) reported fourth quarter 2012 adjusted earnings of 40 cents per
share, surpassing the Zacks Consensus Estimate of 31 cents as well
as the year-ago quarter earnings of 37 cents per share. The
better-than-expected results were driven by lower tax-rate.
However, the company delivered net loss of $63.6 million or $1.11
per share inclusive of the after-tax non-operational charges of
$89.2 million related to goodwill impairment at its Regis salon
division and the write-down of the equity investment in Empire
Educations, which improved considerably from a net loss of $16.4
million or 29 cents per share posted in the year-ago quarter.
Total revenue slipped 4.0% year over year to $568.2 million in the
reported quarter due to sluggish same-store sales.
In full year 2012, the company reported net income of $80.5
million, or $1.30 per share, versus $71.2 million, or $1.16 per
share, in the prior year. Total revenue fell 2.2% to $2,325.9
Service revenues dipped 5.1% year over year to $429.5 million,
while product revenue decreased 0.8% to $128.3 million and fees and
royalties climbed 1.7% to $10.3 million.
Consolidated same-store sales plummeted 3.0%. The rate of decline
which was steeper than the year-ago drop of 1.7%, marked the 16th
straight quarter of negative comps. The continuous deterioration in
comps is primarily due to slower customer traffic. During the
quarter, guest count declined 4.0%.
As per revenue concept, North America Salons contributed more than
80% of the total revenue and recorded sales of $487.9 million, down
4.7%, attributed to a decrease of 3.3% in same-store sales.
International Salons segment, which includes company-owned salons
located primarily in the United Kingdom, reported revenues of $41.0
million, down 3.7%. International same-store sales plunged 6.6% as
retail environment in the U.K. continues to remain challenged.
However, revenue at the Hair restoration centers climbed 4.3% to
$39.3 million, benefiting from same-store sales growth of 4.4% in
During the quarter, gross margins contracted 40 basis points (bps)
to 44.6% and operating margins remained flat year over year at
During the quarter, Regis opened 60 company-owned salons and closed
or relocated 104 salons. Franchisees opened 26 salons and closed
At the end of 2012, Regis owned, franchised, or held ownership
interest at 12,647 locations worldwide.
At the end of 2012, cash and cash equivalents increased to $111.9
million from $96.3 million at the end of 2011. As of June 30, 2012,
Regis reduced its long-term debt and capital lease obligations to
$258.7 million from $281.2 million as of June 30, 2011.
The company's new CEO Hanrahan is taking all the measures to
turnaround Regis' business. Harahan has started implementing a
sound strategy of transformation. The strategy includes simplifying
operating model and leveraging the company's scale, encouraging a
performance-driven environment, improving the salon experience and
hiring, training and retaining top stylists (supported by new human
resource department, which never existed at company previously).
Moreover, the sale of Regis' stake in Provalliance as well as the
divestiture of Hair Club remains encouraging, as both the deals
will enable it to focus on enhancing the salon experience by
offloading non-core assets.
On the flip side, sluggish same-store sales resulting from slower
traffic due to economic concerns, lack of visibility and lingering
risk from fashion changes remain matters of concern.
Regis which competes with Ulta Salon, Cosmetics & Fragrance
) has a Zacks #3 Rank, implying a short-term Hold rating on the
stock. Our long-term recommendation for the stock remains Neutral.
REGIS CORP/MN (RGS): Free Stock Analysis Report
ULTA SALON COSM (ULTA): Free Stock Analysis
To read this article on Zacks.com click here.