) reported second quarter fiscal 2013 adjusted earnings of 3
cents per share, significantly below the Zacks Consensus Estimate
of 13 cents as well as the year-ago quarter earnings of 27 cents
per share. High labor cost, Empire Education Group's lower equity
in earnings and adverse impact from Hurricane Sandy caused the
quarterly earnings to decline by 5 cents.
On a GAAP basis, the company delivered a net loss of $12.3
million or 22 cents per share inclusive of the after-tax charges
of $14 million; partially offsetting the gains from the company's
discontinued Hair Club operations. The results improved
considerably from the net loss of $57.4 million or $1.01 per
share posted in the year-ago quarter.
Total revenue declined 3.8% year over year to $506.2 million
in the reported quarter, which was below the Zacks Consensus
Estimate of $513 million. Revenue in the quarter has dipped with
the 1.9% decline in same-store sales. However, the rate of
decline in comps was lower than the year-ago quarter's drop of
3.3%. The comps in the quarter were primarily impacted by
Hurricane Sandy and Regis' change in the number of store
Service revenues dipped 3.9% year over year to $388.3 million,
mainly due to a 4% annual decline in service revenues in the
region. Product revenue decreased 4.1% to $108.2 million owing to
a 3.6% fall in the same store sales. However, fees and royalties
climbed 4.7% year over year to $9.6 million.
As per revenue concept, Salon revenues declined 3.9% year over
year to $496.5 million. North American Salons recorded sales of
$473.4 million, down 3.8%, attributed to a decrease of 1.7% in
same-store sales. International Salons segment, which includes
company-owned salons located primarily in the United Kingdom,
reported revenues of $32.8 million, down 3.8%. International
same-store sales plunged 6.6%, although it was narrower than the
year-ago quarter's same-store sales of 10.1%.
In the second quarter, Supercuts and SmartStyle witnessed
positive comps of 0.3% and 0.5%, respectively, primarily due to
improved traffic. Regis Salons' comps also improved annually
which were negative 3.2%.
During the quarter, gross margins shrank 250 basis points
(bps) to 41.7% and operating margins were 1.7% compared with 2.2%
in the year-ago quarter.
As of December 31, 2012, the company's store count is
At the end of the quarter, cash and cash equivalents decreased to
$218.3 million from 222.5 million at the end of first quarter
2012. As of December 31, 2012, Regis' long-term debt was $240.0
million; declined from $251.2 million as of September 30,
Though the company is undertaking various strategic
initiatives to improve traffic, continuous decline in revenue as
well as same-store sales implies that the efforts are not
completely paying off. Even if it is for the first time in
thirteen years, the traffic in Smart Style was positive; this
signal is not quite encouraging.
One of the company's peers
Ulta Salon, Cosmetics & Fragrance Inc.
) recently declared that its Holiday Total Sales have increased
considerably by 23.2% within the period of November 11, 2012 to
December 29, 2012. Ulta, which is slated to release its fourth
quarter 2012 results on March 14 currently, expects its net sales
to be within $742 million to $754 million in fourth quarter.
Regis currently retains a Zacks Rank #3 (Hold). Two of the
company's peers, that are performing impressively -
Big 5 Sporting Goods Corp.
Sally Beauty Holdings Inc.
) - hold a Zacks Rank #1 (Strong Buy) a Zacks Rank #2
BIG 5 SPORTING (BGFV): Free Stock Analysis
REGIS CORP/MN (RGS): Free Stock Analysis
SALLY BEAUTY CO (SBH): Free Stock Analysis
ULTA SALON COSM (ULTA): Free Stock Analysis
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