Why Regis Shares Got a Flat Top
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of hair-care salon and products provider Regis (NYS: RGS) received an unwanted buzz cut of as much as 15% from investors today following the release of dismal first-quarter results.
So what: For the quarter, Regis reported just $0.08 in EPS with one-time tax benefits excluded on sales of $505.4 million. Neither figure was even in the same ballpark as Wall Street's consensus of $0.25 in profits on sales of $552.5 million in revenue. Regis' comparable-store sales dipped 3.1% with comparable-store transactions falling 2.3%, which it blamed on higher labor costs. Management stated that previously its response to weakening same-store comps would be to reduce its stylists' hours; however, it's recently come to the conclusion that it can't grow its sales volumes with fewer stylists in its salons.
Now what: To me, this sounds like, "if it is broke, we're not exactly sure how to fix it." Regis' weak results can very easily be explained by falling consumer spending figures. If consumers aren't spending as much, there's very little Regis can do short of offering special margin-killing pricing to lure customers in, or hour cutbacks, to drive traffic or margins. Given that Regis is a cyclical play and offers very little hope of growth over the near term, I'd just as soon leave Regis alone.
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The article Why Regis Shares Got a Flat Top originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Regis. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.