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Regis (RGS) Incurs Loss in Q2, Lags on Revenues; Stock Down
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Regis Corp. (RGS - Free Report) posted adjusted loss of 3 cents per share in the second-quarter of fiscal 2017, wider than the Zacks Consensus Estimate of a loss of 1 cent, by 200%. Moreover, the figure compared unfavorably with the year-ago quarter earnings of 3 cents.
The owner, operator and franchisor of hairstyling and hair care salons, posted revenues of $424 million for the quarter, down 5.9% year over year. The decline was on the back of lower Service and Product revenues as well as lower franchisee fees, partially offset by an increase in Royalties. Reported revenues missed the Zacks Consensus Estimate by nearly 4%.
Notably, Regis’ shares were down 7.5% in the trading session on Feb 3, 2017, following the lower-than-expected results.
Performance in Detail
Consolidated comps in the quarter were down 3.6% compared with 1% decline in the prior quarter. We note that comps grew 2.2% in the year-ago quarter.
The decline in revenue was primarily due to the closing of unprofitable salons and unfavorable foreign currency translations, partly offset by calendar shifts. The company also upholds the shift of Christmas from Friday last year to Sunday this year to have negatively impacted comps by approximately 120 basis points (bps) in the quarter.
Service revenues dipped 5.1% year over year to $323.2 million, mainly due to closing of loss-making salons and foreign currency headwinds, partly offset by calendar shifts. Same-store service sales decreased 2.8%, owing to a 6.1% decline in guest traffic, partially offset by a 3.3% increase in average ticket price.
Product revenues were down 9% year over year to $89.4 million. Same-store product sales also went down 6.7%, due to a 6.9% decrease in guest transactions, partly offset by a 0.2% increase in average ticket price.
Royalties and fees revenues were $11.4 million, down 2.1% year over year. Royalty increases of 4.3% were largely offset by a lower level of initial franchise fees, due to the timing of new salon openings and lapping higher franchise termination fees in the prior-year quarter. Moreover, franchisees posted positive same-store sales and the company also added 41 new franchised locations in the quarter.
Cost of service, as a percentage of service revenues, increased 100 bps to 64.6%, owing to state minimum wage increases, deteriorated stylist productivity and lapping a rebate in the prior-year quarter, partly offset by lower bonuses.
Cost of product, as a percentage of product revenues, also increased 10 bps to 51.4%, mainly due to a mix shift into lower margin product sales to franchisees.
General and administrative expenses of $40.7 million decreased 14.1% on a year-over-year basis. The decrease was mainly due to one-time benefits related to lower sales volumes in the quarter, cost savings and lapping certain costs in the prior-year quarter, partly offset by planned strategic investments in technical training.
Regis Corporation Price, Consensus and EPS Surprise
Cabela’s Incorporated holds a Zacks Rank #2 (Buy). It has provided a Return on Equity (ROE) of 10.92% in the trailing twelve months, while the industry’s average was 9.7%.
Barnes & Noble, Inc. carries a Zacks Rank #2. It has surpassed/met estimates in three of the trailing four quarters, recording a positive average surprise of 3.95%.
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Regis (RGS) Incurs Loss in Q2, Lags on Revenues; Stock Down
Regis Corp. (RGS - Free Report) posted adjusted loss of 3 cents per share in the second-quarter of fiscal 2017, wider than the Zacks Consensus Estimate of a loss of 1 cent, by 200%. Moreover, the figure compared unfavorably with the year-ago quarter earnings of 3 cents.
The owner, operator and franchisor of hairstyling and hair care salons, posted revenues of $424 million for the quarter, down 5.9% year over year. The decline was on the back of lower Service and Product revenues as well as lower franchisee fees, partially offset by an increase in Royalties. Reported revenues missed the Zacks Consensus Estimate by nearly 4%.
Notably, Regis’ shares were down 7.5% in the trading session on Feb 3, 2017, following the lower-than-expected results.
Performance in Detail
Consolidated comps in the quarter were down 3.6% compared with 1% decline in the prior quarter. We note that comps grew 2.2% in the year-ago quarter.
The decline in revenue was primarily due to the closing of unprofitable salons and unfavorable foreign currency translations, partly offset by calendar shifts. The company also upholds the shift of Christmas from Friday last year to Sunday this year to have negatively impacted comps by approximately 120 basis points (bps) in the quarter.
Service revenues dipped 5.1% year over year to $323.2 million, mainly due to closing of loss-making salons and foreign currency headwinds, partly offset by calendar shifts. Same-store service sales decreased 2.8%, owing to a 6.1% decline in guest traffic, partially offset by a 3.3% increase in average ticket price.
Product revenues were down 9% year over year to $89.4 million. Same-store product sales also went down 6.7%, due to a 6.9% decrease in guest transactions, partly offset by a 0.2% increase in average ticket price.
Royalties and fees revenues were $11.4 million, down 2.1% year over year. Royalty increases of 4.3% were largely offset by a lower level of initial franchise fees, due to the timing of new salon openings and lapping higher franchise termination fees in the prior-year quarter. Moreover, franchisees posted positive same-store sales and the company also added 41 new franchised locations in the quarter.
Cost of service, as a percentage of service revenues, increased 100 bps to 64.6%, owing to state minimum wage increases, deteriorated stylist productivity and lapping a rebate in the prior-year quarter, partly offset by lower bonuses.
Cost of product, as a percentage of product revenues, also increased 10 bps to 51.4%, mainly due to a mix shift into lower margin product sales to franchisees.
General and administrative expenses of $40.7 million decreased 14.1% on a year-over-year basis. The decrease was mainly due to one-time benefits related to lower sales volumes in the quarter, cost savings and lapping certain costs in the prior-year quarter, partly offset by planned strategic investments in technical training.
Regis Corporation Price, Consensus and EPS Surprise
Regis Corporation Price, Consensus and EPS Surprise | Regis Corporation Quote
Key Sector Picks
Here are some stocks from the Retail – Miscellaneous industry that you may consider:
Big 5 Sporting Goods Corp. (BGFV - Free Report) has seen current year earnings estimates rise over the past month by 5%. It sports a Zacks Rank #1(Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabela’s Incorporated holds a Zacks Rank #2 (Buy). It has provided a Return on Equity (ROE) of 10.92% in the trailing twelve months, while the industry’s average was 9.7%.
Barnes & Noble, Inc. carries a Zacks Rank #2. It has surpassed/met estimates in three of the trailing four quarters, recording a positive average surprise of 3.95%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>