) fourth-quarter fiscal 2013 adjusted earnings of 6 cents per
share missed the Zacks Consensus Estimate of 10 cents by 40% and
the comparable year-ago quarter's earnings of 36 cents by
Negative same-store sales (comparable store sales) caused the
quarterly earnings to decline 7 cents. Along with this, mounting
labor costs, increased product costs and higher connectivity
costs also pressurized earnings in the quarter.
Total revenue declined 5.0% year over year to $502.3 million,
missing the Zacks Consensus Estimate of $514 million by 2.3%. The
quarterly revenues decreased due to a decline in comps and lower
Service revenues dropped 5.3% year over year to $390 million,
mainly due to a decrease in North American salon revenues and a
3.1% decline in service same-store sales resulting from a 3.4%
fall in guest counts. The shift of Easter from April to March
also played a role in pulling down the service same-store sales
during the quarter.
Product revenues dipped 4.9% to $102.0 million owing to a 3.3%
fall in product same-store sales. However, royalties and fees
revenues climbed 5.2% year over year to $10.2 million, gaining
from higher franchisee comps.
Consolidated comps in the quarter were down 3.1% due to a 3.7%
decrease in guest count, offset by a 0.6% rise in average ticket
price. However, the rate of decline in comps was slightly better
than the year-ago quarter's drop of 3.5%.
Cost of service as a percent of service revenues expanded 180
basis points (bps) to 58.9% as it was adversely impacted by
negative service comps and higher labor costs. Cost of product as
a percent of product revenues (adjusted) also climbed up 240 bps
to 53.5%, due to headwinds from regular clearance sales.
In full fiscal year 2013, the company reported earnings of 18
cents per share versus $1.14 per share in the prior year.
Earnings were also lower than the Zacks Consensus Estimate of 24
cents. Total revenue was $2.02 billion, down 0.5% from the Zacks
Consensus Estimate and 4.9% from the year-ago quarter.
During the quarter, Regis opened 28 company-owned salons while
closing down or transferring 118 company-owned units. On Jun 30,
2013, the company had 9,763 salons, of which 7,435 were
company-owned and 2,082 franchised.
Although the Zacks Rank #3 (Hold) company has taken a set of
initiatives to boost its business, lower earnings and a
weaker top line reflect that the company's efforts are not paying
off. Initiatives taken by the company include installing
third-party point-of-sale software systems (SuperSalon),
implementing cost-effective promotions, revising its pricing
strategy and enhancing normal salon hours. Moreover, owing to the
continuous fall in guest count, the company has witnessed
negative comps for the past 20 quarters. We believe that the
sluggish comps trend will continue to affect Regis' result in the
next few quarters until the customer-visit patterns completely
rebound. Regis' profits are also expected to reel under pressure
due to higher labor costs and mounting retail expenses.
Some other retail stocks with a favorable Zacks Rank include
Five Below, Inc.
Steiner Leisure Ltd.
Tractor Supply Company
). All these companies carry a Zacks Rank #2 (Buy).
REGIS CORP/MN (RGS): Free Stock Analysis
STEINER LEISURE (STNR): Free Stock Analysis
TRACTOR SUPPLY (TSCO): Free Stock Analysis
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