Regis Corporation (RGS) reported fourth quarter 2011 adjusted earnings of 37 cents per share, surpassing the Zacks Consensus Estimate of 30 cents per share as well as the prior-year quarter earnings of 34 cents per share.
During the quarter, the company reported GAAP net loss of $16.4 million or 29 cents per share, well below the net income of $18.3 million or 30 cents per share posted in the year-ago quarter.
In fiscal year 2011, adjusted earnings were $1.16 as against $1.30 in the prior fiscal year. GAAP loss was 16 cents per share in the reported year as compared with a profit of 75 cents per share in the last year.
Total revenue inched up 0.3% year over year to $592.0 million in the fourth quarter attributable to higher footfalls. Subsequently, quarterly revenue sailed past the Zacks Consensus Estimate of $588 million. In fiscal 2011, total revenue declined 1.4% to $2.33 billion.
Quarter Performance
Service revenues and product revenues rose 0.1% and 1.2% year over year to $452.4 million and $129.4 million, respectively; whereas fee and royalties fell 1.0% to $10.2 million.
Consolidated same-store sales plummeted for the twelfth consecutive quarter to 1.7%. However, this rate of decline compared favorably with the year-ago quarter's drop of 2.7% and the third quarter plunge of 2.3%, reflecting improvement in customer visitation. The several initiatives taken by Regis to drive traffic seems to have paid off as guest count expanded 150 basis points (bps) over the last nine months, but still plunged 2.5%.
Domestic same-store sales fell 1.6% year over year while International same-store sales decreased 5.5%. However, hair restoration same-store sales rose 1.3% in the quarter.
Operating expenses jumped 5.5% year over year to $584.8 million, reflecting higher costs.
At the end of the fourth quarter of 2011, Regis owned, franchised, or held ownership interest in 12,701 worldwide locations versus 12,728 at the end of the fourth quarter of 2010 and 12,691 at the end of the third quarter of 2011.
Financial Position
At the end of fourth quarter 2011, the Beauty Salon operator’s cash and cash equivalents declined to $96.3 million from $151.9 million at the end of the fourth quarter of 2010. As of June 30, 2011, Regis reduced its long-term debt to $281.2 million versus $388.4 million as of June 30, 2010.
Outlook
For fiscal 2012, Regis is expected to make further efforts to improve consumer traffic. The company continues to anticipate same-store sales in the -1% to +1% range and EBITDA between $222 million and $242 million. The company estimates earnings in the range of $1.16 to $1.32 per share. However, consumer behavior continues to flag as guest count dropped 2.5% and same store sales plunged 3.6% during the first seven weeks of the reported quarter.
Our Take
The company reported better-than-expected fourth quarter results and continues to undertake a host of initiatives to improve traffic. To boost customer visitation and ensure better service, Regis is planning to install new point-of-sale software in all of its company-owned salons over the next year.
However, the company has commenced the first quarter of 2012 on a disappointing note, reflecting persistent economic challenges. Hence, estimates for the company are expected to move down in the coming days as same-store sales continue to remain sluggish.
Regis has a Zacks #4 Rank, implying a short-term Sell rating on the stock. Our long-term recommendation for the stock remains Neutral.
One of Regis' primary competitors, Ulta Salon, Cosmetics & Fragrance Inc. (ULTA), is expected to release its second quarter 2011 earnings on September 8, 2011.
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