Regis Corporation’s (RGS) fourth quarter operating earnings of 59 cents per share were ahead of the Zacks Consensus Estimate of 46 cents per share. Earnings also topped the prior-year period results of 55 cents per share. Results reflect the benefits of the cost containment measures taken by the company.
However, Regis reported a fourth quarter net loss of 11 cents per share as a result of the write-down of its 30% ownership interest in Provalliance, the largest operator and franchisor of hair salons on the European continent.
Revenues for the quarter were down 2.5% to $625 million. Consolidated total same-store sales decreased 4.0% and were a negative for the first time in the company’s 87-year history.
Consumer behavior has changed in this difficult economic environment. Consumers are cutting back on expenditures and as a result, a slowdown in spending and lengthening of visitation patterns is being observed.
For 2010, Regis continues to expect same-store sales to be -3% to +1%. While same-store sales are expected to improve throughout the year, the first quarter seems to be a difficult one.
Management has taken steps to strengthen its balance sheet and improve its financial debt covenant ratios. Regis has reduced its total debt by $173 million to $634 million, driven by a reduction in overhead expenses and more efficient management of its working capital.
During July, Regis raised capital of $336 million from its common stock and convertible senior notes offering for paying down its debt. The company also modified its existing debt agreements.
According to management, in the first quarter of fiscal 2010, Regis will report a charge of about $18 million pre-tax for make-whole premiums and other fees related to its debt modifications and pre-payment. Additionally, the company expects to incur a lease termination and professional fees of approximately $3.4 million pre-tax, associated with its plan to shut down around 80 underperforming locations in the United Kingdom.
Regis is the dominant company in the hair care industry, whose platform should allow it to leverage its position. Additionally, cost curtailment measures including the debt reduction augur well going forward.
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