) recently delivered another disappointed earnings report as
same-store sales continued to fall, prompting analysts to revise
their estimates significantly lower yet again. The company has
missed the Zacks Consensus Estimate is 5 out of the last 6
It is a Zacks Rank #5 (Strong Sell) stock.
Since I last wrote about Regis Corporation
as the 'Bear of the Day' on October 18, 2013
, the stock has fallen more than -13%. Considering the negative
earnings momentum and lofty valuation, the near-term future still
doesn't look very bright for the stock.
Regis Corporation is focused primarily on hair salons. It owns,
franchises or holds ownership interests in nearly 10,000 locations
across the globe under the brands Supercuts, Sassoon Salon, Regis
Salons, MasterCuts and Cost Cutters, among others.
Second Quarter Results
Regis Corporation delivered disappointing quarterly results once
again. On January 27, it reported adjusted EPS of -$0.04 for the
second quarter of its fiscal 2014, missing the Zacks Consensus
Estimate that called for EPS of +$0.01. It was the company's 5th
earnings miss in the last 6 quarters.
Sales fell -7% to $468.4 million, which was below the Zacks
Consensus Estimate of $480.0 million. This was driven by a -6.2%
decline in same-store sales as guest count fell -7.4%.
The adjusted cost of service and product as a percentage of
revenues increased 50 basis points to 59.9%. This was driven in
part by negative leverage of fixed expenses. The adjusted operating
profit margin declined from +1.7% of revenue to -0.7%.
Not surprisingly, analysts continued to revise their earnings
estimates significantly lower for Regis Corporation. This sent the
stock to a Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for 2014 is now -$0.01, down from
$0.16 just 30 days ago. The 2015 consensus has fallen from $0.38 to
$0.25 over the same period. You can see the steady decline in
consensus estimates over the last several months for Regis:
Shares of Regis Corporation have sold off a bit since the Q2
earnings miss. But the stock still does not look like a value here.
Shares of RGS trade at a lofty 87x 12-month forward earnings, which
is well above its historical median and the industry multiple.
Based on the current consensus estimate for 2015, Regis trades at a
pricey 51x. Its price to cash flow ratio of 37 looks expensive too.
The Bottom Line
With negative same-store sales, persistently falling earnings
estimates and premium valuation, investors should continue avoiding
Regis Corporation until it can turn things around.
Todd Bunton, CFA is the Growth & Income Stock Strategist
and Editor of the
Income Plus Investor service
REGIS CORP/MN (RGS): Free Stock Analysis Report
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