NEW YORK (TheStreet) -- Regis (RGS) was falling 9.84% to $12.10 on Monday after the company announced worse-than-expected second quarter earnings.
The world's largest hair salon chain reported a loss of four cents per share excluding non-recurring items, which fell below analysts' estimates for the quarter. Regis' revenue also dropped 7.5% year-over-year to $468.4 million. The company also announced that its same-store sales fell 9.2%, while same-store service was down 5.5%.
President and CEO Dan Hanrahan said the following in the company's official statement:
"While I would normally not address technical accounting matters, it is important for me to comment on the $112.1 million of non-cash charges we reported during the quarter to impair goodwill and establish a valuation allowance against our deferred tax assets. These non-cash charges are highly technical in nature and do not have any economic impact on our business model. Our business model is sound, our balance sheet is strong and our business continues to generate positive cash flow. In fact, our business generated $21.6 million in EBITDA, as adjusted, for the quarter. I am confident in our ability to restore Regis to sustainable growth and improved profitability."
TheStreet Ratings team rates Regis as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate REGIS CORP/MN (RGS) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 100.3% when compared to the same quarter one year ago, falling from $38.42 million to -$0.14 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Diversified Consumer Services industry and the overall market, REGIS CORP/MN's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for REGIS CORP/MN is currently extremely low, coming in at 14.87%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.02% trails that of the industry average.
- The share price of REGIS CORP/MN has not done very well: it is down 17.99% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- RGS, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: RGS Ratings Report