) recently completed the sale of one of its subsidiaries, Hair
Club for Men and Women, to Tokyo-based Aderans Co., Ltd. We note
that Regis inked a deal with Aderans Co.to offload the said
division last July.
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Regis acquired Hair Club in Dec 2004. The subsidiary offers
solutions for hair loss and holds around 5% share in the $4
billion U.S. market. There are nearly 98 North American Hair Club
locations, including 29 franchise units.
Minneapolis-based Regis received $163.5 million in cash from
Aderans for the divesture. Aderans is a worldwide provider of
hair replacement and restoration products and services and owns
several internationally acknowledged brands. Regis will likely
record a post-tax gain of about $12 million from the deal.
We view the deal as strategically positive for both parties. It
gives Regis immediate cash value as well as an option to divest
one of its non-core businesses. On the other hand, the Japanese
firm Aderans will get an opportunity to cater to Regis' strong
U.S. client base and thereby strengthen its global business.
The deal follows the divesture of Regis' minority ownership
interest in Provalliance - the largest hair salon company in
Europe -in Apr 2012. Both the divestitures reflect the leading
global hair care company's efforts to turn around from continued
underperformance by offloading non-core assets and solely
focusing on enhancing salon experience.
Regis, which owns various segments like Supercuts, MasterCuts,
Regis salons and SmartStyle, has been reeling under pressure for
quite some time. Weak salon traffic due to changes in lifestyle
patterns and economic uncertainty has resulted in negative
same-store sales (comps) in the last few quarters.
Responding to the above difficulties, Regis decided to
concentrate on its core North American salon business. Management
remains committed to restructuring and cost-containment efforts.
In 2011, Regis revealed its intention to slash costs by $40
million to $50 million over the next two fiscal years. Regis also
remains steadfast in shutting down underperforming stores.
Regis currently retains a Zacks Rank #3 (Hold). Some retail
stocks that warrant a look at the current level include
Sally Beauty Holdings Inc.
Hastings Entertainment Inc.
). While Cabela holds a Zacks Rank #1 (Strong Buy),
Sally Beauty and Hastings Entertainment retain a Zacks Rank #2