With Sally Beauty Holdings Inc., there is a chance history might repeat itself.

First came Procter & Gamble – when it announced an expanded agreement with the beauty retailer’s Beauty Systems Group (BSG) earlier this year after pulling their Wella line of hair care products from BSG stores in 2004.

Now, Farouk Systems Group — known for its Biosilk line of products — may be making its way back from L’Oreal’s Beauty Alliance stores, and back into Sally’s BSG unit for distribution, according to a note by Bear Stearns analyst Justin Hott.

Previously, while announcing its second-quarter results on the heels of losing L’Oreal distribution rights, Sally said Farouk had terminated its distribution agreement with BSG. Farouk product sales in the first half of fiscal 2007 accounted for about 3 percent of BSG’s total revenue in that period, Sally said at that time.

Farouk may have turned to L’Oreal hoping for better execution, or perhaps a sale of the company. But L’Oreal recently added California-based hair care company PureOlogy to its portfolio — perhaps leaving Farouk an unlikely candidate for purchase, Hott wrote.

“This potential return could be a positive sign that the loss of top lines such as L’Oreal’s brands will stop weighing down SBH shares,” he said, adding it may make more sense for brands like Farouk to be at BSG.

Farouk’s possible return to Sally might not mean much to earnings right away, but it would reinforce the view that BSG could live without L’Oreal, Hott wrote.

It could also indicate that other brands could follow.

“We also have more confidence that other brands could follow,  such as the Paul Mitchell brand out West, which could add $0.02-$0.05 to annual EPS,” he wrote.

(Photo: from Sally Beauty Web site)