Yahoo Finance Regis Rises as Q1 Loss Narrows, Revenues Miss; Comps Up
Regis Corp.'s RGS incurred a loss in first-quarter fiscal 2016, which was narrower than the Zacks Consensus Estimate as well as the year-ago figure. Comps also showed an upward trend. Share price of the company rose more than 17% in response on Oct 29.
The owner, operator and franchisor of hairstyling and hair care salons posted first-quarter adjusted loss of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 9 cents and the year-ago loss of 15 cents. The improvement came on the back of comps growth.
Total revenue declined 3.1% year over year to $450.1 million, owing to a decline in Service and Product revenues, partially offset by an increase in Franchise revenues. Further, revenues missed the Zacks Consensus Estimate of $456 million by 1.3%.
Performance in Detail
Consolidated comps in the quarter were up 0.7% that compared favorably with the year-ago growth of 0.6% and the prior-quarter decline of 0.8%. The improved comps reflect Regis’ planned strategic investments and retail promotions that have started yielding benefits.
Service revenues dropped 4% year over year to $350.2 million mainly due to a reduction in the number of North American salons and foreign currency headwinds. Same-store sales increased 0.3% year over year. The growth was driven by an increase in average ticket price of 1.4%, as a result of a change in service mix and pricing, offset by 1.1% decline in guest traffic.
Product revenues were down 0.9% year over year to $88.0 million owing to a reduction in the number of salons and foreign currency headwinds. Same-store sales were up 2.4% backed by a 3.6% increase in guest traffic, partially offset by 1.2% decline in average ticket price.
Royalties and fees revenues were $12 million, up 8.6% year over year. Franchisees posted positive same-store sales and the company added 160 net franchised locations in the last 12 months.
Cost of service as a percent of service revenues (excluding legal expense) expanded 90 basis points (bps) backed by higher minimum wages, stylist productivity, and higher health insurance costs, partly offset by lower field incentives.
General and administrative expenses of $44.5 million decreased 1.3% year over year. Excluding the impact of certain one-time items in the prior period, general and administrative expenses were flat year over year. Expenses related to the planned strategic investments were offset by the inclusion of certain costs in the prior year quarter, cost savings and foreign exchange.
Our Take
After posting negative comps for the past few quarters, the slightly improvement in the reported quarter was encouraging. This reflects the company’s focus to improve its execution and performance. However, the company has a lot of work left 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).
Stocks to Consider
Some better-ranked stocks in the retail sector are NIKE, Inc. NKE, ULTA Salon, Cosmetics & Fragrance, Inc. ULTA and Build-A-Bear Workshop Inc. BBW. While NIKE and ULTA Salon sports a Zacks Rank #1 (Strong Buy), Build-A-Bear Workshop carries a Zacks Rank #2 (Buy).
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