On Sep 5, 2014, we issued an updated research report on Regis Corp. (RGS).
Regis Corp. reported mixed fourth-quarter 2014 results. The company’s adjusted loss of 10 cents per share compared unfavorably with the Zacks Consensus Estimate of earnings of 3 cents as well as the year-ago earnings of 6 cents. With this, the company missed the earnings expectations in five out of six quarters.
Even though revenues beat the consensus mark by 1%, the same fell 3.6% year over year to $483.9 million. Additionally, service revenues and product revenues have been declining continuously at Regis due to weak same-store sales.
Traffic at Regis has been on a decline for the past few quarters due to a weak consumer discretionary spending environment in the U.S. Government budget cuts; high tax rates and still-tightened credit availability continue to hurt consumers’ discretionary spending. Additionally, a sluggishly recovering economy in the U.K. is affecting Regis’ international operations.
We are encouraged by the company’s restructuring initiatives, modified point-of-sale system and retail plan. Further, the company has reorganized its field structure, which includes moving from branded to a geographic management structure. Additionally, the Supercuts and SmartStyle brands are performing moderately better than the company’s other brands.
However, performance at many locations continues to be poor, with some places seeing no signs of a turnaround. Also, higher operating costs owing to different sales-driving initiatives, mounting retail expenses and increasing labor costs are expected to hurt margins in the upcoming quarters.
Regis currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the same industry include Bed Bath & Beyond Inc. (BBBY), Five Below, Inc. (FIVE) and Jumei International Holding Ltd. (JMEI). All these stocks carry a Zacks Rank #2 (Buy).
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