) recently reported second quarter 2012 revenues of $563 million,
down 2.0% year over year and 1.2% sequentially.
Same-store sales (comps) for the second quarter fell 3.0% year
over year. The rate of decline was sharper than the year-ago drop
of 1.3% but in line with the previous quarter's decrease. This
indicates a persistent deterioration in the quarter's same-store
sales.Although service customer visits improved 10 basis points
sequentially, it was not sufficient to hold up comps. Service
same-store sales fell 3.3% versus a decline of 2.1% in the
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 where same-store sales grew 1.3% in the
quarter versus a growth of 0.8% in the prior-year quarter.
Geographically, North America was better placed than the
international market. Domestic same-store sales fell 2.9% year over
year, while international same-store sales p lunged
Results remained weak in the company's relatively higher-priced,
mall-based Regis Salon division, but were stronger in value salon
concepts owing to a shift in consumer behavior in the backdrop of
While Supercuts (located in strip centers; around $17 average
ticket) declined 1.1% versus a 0.5% growth in the year-ago period,
MasterCuts (around $21 average ticket) and higher-end Regis salons
(87% located in malls; around $41 average ticket) posted declines
of 3.4% and 4.9%, respectively. SmartStyle salons, which are
located exclusively in Wal-Mart Supercenters, recorded a decrease
Regis, which owns, franchises or has stakes in more than 12,700
salons, hair restoration centers and cosmetology education
services, is considering a slew of initiatives to turn its business
around. Ma nagement remains committed to restructuring and cost
cutting through overhead reduction aswell as closure of under
However, none of the efforts have paid off till now. Sales have
on the downhill for quite some time. W e expect international salon
business to record weak same-store sales as the segment mainly
includes company-owned salons located primarily in the United
Additionally, we expect margins to remain under pressure at Hair
restoration in the near term as the business continues to
experience increase in the cost of hair systems due to spike in
labor cost in China where these systems are manufactured.
Regis currently retains a Zacks #4 Rank, which translates into a
short-term Sell rating. We are also maintaining a long-term Neutral
recommendation on the stock. However, one of Regis' close
Ulta Salon, Cosmetics & Fragrance Inc.
) currently retains a Zacks #1 Rank, which translates into a
short-term Strong Buy rating.
However, the company is expected to end the first quarter of
2012 on a disappointing note due to economic challenges. Estimates
are also expected to move down in the coming days as same-store
sales continue to remain sluggish.
The company is slated to release its second quarter earnings on
January 23, 2011. The Zacks Consensus earnings estimate for the
second quarter is 26 cents, representing an annualized gain of
REGIS CORP/MN (
): Free Stock Analysis Report
ULTA SALON COSM (
): Free Stock Analysis Report
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