Regis Corp. has essentially completed a shift to a full franchise model, ready for growth after the Minneapolis-based hair salon business overcomes pandemic issues such as worker shortages, its chief executive said Thursday.
Regis positioned for growth but limited by pandemic issues such as worker shortages
Regis announced its year-end results and says its transformation to a franchise model is complete.
August 26, 2021 at 5:51PM
The shortage of stylists is a limiting factor in increasing same-store sales growth, Chief Executive Felipe Athayde said on the company's quarterly earnings call. The salon hours worked each week continue to lag about 25% from pre-pandemic levels.
"We are confident that this disruption is temporary in nature," Athayde said. "We were encouraged last week by the announcement of the end of the additional federal unemployment benefits given the direct correlation between labor hours and revenue in our business."
Regis has been transitioning for the past few years from owning many of its salons to being a true franchise business. It has sold corporate salons to franchisees and closed underperforming salons.
"Our team is now free to focus their efforts on fully supporting our franchisees and shifting to phase two of our re-franchising process, providing growth opportunity to our most capable franchisees both existing and new," Felipe Athayde, Regis' president and chief executive, said on the company's quarterly earnings call.
The company now owns 276 salons, 4.7% of the total salons in its system. It completed the previous fiscal year with 1,632 corporate-owned salons, or 23.9% of the total salons. Athayde said the number of company-owned salons would be 130 by the end of 2021.
Overall, on June 30, the end of Regis' fiscal year, the company had a total of 5,917 salons, down from 6,923 salons at the same point last year. The company said it re-franchised, closed or negotiated lease buyouts on 550 company-owned stores in the quarter and 1,356 during the year.
Athayde told analysts Regis is well-positioned for 2022 with the conversion of its salon portfolio nearly complete, a new management team and a new salon-management technology platform that it has been rolling out.
Completing the transition should allow the company to focus on improving earnings. After the markets closed Wednesday, Regis reported a net loss of $34.3 million, or 95 cents a share, for its fourth quarter. In the same period last year, the loss was $73.6 million, or $2.05 a share.
Total revenue for the quarter was $99.1 million, up from to $60.1 million a year ago, when the country was still in the midst of the tightest COVID-19 restrictions. Systemwide revenue — which includes franchisees — was $294 million, up from $119.4 million. The positive comparisons from the year-ago quarter were mainly due to the number of mandated salon closures last year.
The company's adjusted net loss of the quarter, after excluding $7.8 million in discrete items, was $26.5 million, or a loss of 74 cents a share.
For the year, the company lost $113.3 million, or $3.15 a share, on total revenue of $415.1 million. That compared with a net loss of $171.4 million, or $4.79 a share on total revenue of $669.7 million.
Systemwide revenue for the year was $1.1 billion, down 20.6% from the previous year.
Analysts had been expecting much better earnings results, and on Thursday the company's shares fell nearly 15% to close at $5.97.
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