) reported second quarter 2012 adjusted earnings of 32 cents per
share, way ahead of the Zacks Consensus Estimate of 8 cents and the
year-ago quarter earnings of 25 cents. The better-than-expected
results were driven by lower tax rate and margin expansion.
However, including the after tax non-recurring expense of $77
million, the company delivered a net loss of $57.4 million or $1.01
per share compared with net earnings of $14.5 million or 24 cents
per share posted in the year-ago quarter.
Total revenue fell 1.9% year over year to $563.3 million in the
reported quarter due to sluggish same-store sales.
Service revenues and product revenues dipped 2.2% and 1.2% year
over year to $421.3 million and $132.2 million, respectively; while
fees and royalties inched up 1.7% to $9.8 million.
Consolidated same-store sales plummeted to 3.0%. Moreover, the
rate of decline was sharper than the year-ago drop of 1.3% but in
line with the sequential decrease. The sustained deterioration in
comps is primarily due to slower customer traffic. During the
quarter, guest count plunged 2.4%.
Service same-store sales fell 3.3% versus a decline of 2.1% in
prior-year quarter. Retail same-store sales fell 2.2% against a
growth of 1.5% in the second quarter of 2010, implying that the
company is struggling to drive traffic. However, consolidated Hair
restoration business remained a sweet spot as same-store sales grew
1.7% in the quarter versus a 0.8% rise in the prior-year
Geographically, North America witnessed a narrower loss than the
international market. Domestic same-store sales fell 2.9% year over
year, while International same-store sales plunged 10.1%.
International business continues to suffer due to challenging
retail environment in the United Kingdom, where majority of
company-owned salons are located.
During the quarter, gross margin expanded 30 basis points (bps)
to 44.8%. Operational operating margin also enhanced 20 bps to
4.4%, benefiting from improved service margin and reduced
At the end of the second quarter of 2012, Regis owned,
franchised, or held ownership interest in 12,777 worldwide
locations, up 33% year over year.
At the end of the quarter, cash and cash equivalents declined to
$83.1 million from $96.3 million at the end of the fourth quarter
of 2011. As of September 30, 2011, Regis reduced its long-term debt
and capital lease obligations to $263.9 million from $281.2 million
as of June 30, 2011.
With comps coming in below 3% for the first half of 2012, the
Beauty Salon operator trimmed its outlook for fiscal 2012. The
company now anticipates same-store sales in the - negative 3.5% to
negative 2.5% range versus the previous estimation of negative 1%
to positive 1% range. The company has cut down its earnings
guidance range to $1.11 to $1.21 per share from the earlier
guidance of $1.16 to $1.32 per share. EBITDA guidance has been
reduced from $222 million - $242 million to $210 million - $220
Though the company is undertaking a host of initiatives to
improve traffic, continuous decline in same-store sales and
customer visitation implies that the efforts are not paying off.
With reduced outlook for 2012 and and the retirement of president
Randy L. Pearce, effective from June 30, who was tipped to become
the CEO of the company in February, further adds to the
uncertainty. Hence, estimates for the company are expected to move
down in the coming days. The Zacks Consensus Estimate for 2011 and
2012 are pegged at $1.17 and $1.32, respectively.
Regis has a Zacks #3 Rank, implying a short-term Hold rating on
the stock. Our long-term recommendation for the stock remains
One of Regis' primary competitors,
Ulta Salon, Cosmetics & Fragrance Inc.
), is expected to release its fourth quarter 2011 earnings on March
REGIS CORP/MN (
): Free Stock Analysis Report
ULTA SALON COSM (
): Free Stock Analysis Report
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