matrix/Redken Sebastian Note: Percentage of sales by merchandise category for fiscal year 2010 HOLDINGS, INC. 27

28 Beauty Systems Group Organic BSG U.S. stores: BSG Net New Store Openings Low capital required $75k Average inventory of $150k Acquisition Organic Positive contribution margins within 4 months Approximately 2 year cash payback on the initial investment Minimal staffing requirements and low rent expense As of September 30, 2010 HOLDINGS, INC. 28

29 BSG s Growth Initiatives Expand store base organically Further penetrate existing geographies Enter new territories Improve profitability Optimize distribution network Continue integration efforts Broaden offerings with new suppliers Seek potential fold-in acquisition opportunities HOLDINGS, INC. 29

30 Reconciliations to non- GAAP Financial Measures HOLDINGS, INC.

31 Non-GAAP Financial Measures Reconciliations ($ in Millions) FY04 FY05 FY06 FY07 FY08 FY09 FY10 1Q11 Net Earnings $105.3 $116.5 $110.2 $44.5 $77.7 $99.1 $143.8 $40.9 Interest expense, net of interest income Provision for income taxes Depreciation and amortization Non-cash charge related to Alberto- Culver stock conversion Share-based compensation Transaction expenses 41.5 (1) 21.5 (2) Sales-based service fee charged by Alberto-Culver Adjusted EBITDA $247.3 $258.2 $293.8 $309.5 $341.7 $352.5 $404.9 $114.3 (1) Transaction expenses of $41.5 for termination of the Regis transaction. (2) Transaction expenses of $21.5 for separation of the Company from Alberto-Culver in November See Notes to Consolidated Financial Statements in the Company s annual report on Form 10-K for the fiscal years ended September 30, 2007 and HOLDINGS, INC. 31