) recently gave an update on the sales and same-store sales (comps)
figures for its upcoming third quarter. The company reported third
quarter 2012 revenues of $573.6 million, down 1.3% year over year
but up 1.9% sequentially.
Same-store sales (comps) for the third quarter fell 3.4% year
over year. The rate of decline was sharper than the year-ago drop
of 2.3% as well as the previous quarter's decrease of 3.0%. This
indicates a persistent deterioration in the company's same-store
sales. Same-store customer counts dropped 3.0% in the third
quarter. Service same-store sales fell 4.1% versus a decline of
2.8% in the prior-year quarter.
Retail same-store sales fell 0.9% against a decline of 0.7% in
the third quarter of 2011, implying that the company is still
struggling to drive traffic. However, consolidated hair restoration
business remained a bright spot with same-store sales growth of
4.3% in the quarter versus a growth of 1.3% in the prior-year
Geographically, North America was better placed than the
international market. Domestic same-store sales fell 3.5% year over
year, while international same-store sales plunged 10.6%.
While the company's relatively higher-priced, mall-based Regis
Salon division was challenged; value salon concepts were relatively
better positioned owing to the value sensitive nature of consumers
in the backdrop of economic uncertainty.
Comps at Supercuts (located in strip centers; around $17 average
ticket) was flat year over year versus a 0.2% growth in the
year-ago period, while MasterCuts (around $21 average ticket) and
higher-end Regis salons (87% located in malls; around $41 average
ticket) posted declines of 3.9% and 4.8%, respectively. SmartStyle
salons, which are located exclusively in Wal-Mart Supercenters,
recorded a decrease of 5.1%.
Regis, which owns, franchises or has stakes in more than 12,800
salons, hair restoration centers and cosmetology education
services, is considering a slew of initiatives to turn its business
around. Management remains committed to restructuring and cost
cutting through overhead reduction as well as shutting down poor
However, all the efforts seem futile at the current level given
the continued deceleration in comps and sales. Sales have been
going downhill for quite some time. Additionally, we expect margins
to remain under pressure at Hair restoration in the near term as
the business continues to experience an increase in the cost of
hair systems due to spike in labor cost in China where these
systems are manufactured.
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 estimate of negative 1% to
positive 1% range. The company also cut its earnings guidance range
to $1.11 to $1.21 per share from $1.16 to $1.32 per share.
Regis currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We are 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.
Regis is slated to release its third quarter earnings on April
26, 2012. The Zacks Consensus earnings estimate for the third
quarter is pegged at 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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