Regis Gets Hair Mussed

Regis (RGS) warned that numbers for the second half of its fiscal year ending in June will be hit hard by weak sales and soft margins. Its shares fell 6%.

The Minneapolis-based haircare company said heavy discounting would take its toll on the third quarter, which ends next week. Regis expects to make 45 cents to 48 cents a share for the third quarter, reversing the year-ago charge-influenced 37-cent loss but falling far short of the 58-cent analyst consensus estimate. Regis expects to post revenue of $607 million, against the $612 million Thomson Financial target.

"The salon industry continues to face a challenging retail and service environment," CEO Paul D. Finkelstein said. "The issues impacting the salon industry, and our current business results, are disheartening. However, we consider these factors to be near term in nature and we are committed to, and capable of, achieving stronger product margins in fiscal-year 2007."

Lower product margins should cut third-quarter earnings by 5 cents per diluted share, the company said, adding that discounting has been hefty due to a product shift.

Those trends will continue in the fourth quarter, when Regis expects it will earn around 60 cents a share, a dime short of the Thomson target. Regis expects revenue of $640 million to $645 million,against a $645 million Wall Street view.

Late Tuesday, Regis fell $2.15 to $35.81.

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