On Dec 30, 2014, we issued an updated research report on Regis Corp. (RGS).
Regis reported mixed fiscal first-quarter 2015 results. The company’s adjusted loss of 10 cents per share were wider than the Zacks Consensus Estimate of a loss of 6 cents and compared unfavorably with the year-ago earnings of a penny. With this, the company missed the earnings expectations in six out of seven quarters.
Even though revenues beat the consensus mark by a narrow margin, the same fell 0.9% year over year to $464.6 million, due to lower service revenues. Additionally, service revenues have been declining continuously at Regis due to weak same-store sales.
Traffic at Regis has been declining over the past few quarters due to weak consumer discretionary spending environment in the U.S. Despite moderate improvement in economic growth, consumers are raising their discretionary spending only modestly as an increase in jobs this year is yet to translate into significantly higher wages. High interest rates, higher health care costs and still tightened credit availability continue to hurt consumer discretionary spending in the U.S., which are pulling down the company‘s revenues. Additionally, a sluggishly recovering economy in the U.K. is affecting Regis’ international operations.
In fact, 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 continue to hurt margins, going ahead.
Nevertheless, 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, Regis’ Supercuts and SmartStyle brands are performing moderately better than the other brands, with comps growth of 2.8% in the fiscal first quarter of 2015. Also, the franchisees posted positive same-store sales in the last reported quarter and added 111 net locations in the year.
Stocks to Consider
Regis currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Bed Bath & Beyond Inc. (BBBY), CST Brands, Inc. (CST) and Hibbett Sports, Inc. (HIBB). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment