Regis Reports Sales Decline – Analyst Blog

In a pre-earnings announcement, Regis Corporation (RGS) has disclosed that its third quarter fiscal 2010 consolidated same-store sales has decreased by 1.8%. The company has reported a 2.7% decline in revenue from the prior-year quarter to $588 million.

Consumer behavior has altered in this difficult economic environment. People are cutting back on expenditures, resulting in a slowdown in spending and a lengthening of salon visitation patterns.

Domestic same-store sales were down 1.8% while International same-store sales decreased 4.8%. However, Hair restoration same-store sales increased 1.4% in the quarter. Regis will announce its second quarter 2010 earnings results on Apr 28, 2010.

During the third quarter last year, the company closed the sale of its Trade Secret retail product unit to Premier Salons Beauty Inc. This resulted in the company reporting $13 million of sales to Premier Salons, as Regis agreed to offer some transitional administrative and other support services to Premier that included the supply of certain retail products too. Excluding these sales, the company said that third quarter 2010 revenues dipped just 0.7%.

However, management has taken steps to strengthen its balance sheet and improve its financial debt covenant ratios. Regis has significantly reduced its total debt in fiscal 2009. This was driven by a reduction in overhead expenses and a more efficient management of its working capital.

Regis’ management said that the month of March had been the excellent after a long time, with North American same-store sales remaining flat. Its value concepts continue to perform well and better than the higher price point Regis unit.

 Regis, the dominant company in the hair care industry, should leverage its position on its platform. Though the economic downturn has severely impacted the company’s earnings in the last few quarters, we believe the recent signs of economic recovery and the company’s implementation of cost curtailment measures including debt reduction augur well.