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Regis Corp (RGS)
NASDAQ:RGS

Regis (RGS) AI Stock Analysis

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Regis

(NASDAQ:RGS)

56Neutral
Regis's financial performance is mixed, with strong profitability but declining revenues and high leverage. Technical indicators are bearish, though the valuation suggests potential undervaluation. Strategic initiatives from the earnings call provide optimism, yet challenges remain, leading to a moderate overall score.

Regis (RGS) vs. S&P 500 (SPY)

Regis Business Overview & Revenue Model

Company DescriptionRegis Corporation owns, operates, and franchises hairstyling and hair care salons in the United States, Canada, Puerto Rico, and the United Kingdom. The company operates in two segments, Franchise Salons and Company-Owned Salons. Its salons provide haircutting and styling, including shampooing and conditioning; hair coloring; and other services, as well as sells various hair care and other beauty products. The company also offers mobile applications; and operates accredited cosmetology schools. Regis Corporation operates its salons primarily under the SmartStyle, Supercuts, Cost Cutters, Roosters, First Choice Haircutters, and Magicuts concepts names. As of June 30, 2022, the company operated 5,576 salons, such as 5,395 franchised salons, 105 company-owned salons, and 76 non-controlling ownership salons. Regis Corporation was founded in 1922 and is headquartered in Minneapolis, Minnesota.
How the Company Makes MoneyRegis Corporation primarily generates revenue through the operation and franchising of hair salons. The company's income is derived from two main sources: the direct operation of company-owned salons and the collection of franchise fees and royalties from independently owned franchises. Revenue from company-owned salons comes from the provision of haircuts, coloring, styling services, and the sale of hair care products. Franchise revenue involves initial franchise fees paid by franchisees to use Regis' brands, as well as ongoing royalties based on a percentage of the franchisees' sales. Regis also benefits from strategic partnerships with product manufacturers and distributors, enhancing its product offerings and contributing to its revenue streams.

Regis Financial Statement Overview

Summary
Regis shows commendable profitability improvements with strong net and EBIT margins, and positive free cash flow. However, declining revenues and high leverage with a debt-to-equity ratio of 4.16 present significant challenges.
Income Statement
65
Positive
Regis has demonstrated significant improvements in profitability over recent periods, with a strong TTM net profit margin of 50.0% and a positive EBIT margin of 8.5% in TTM, indicating effective cost management and operational efficiency. However, the company has experienced a declining revenue trend from $415.1M in 2021 to $191.3M in TTM, which poses a challenge for sustaining long-term growth.
Balance Sheet
40
Negative
The balance sheet reflects high leverage with a debt-to-equity ratio of 4.16 in TTM, showing significant reliance on debt financing. Stockholders' equity remains low at $66.7M as of TTM, although improved from prior negative equity positions. The equity ratio of 12.6% in TTM indicates limited asset backing, which could be a risk if financial conditions worsen.
Cash Flow
55
Neutral
Regis has improved its cash flow position, turning to positive free cash flow of $5.1M in TTM from previous negative figures. The operating cash flow to net income ratio of 0.06 in TTM suggests that while positive, operating cash flows are not yet robust. Free cash flow growth is significant, but sustainability remains a concern given past volatility.
Breakdown
TTMJun 2024Jun 2023Jun 2022Jun 2021Jun 2020
Income StatementTotal Revenue
191.34M202.98M233.33M275.97M415.11M669.73M
Gross Profit
108.20M101.76M76.54M65.62M129.41M235.55M
EBIT
16.31M20.89M8.78M-15.24M-91.13M-80.28M
EBITDA
74.80M68.74M17.30M-22.67M-81.44M-108.39M
Net Income Common Stockholders
95.66M91.06M-7.38M-46.46M-113.33M-172.19M
Balance SheetCash, Cash Equivalents and Short-Term Investments
168.91M10.07M9.51M17.04M19.19M113.67M
Total Assets
1.95B530.50M607.38M769.30M996.38M1.34B
Total Debt
469.88M399.28M550.65M691.63M822.25M1.02B
Net Debt
300.97M389.21M541.14M674.59M803.06M909.54M
Total Liabilities
941.71M473.71M644.11M800.25M979.34M1.22B
Stockholders Equity
1.01B56.79M-36.73M-30.95M17.05M125.70M
Cash FlowFree Cash Flow
5.10M-2.42M-8.37M-43.95M-111.36M-123.90M
Operating Cash Flow
5.60M-2.04M-7.89M-38.64M-99.88M-86.41M
Investing Cash Flow
-8.66M1.62M4.02M7.68M-2.10M61.03M
Financing Cash Flow
13.72M8.36M-2.15M29.42M7.78M56.16M

Regis Technical Analysis

Technical Analysis Sentiment
Negative
Last Price18.01
Price Trends
50DMA
21.32
Negative
100DMA
21.98
Negative
200DMA
22.36
Negative
Market Momentum
MACD
-0.86
Negative
RSI
40.21
Neutral
STOCH
43.51
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RGS, the sentiment is Negative. The current price of 18.01 is below the 20-day moving average (MA) of 18.41, below the 50-day MA of 21.32, and below the 200-day MA of 22.36, indicating a bearish trend. The MACD of -0.86 indicates Negative momentum. The RSI at 40.21 is Neutral, neither overbought nor oversold. The STOCH value of 43.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RGS.

