Finances improving while Regis ramps up transformation efforts

Earnings are showing improvement at Regis Corp. as the company nears completion of its transformation to an all-franchise salon model.

The Minneapolis-based salon company two years ago started closing or selling its company-owned assets to franchisees. That was two CEOs ago.

Now, the company — after a year with lower revenue — is focusing on growth again under a third CEO, Matthew Doctor.

Doctor joined Regis in February 2021 from a franchised restaurant company and became interim CEO at the end of last year when Felipe Athayde resigned. The board of directors removed the "interim" from Doctor's title in May.

The company had a challenging quarter. For April, May and June, Regis lost $42.6 million, or 93 cents a share. In the fourth quarter last year, the company lost $34.3 million, or 95 cents a share.

Revenue was down 32% to $66.1 million.

Besides the Regis franchises, the company also operates Supercuts, Cost Cutters, Roosters men's salons and First Choice Haircutters in Canada.

When Doctor was appointed interim CEO in December, he pledged to refinance the company's outstanding debt, do something about their salon management software and continue the transition to an all-franchise model.

"I am pleased that in a short period of time, we successfully delivered on all three by renegotiating our credit agreement with our lender group, selling Opensalon Pro to our new point-of-sale technology partner, Zenoti, and winding down our company-owned salons from 276 to 105 locations," Doctor said in a news release.

With the shift to an all-franchise model nearly completed, Doctor said he will now focus on stylist recruitment and retention, the new salon management software and improving Regis' financial results.

Earnings adjusted for a long list including severance and lease adjustment fees did hit positive territory of $1 million in the quarter, compared with a $22.7 million loss in the same period a year ago.

The company attributed most of its revenue drop, which was 33% for the full fiscal year, to its continuing sell-off of corporate-owned salons.

When franchises' revenue is included, sales were up 7.7% for the quarter and 13.1% for the year.

On June 30, Regis announced it had sold its Opensalon Pro software to Zenoti, a provider of cloud-based salon and fitness center management software. In the deal, Zenoti became the salon technology platform for all the brands within Regis.

"We took a hard look in the mirror, and we had to choose whether we're a hair care franchiser or a technology company. We cannot be both," Doctor said on the company's earnings conference call.

Shares closed Tuesday down 3.5% to $1.36. The company received a delisting warning in June from the New York Stock Exchange because its shares were trading under $1. For the last six trading days they have been above $1, which could clear the warning if they continue to trade at that level.