) reported first quarter 2013 adjusted earnings of 8 cents per
share, significantly below the Zacks Consensus Estimate of 25
cents as well as the year-ago quarter earnings of 22 cents per
share. The below-expectation results can be traced back to
fragile same-store sales and a contraction of 230 basis points in
On GAAP basis, the company delivered net income of $28.5
million or 45 cents per share inclusive of the after-tax net
non-operational charges of $24.2 million, related to the
cumulative foreign currency translation benefit, particularly
from the sale of the ownership interest in Provalliance. The
result improved considerably from earnings of $8.3 million or 15
cents per share posted in the year-ago quarter.
Total revenue fell 5.0% year over year to $505.4 million in
the reported quarter as feeble same-store sales continue.
Service revenues dipped 5.0% year over year to $393.4 million
and product revenue decreased 4.0% to $102.3 million due to
depressing same store sale. However, fees and royalties crept up
1.0% to $9.7 million.
Consolidated same-store sales slipped 3.1%. Though, the rate
of decline was slightly lower than the year-ago drop of 3.4%,
this marked the 17
straight quarter of negative comps. The continuous deterioration
in comps is primarily due to less customer footfall in salons.
During the quarter, same-store transaction counts for salon
businesses lagged 2.3%.
As per revenue concept, North America Salons contributed more
than 90% of the total revenue and recorded sales of $473.9
million, down 4.8%, attributed to a decrease of 3.0% in
same-store sales. International Salons segment, which includes
company-owned salons located primarily in the United Kingdom,
reported revenues of $31.5 million, down 6.0%. International
same-store sales plunged 5.1% as retail environment in U.K.
continues to remain challenged.
Comps for value-priced salons were led by Supercuts, which was
positive 1.2% and also outperformed Promenade, MasterCuts and
SmartStyle which were negative 3.2%, 4.2% and 4.2%,
During the quarter, gross margins constricted 230 basis points
(bps) to 42.4% and operational operating margins decreased 210
basis points to 1.8%.
As of September 30, 2012, store count dropped by 2,602 units
to 10,045 salons, as the sale of ownership interest in
Provalliance closed during the quarter.
At the end of the quarter, cash and cash equivalents increased to
$222.5 million from $112.0 million at the end of 2012. As of
September 30, 2012, Regis reduced its long term debt to $251.2
million from $258.7 million as of June 30, 2012.
Though for the first time in several years traffic was
positive in Smart Style, supported by a back-to-school coupon
event and increased staffing in this business, this positive
signal is not much encouraging and we believe that the company
has a long way to go. At present, the main goal of the company is
to drive traffic and hence, management remains focused on
improving the salon experience, simplifying operating model,
leveraging the company's scale and optimizing salon
Regis which competes with
Ulta Salon, Cosmetics & Fragrance Inc.
) has a Zacks #3 Rank, implying a short-term 'Hold' rating on the
stock. Our long-term recommendation on the stock remains
REGIS CORP/MN (RGS): Free Stock Analysis
ULTA SALON COSM (ULTA): Free Stock Analysis
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