Regis Corp.'s (RGS) reported a loss in fiscal first quarter 2015, wider than the Zacks Consensus Estimate. Share price of the company fell 2% in response. However, revenues marginally beat the Zacks Consensus Estimate while comps showed an upward trend.
The owner, operator and franchisor of hairstyling and hair care salons posted fiscal first quarter 2015 adjusted loss of 15 cents per share that compared unfavorably with the Zacks Consensus Estimate of a loss of 6 cents and the year-ago earnings of 1 cent. The decline in total operating costs and expenses and improved comps could not offset the impact of a decline in revenues, thereby resulting in a loss.
Total revenue declined 0.9% year over year to $464.6 million, owing to a decline in Service revenues, partially offset by an increase in Product revenues. However, revenues slightly beat the Zacks Consensus Estimate of $464 million.
Performance in Detail
Consolidated comps in the quarter were up 0.6% that compared favorably with the year-ago decline of 5.4% and also the prior quarter decline of 6.2%. The improved comps reflect the company’s planned strategic investments and retail promotions that have started reaping benefits.
Service revenues dropped 0.9% year over year to $464.6 million mainly due to a reduction in the number of North American salons. Same-store sales were flat year over year, better than a decline of 3.1% in the year-ago quarter. Decline in guest traffic of 0.6% was offset by an increase in average ticket price of 0.6%.
Product revenues were up 2.3% year over year to $88.8 million owing to higher promotion levels and increased guest traffic. Same store sales were up 3.5% that compared favorably with a decline of 14.8% in the year-ago quarter. Increase in same store sales reflect a 4.1% increase in guest traffic, partially offset by 0.6% decline in average ticket price. Royalties and fees revenues were $11 million, up 9.2% year over year.
Cost of service as a percent of service revenues (excluding legal expense) expanded 70 basis points (bps) owing to higher field incentives, state minimum wage increases and costs related to higher retail promotions.
General and administrative expenses were up 1.7% year over year to $44.5 million owing to costs related to planned strategic investments in Asset Protection and Human Resource initiatives.
Our Take
After posting negative comps consistently over the past few quarters, the slightly positive comps in the reported quarter are encouraging. This reflects the company’s focus to improve its execution and performance. However, the company has a lot of work left ahead to maintain traffic and positive comps. Meanwhile, the costs incurred to execute these initiatives would continue to dampen profits. Regis currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks in the retail sector include Barnes & Noble, Inc. (BKS), Big 5 Sporting Goods Corp. (BGFV) and Bed Bath & Beyond Inc. (BBBY). While Barnes & Noble sports a Zacks Rank #1 (Strong Buy), Bed Bath & Beyond and Big 5 Sporting Goods carry a Zacks Rank #2 (Buy).
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