Regis’ Sales Slide; New CEO Says “We Have Lots of Work Ahead of Us”
Regis Corporation on Thursday reported a widening loss and decreased revenue for the fourth quarter, as it attempts to chart a turnaround under a newly appointed CEO.
The company reported a net loss of $63.6 million, or $1.11 per share, for the quarter that ended June 30. That’s compared to a loss of $16.4 million, or 29 cents per share, during the same period a year ago.
Excluding $89.2 million of after tax-items related to goodwill impairment charges and the write-down of an equity investment, earnings totaled 40 cents per share—beating analysts’ expectations of 31 cents. They also exceeded adjusted earnings of 37 cents per share from the same period a year ago.
Dan Hanrahan, who took the helm as president and CEO less than three weeks ago, said in a statement that there is “significant opportunity to improve our performance,” and the company is “committed to improving the salon experience for our guests, hiring and retaining the best stylists, continuing our efforts to simplify our operating model, and effectively leveraging our scale as North America’s largest salon company.”
The year-over-year gain in adjusted earnings “reflects Regis’ ongoing commitment to controlling costs, managing our business more efficiently, and a decrease in the effective income tax rate,” Hanrahan said.
Revenue totaled $568.2 million for the quarter, down 4 percent. Same-store sales, meanwhile, slid 3 percent—a sharper drop than the 1.7 percent decrease experienced during the same period a year ago. Revenue also fell short of the $569.4 million that analysts polled by Thomson Reuters were expecting.
For its full fiscal year, Regis reported sales of $2.3 billion, down 2.2 percent from the previous year. Its full-year net loss totaled $114.1 million, compared to a loss of $8.9 million for fiscal 2011.
Hanrahan acknowledged that the company “faced a number of challenges in the past year,” and said, “We have lots of work ahead of us.”
Hanrahan joins Regis during a tumultuous period for the company—which has struggled and trimmed expenses in recent years as consumers have reduced the frequency of their salon visits amid the recession. Last year, the company outlined a planned $40 million to $50 million expense reduction over the next two fiscal years. The move triggered a contentious proxy battle after investor Starboard Value LP, a New York-based hedge fund, said the plans were insufficient and fought for control on the board. It ultimately won three board seats.
In January, Regis laid off 110 employees from its corporate office. Then in February, the company announced plans to eliminate at least half of its 50 store brands in an effort to cut costs. Regis planned to convert most of the affected salons to the remaining, strongest-performing brands but also said it would need to close some salons.
Prior to Hanrahan’s appointment, Regis had been without a permanent leader since Paul Finkelstein stepped down as CEO in February. Then-President Randy Pearce was set to succeed Finkelstein upon his departure but announced in January that he planned to leave the company on June 30 instead. Interim Chief Operating Officer Eric Bakken served as interim CEO during the search for a permanent chief executive.
Hanrahan said that the previously announced sale of non-core assets will help Regis focus on its primary salon business. For example, the company recently announced plans to sell Hair Club for Men and Women—a subsidiary that offers various hair-loss products and services—for $163.5 million.