Regis is hair, there, and everywhere. The world's biggest hair salon company, Regis owns, franchises, or holds a stake in some 12,600 salons and hair restoration centers, most of which are in North America. Formats range from mall-based to strip mall to nooks inside Wal-Mart. Salons operate under the Regis banner, as well as Supercuts, Sassoon, MasterCuts, and Hair Club for Men and Women, which Regis is divesting. In addition to haircare services for the masses, salons offer related products (generating about 20% of sales). Beyond North America, the company owns about 400 salons in the UK, and Germany. Regis is selling non-core assets to focus on its core salon business.
Regis is busy owning, operating, and franchising hair and retail product salons, and centers for hair restoration. Operations are organized by business: hair restoration and salons. Salons are further divided geographically between North America and International. Regis also maintains ownership interests in Empire Education Group, an operator of accredited cosmetology schools, known as Empire Beauty School in the US, and the MY Style concept salons in Japan.
Regis has acquired more than 8,050 salons since 1994. Its varied concept salons target different price points, with walk-in Supercuts and Cost Cutters locations offering low-priced haircuts, Regis and Sassoon brand salons charging a bit more, and appointment-needed Jean Louis David salons at the high end of the price spectrum. Most sales are to women, with the exception of MasterCuts whose market is split more or less evenly between men and women.
Geographically, Regis estimates that it commands about 2% of the highly fragmented salon worldwide market. Regis salons are concentrated in North America, including the US, Canada, and Puerto Rico, which represent more than 85% of sales. The company has at least one salon in every major city in the US. Its hair restoration centers dot the US and Canada. Abroad, Regis subsidiaries are established in the UK, and, less so, Germany.
The global recession is contributing to a bad fiscal hair day for Regis. Amid a slowdown in customer visits, the company's revenue slumped for a fifth consecutive year in fiscal 2012 (ends June). The trend was modestly offset by an uptick in the average ticket price for services and products, which helped to soften the continued slide in same-store sales (referring to stores that have been open for at least a year). Industry wide, the company's value-priced formats, including SmartStyle and Supercuts, have outperformed pricier salons as people trade down or chose a walk-in appointment. Nonetheless, earnings, which rebounded into the black in 2010 from more than a $124 million loss the prior year, fell again to nearly a $9 million deficit in 2011, widening to a $114 million loss in 2012. Results reflect a significant impairment to goodwill associated with the company's Promenade salon concept, which has posted an accelerated decrease in revenues over the last three years. Cash generated from operations declined as the company restructures to improve the salon experience in 2013.
Regis' strategy focuses on increasing real estate with strong visibility and customer traffic coupled with a buzz cut to peripheral activities. The turnaround effort, led by a newly hired CEO Dan Hanrahan (formerly with Celebrity Cruises), effective August 2012, includes plans to sell its hair restoration business, Hair Club for Men and Women, to Japanese wig maker Aderans Co. for $163.5 million. The sale of Hair Club is expected to close in the second half of 2012. The pending sale follows the divestment of its 47% stake in Provalliance for €80 million to the Provost family in October.
Weak financial results have also forced Regis to scrutinize salon growth opportunities, both company-owned and franchised. During 2012 Regis closed roughly 330 company-owned salons, and some 50 franchised locations, as it added about 360 other salons to its empire to spur sales. Internationally, Regis in 2012 closed 16 underperforming company-owned salons and opened 14 new locations. – less
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