As Regis Corp. continues selling its company-owned hair salons, the overall business continues to be hampered by the coronavirus pandemic.
The Minneapolis-based company on Monday reported results for its fiscal first quarter, ending Sept. 30, that missed analysts' expectations on both the top and bottom line. Its shares tumbled, closing at $5.12, down 7.6% on a day when broad-market indexes finished higher.
Revenue was $111.4 million, down 55% from $247 million a year ago, when it had 1,056 more company-owned salons adding to the top line. The firm has been converting to an asset-lite business model by selling company-owned locations to franchisees, and it sold 137 in the latest period.
But the company also estimated that $44 million of the revenue decline overall was from reduced traffic due to the pandemic, including mandated re-closing of salons in some places. Analysts expected revenue of $145 million.
The company continues to seek buyers for its remaining salons.
"Despite the uncertainty of current times, the opportunities for Regis today are very real," new Chief Executive Felipe Athayde said in a statement.
"We have seen consistent high interest in the remaining salons left in our corporate portfolio, from potential investors who see the current environment as a great opportunity to build a portfolio of hair salons to serve as a platform for future consolidation and aggressive new unit growth," he said.
The company lost $35.3 million in the quarter, or 98 cents a share, compared with a net loss of $13.8 million, or 38 cents a share a near ago.
Adjusted for restructuring and other onetime costs, Regis lost $27.9 million, or 78 cent loss a share. It had an adjusted profit of $13.9 million, or 37 cents per share, a year ago.
Analysts expected an adjusted EPS loss of 13 cents a share.
Athayde told analysts on the company's earnings call that as a new CEO, his main priority is to complete the process of converting to an all-franchise model but that his obsession is the profitability of franchise owners.
"The brands which have grown the fastest are those that have been the most profitable. I consider this to be my most important learning from my 10 years in the restaurant industry," Athayde told analysts. "So Regis' obsession has to be and will be the profitability of our franchisees."