Regis Corporation (RGS) recently reported first quarter 2012 revenues of $569 million, down 1.7% year over year.
Regis owns, franchises or has stakes in more than 12,700 salons, hair restoration centers and cosmetology education services.
The same-store sales (comps) for the first quarter fell 3.1% year over year. The rate of decline was sharper than respective drops of 1.5% and 1.7% in the year-ago and fourth quarters, implying a persistent deterioration in the quarter’s same-store sales. Although service customer visitation improved 30 basis points sequentially, it was not sufficient enough to uphold comps. Service same-store sales fell 3.1% over a decline of 2.4% in prior year’s quarter.
Retail same-store sales fell 3.2% against a growth of 1.7% in the first quarter of 2010, implying that the company is struggling to drive traffic. However, consolidated Hair restoration same-store sales rose 1.3% in the quarter.
Geographically, North America saw a narrower loss than the international market. Domestic same-store sales fell 3.0% year over year, while International same-store sales plunged 9.4%.
Results remained weak in the company’s relatively higher-priced, mall-based Regis Salon division, but were stronger in value salon concepts due to a shift in consumer behavior amid the economic uncertainty. While Supercuts (located in strip centers; around $17 average ticket) posted flat comps versus a 0.3% decline in year-ago period, MasterCuts (around $21 average ticket) and higher-end Regis salons (87% located in malls; around $41 average ticket) posted declines of 4.3% and 4.5%, respectively. SmartStyle salons, which are located exclusively in Wal-Mart Supercenters, recorded a decrease of 3.6%.
Outlook
Regis is considering a set of initiatives and a change in top management to turn around its business. Accordingly, all its company-owned salons will be enhanced over the next year with new point-of-sale software.
Moreover, management remains committed to restructuring and cost cutting through overhead reduction as well as shuttering of underperforming stores, cut-back in bonuses and contract renegotiations. Over the next two years, Regis targets saving $40–$50 million in costs.
However, the company is expected to end the first quarter of 2012 on a disappointing note due to economic challenges. Estimates are also expected to move down in the coming days as same-store sales continue to remain sluggish.
The company is slated to release its first quarter earnings on October 24, 2011. The Zacks Consensus earnings estimate for the first quarter is 27 cents, representing an annualized rate of decline of 10.4%.
Regis currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining a long-term Neutral recommendation on the stock. However, one of Regis’ close competitors, Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating.
