Investors drove Regis Corp. shares down 10 percent Monday after the hair salon firm reported a quarterly loss that missed expectations.
Citing lower same-store sales, noncash charges and higher operating expenses, the Edina-based company reported an adjusted loss of 4 cents a share for the three months ended Dec. 31, the second quarter of its fiscal year. That was five cents below the profit of 1 cent a share that Wall Street had been expecting.
Net earnings were $110 million, compared to a loss of $12.3 million a year ago. Revenue dropped 7.5 percent to $468.4 million.
Regis shares closed Monday at $12.09, down $1.33 or 9.9 percent. The stock also was downgraded from buy to neutral Monday by analysts at CL King in Albany, N.Y.
Regis CEO Dan Hanrahan said the company's efforts to improve operations "have triggered increased turnover as well as a steep learning curve within the field that negatively impacted our revenue and current operating results." The changes revolved around installing a new point-of-sale computer system, a staff reorganization and a standardized way of selling hair-care products.
Same-store sales were down 6.2 percent. The company owns 7,388 hair salons, nearly all of them in North America, under the brand names SmartStyle/Cost Cutters, Supercuts, MasterCuts, Promenade and Regis Salons. It also franchises another 2,123 salons in North America.
The second-quarter loss represented a reversal from the first quarter of the fiscal year, when Regis beat Wall Street expectations by 6 cents a share and eked out a tiny adjusted profit. The second-quarter loss was also slightly worse than the year-ago adjusted loss of 3 cents a share.
Hanrahan said the company took a $112.1 million in noncash charges related to goodwill and deferred tax assets.
"These noncash charges are highly technical in nature and do not have any economic impact on our business model," Hanrahan said. "Our business model is sound, our balance sheet is strong and our business continues to generate positive cash flow."