Why Regis Shares Got a Flat Top

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What: Shares of hair-care salon and products provider Regis (NYSE: 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.

Craving more input? Start by adding Regis to your free and personalized Watchlist so you can keep up on the latest news with the company.

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Related Tickers

10/21/2016 2:35 PM
RGS $11.71 Down -0.15 -1.26%
Regis CAPS Rating: *****