We are maintaining our long-term Neutral recommendation on
), the largest hair salon chain in the world.
Hanrahan, the CEO of Regis Corp., is taking all the measures to
turnaround its business. He is implementing a sound strategy of
transformation, which includes simplifying the operating model,
leveraging the company's scale and encouraging a
performance-driven environment, which will ultimately improve the
To achieve its objectives, management currently plans to roll out
a third-party point-of-sale (POS) software system (SuperSalon) to
all salons by the end of 2013, replacing another provider
(Shortcuts), which previously replaced an internally developed
program. Regis is optimistic about this new technology, as this
new software, SuperSalon, has adequate capabilities of both POS
and customer relationship management, confirmed by its successful
use by Regis franchisees. To drive traffic as well as
profitability, the company is focusing on an effective promotion
and pricing strategy. As a result, Regis also employed a Vice
President of pricing to better execute the promotion and pricing
strategy. Moreover, to increase sales, the company plans to
improve its scheduling and staffing levels.
During the quarter, SmartStyle salon witnessed positive
traffic for the first time in several years, benefiting from
better staffed hours and the back-to-school promotion. To enhance
guest service, the company has rolled out a program, 'The Moments
of Truth', which focuses on the critical points in a service
including the welcome, consultation and check out. The
initial response to the program was great and to further enhance
guest experience, management plans to train its stylists. The
company is still reviewing its technical training programs, which
still have several tests underway. Furthermore, Regis is also
focusing on salons manager training, employee rewards,
promotional activities and use of technology. The company has
also created centralized corporate operations and human resources
groups to standardize and improve business processes throughout
the entire organization and develop a performance-based culture.
Additionally, its cost saving initiatives, impressive balance
sheet position and divestiture of Hair Club remain encouraging.
However, the persistent sluggishness in traffic due to economic
concerns remains a drag on same-store sales and has resulted in
17 straight quarters of negative same-store sales. Traffic trends
remained choppy and average ticket remained under pressure due to
the comprehensive promotional strategy and lower pricing.
Additionally, United Kingdom retail environment remains
challenging; hence going forward, we expect International salon
business to record weak same-store sales as the segment mainly
includes company-owned salons located in United Kingdom. During
the first quarter of 2012, International same-store sales
Moreover, lingering risks from fashion changes and competition
from companies like
Ulta Salon, Cosmetics & Fragrance, Inc.
Sally Beauty Holdings Inc.
) add to the woes. Furthermore, the absence of the 2013 guidance
until the new CEO completes the evaluation of business indicates
lack of visibility in the near term.
REGIS CORP/MN (RGS): Free Stock Analysis
SALLY BEAUTY CO (SBH): Free Stock Analysis
ULTA SALON COSM (ULTA): Free Stock Analysis
To read this article on Zacks.com click here.