Regis Corp. plans to eliminate at least half of its store brands, a move the Edina company hopes will reduce costs and simplify its bulky business.
Interim Chief Operating Officer Eric Bakken told the Star Tribune that the world's largest operator of hair salons will trim, at a minimum, 25 brands from its stable of 50. Regis' brands include Supercuts, MasterCuts, SmartStyle and CostCutters.
The company plans to convert most of the affected salons to the remaining brands. But Bakken says Regis will need to close some stores. He declined to disclose a figure but said the percentage of closed salons will be less than 10 percent of the company's 7,500 salons, which doesn't include franchises, in North America.
"We probably made [the business] more complicated than it had to be," said Mark Fosland, the company's senior vice president of finance.
Regis plans to redirect many salons to its strongest-performing brands like Supercuts, Hair Masters, and First Choice in Canada. The company has already converted about 80 stores to its Supercuts banner, mostly in Chicago, with another 30 to 50 salons scheduled for a brand makeover later this year.
The company will organize its remaining brands into one of three consumer segments: value, value with full service, and premium.
Reducing Regis' brand portfolio plays a crucial role in the company's turnaround strategy. The struggling firm has been hampered by mounting costs and more than three consecutive years of declines of sales at stores open for at least a year, a key measure of retail growth.
Last fall, Starboard Value LP, a New York-based hedge fund, successfully placed three candidates on Regis' board of directors, promising investors that it would cut costs and restore growth. The firm estimated the North American salon business accounted for nearly 40 percent of Regis' $310 million in general administrative costs last year.
The company recently laid off 110 employees, or 10 percent of its corporate staff.
Over the years, Regis had acquired dozens of regional brands that boosted annual sales. But Regis often operated each brand as its own company, resulting in a confusing hodgepodge of overlapping businesses, analysts say.
"It appears that the subsequent post-merger integration process may have failed to consolidate the numerous brands ... necessary to achieve [cost] benefits," James Miller, an analyst at Institutional Shareholder Services, wrote in a report.
Worse yet, the brands looked exactly the same to the customer, Bakken said.
Brand trimming alone won't get the job done, officials say. Regis desperately needs to start growing sales again.
Increasingly buffeted by competition from chains like Fantastic Sams and Great Clips, Regis' same-store sales have fallen for 14 consecutive quarters, a trend that's likely to continue for the foreseeable future. Regis already expects same-store sales to decline between 2.5 percent and 3.5 percent in fiscal 2012.
Ideally, Regis would like same-store sales to rise from 2 to 4 percent, said Fosland, Regis' finance executive.
"We're not like Apple," he said. Same-store sales are "never going to hit 10 percent. Our industry is glacial."
Thomas Lee • 612-673-4113