Why Regis Corp. Shares Tumbled

Why Regis Corp. Shares Tumbled

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 thesis.

What: Shares of Regis Corp. were getting dumped today, falling as much as 14% and finishing down 10% after posting an underwhelming earnings report this morning.

So what: The hair-salon chain missed badly on both top and bottom lines, reporting a loss of $0.04 a share, below estimates of a $0.02-per-share profit, while revenues dropped 7.5% to $468.4 million, missing the consensus at $480.3 million. The drop in sales came almost entirely from negative organic growth as same-store sales fell 6.2%. CEO Dan Hanrahan seemed to say that the loss of sales came from a poor or slow execution of the company's restructuring plan, but he was confident that the company eventually "will realize increased growth and profitability throughout our entire organization."

Now what: With same-store sales falling more than 6%, I'm almost surprised that shares didn't fall further than they did. The parent of Supercuts and other chains explained that the company has been changing its point-of-sale system, its retail plan, and has reorganized its field structure, which includes moving from a branded to a geographic management structure. But with this quarter's report, the early verdict seems to be a fail, and the salon business is very competitive anyway. Analysts are expecting minimal growth for this borderline profitable company. Based on all that, it's hard to see a reason to invest here.

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Originally published