Regis Risk Analysis

Regis disclosed 31 risk factors in its most recent earnings report. Regis reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Regis Peers Comparison

Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
77
Outperform
$16.61B14.7450.39%0.79%-2.70%
SBSBH
70
Neutral
$920.65M5.3529.39%0.57%6.28%
EPEPC
63
Neutral
$1.51B17.076.02%1.92%-1.24%-10.95%
59
Neutral
$12.17B11.04-1.10%3.77%1.26%-19.70%
RGRGS
56
Neutral
$44.21M0.49526.88%-11.38%
56
Neutral
$6.50B8.40-52.83%2.64%-1.63%-5.94%
54
Neutral
$109.26M-6.58%3.45%-0.54%-78.88%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
RGS
Regis
18.01
10.60
143.05%
LCUT
Lifetime Brands
4.87
-5.47
-52.90%
BBWI
Bath & Body Works
30.63
-14.85
-32.65%
SBH
Sally Beauty
8.92
-2.14
-19.35%
ULTA
Ulta Beauty
382.51
-57.47
-13.06%
EPC
Edgewell Personal Care
31.21
-4.81
-13.35%

Regis Earnings Call Summary

Earnings Call Date: Feb 12, 2025 | % Change Since: -32.77% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant strategic initiatives, such as the acquisition of Alline Salon Group and the successful launch of the Supercuts loyalty program, leading to improved financial metrics. However, challenges like same-store sales decline and brand-specific performance issues balanced the narrative, indicating a cautiously optimistic outlook.
Highlights
Acquisition of Alline Salon Group
Regis acquired the Alline Salon Group, adding 314 salons to the company, enhancing strategic and financial positioning, and expected to drive future growth.
Improved Financial Performance
Year-over-year improvements in operating income, net income, earnings per share, adjusted EBITDA, and cash flow. Adjusted EBITDA increased by 12.7% to $7.1 million, and earnings per share rose to $2.71.
Successful Launch of Supercuts Loyalty Program
Supercuts Rewards program launched with 27% of sales via members and improved same-store sales and traffic by 200 basis points for salons with high membership adoption.
Positive Cash Flow Generation
Regis returned to generating positive cash from operations, reflecting a $7.6 million improvement over the prior year for the six-month period.
Lowlights
Same-Store Sales Decline
Same-store sales declined by 1.6% in the second quarter, affected by a smaller window between Thanksgiving and Christmas and brand-specific disparities.
SmartStyle Brand Performance
SmartStyle brand underperformed with a 6.4% decline in sales, attributed to closures and remodels within Walmart.
Revenue Decline
Total second quarter revenues were $46.7 million, an 8.5% decline compared to the prior year, driven by franchise closures and a challenging sales environment.
Impact of Store Closures
Store closures had a 130 basis points drag on overall comps for the second quarter, affecting same-store sales performance.
Company Guidance
During the second quarter of fiscal year 2025, Regis made notable strides in both strategic acquisitions and financial performance. The acquisition of the Alline Salon Group, consisting of 314 salons, significantly bolstered Regis's portfolio, enhancing their strategic position and contributing $2.7 million in revenue and $0.5 million in EBITDA within just two weeks post-acquisition. This acquisition was valued at $22 million, with $19 million paid in cash and approximately 140,000 shares of stock. Financially, Regis reported a 12.7% year-over-year increase in adjusted EBITDA, totaling $7.1 million, despite an 8.5% decline in total revenue to $46.7 million. The decline was primarily attributed to a decrease in no-margin franchise rental income and same-store sales, which fell by 1.6%. However, the company's same-store sales showed disparity among brands, with Supercuts experiencing a slight growth of 0.5%, whereas SmartStyle saw a decline of 6.4%. Earnings per diluted share were $2.71, although adjusted earnings per share were $0.61 due to one-time income from discontinued operations. The strategic focus remains on optimizing brand strategy and salon operations, with initiatives like the Supercuts loyalty program showing promising results, achieving 27% of sales through membership and boosting same-store sales and traffic by 200 basis points in high-participation salons. Looking forward, Regis is committed to driving growth through a mix of corporate and franchise salons, with key strategic initiatives aimed at improving salon-level performance and digital guest experiences.

Regis Corporate Events

M&A TransactionsBusiness Operations and Strategy
Regis Corporation Expands with Strategic Acquisition of Alline
Positive
Dec 19, 2024

Regis Corporation has acquired Alline Salon Group, its largest franchisee, for $22 million in cash and stock, with potential additional earn-out payments. The acquisition strengthens Regis’ operational footprint and provides a testing ground for brand initiatives, maintaining an asset-light model with most salons still franchisee-owned. This strategic move is expected to enhance Regis’ EBITDA and provide value creation opportunities, aligning stakeholder interests towards success.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.