Regis Corp (NYSE:RGS)

CAPS Rating: 4 out of 5

The Company owns, operates and franchises hairstyling and hair care salons throughout the United States, the United Kingdom, France, Canada, Puerto Rico and several other countries.

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Member Avatar RossCAP (< 20) Submitted: 3/13/2014 12:29:11 PM : Outperform Start Price: $14.30 RGS Score: +4.97

RGS is a leader in the highly-fragmented haircare industry whose primary business is owning and franchising hair salons. I would like to set the table with some investment advice from Warren Buffett: “We see change as the enemy of investments…so we look for the absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everyone needs.” There are few things more mundane than having your haircut 6-12x per year. The company sells a service that has experienced few, if any technological changes and cannot be outsourced. Regis enjoys some pricing power. I see the current negative trends (-SSS) as transitory rather than permanent. The Company is in the early innings of a turnaround, which is being spearheaded by a new leadership team and board. I see EBITDA margins “reverting” to more normalized levels (today: <5%, 10-year average: 10.2%) as management executes against its business turnaround plan. It should be noted that the Company’s franchisees comp positively and generate roughly $50,000 more per salon than a company-owned store (there is a lot of leverage to improved sales trends). RGS has a healthy balance sheet (net cash) and good long-term return characteristics (excellent FCF). Recently, there was significant insider buying. If the company is successful in improving its margins, then the equity is worth > $25 per share from ~$14.50 today. The primary risk is in the timing of the turnaround. After several years of disappointing results, RGS has become an orphan stock, unloved and under-followed by Wall Street pros.

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Member Avatar seekinggotham (38.63) Submitted: 8/1/2013 12:27:16 AM : Outperform Start Price: $16.07 RGS Score: -66.39

this pick is a combo MF Special Ops pick and Starboard Value. The thesis was basically divesting non-core operations coupled with a stock buyback program or a special divi and driving greater profitability through better focus on core operations - once the non-core stuff was disposed of.

While some divestitures occurred, mgmt's been reluctant to initiate a buyback program or pay out a special divi. Previously, mgmt indicated that it didn't want to return cash to shareholders until it completed renogotiating its credit facility. That was months ago when lots of companies were able to successfully able to renegotiate their credit facilities at generally favorable terms. RGS wasn't able to do so and to my knowledge still hasn't. Meanwhile it sits on cash.

I closed out my position a month or 2 ago as I grew tired watching mgmt not be able to 1) improve its core business or 2) execute on its credit facility renegotiation and bump up the share price through buybacks or a divi.

I'll continue to keep this open in CAPs in the event Starboard can drive some meaningful change and get me in the green.

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Member Avatar RXDOC73 (99.39) Submitted: 10/10/2011 7:28:11 AM : Outperform Start Price: $15.48 RGS Score: -69.02

Looks like they are considering selling off hair club and concentrate on their core. I will give it a shot as hair club will generate a nice one time for investors.

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Member Avatar Egalvin (< 20) Submitted: 10/27/2010 3:16:14 PM : Outperform Start Price: $19.39 RGS Score: -90.53

Prime PE takeover traget

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Member Avatar hansenrs (< 20) Submitted: 10/24/2007 12:15:41 PM : Underperform Start Price: $28.94 RGS Score: +87.82

I had a significant amount invested in Regis for about 8 years. They did great with a great lead in market share and seemingly unlimited opportunity for growth. Then they started making really strange decisions. The failed merger was just the final very large straw for me. I've been watching them closely since to see if I could trust them enough to put money back in. The only thing they have holding them back seems to be their own overconfidence. I'm not ready to reinvest yet.

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Member Avatar NetscribeServcs (< 20) Submitted: 3/27/2007 9:12:34 AM : Outperform Start Price: $37.75 RGS Score: -109.62

Regis Corp., (RC) is beauty industry's global leader in beauty salons, hair restoration centers and education, aims to provide high quality affordable hair care services and products to a wide range of customers through salons located in high traffic and convenient locations. As of December 31, 2006, RC’s worldwide operations included 11,570 company-owned and franchise salons, 88 hair restoration centers and 55 beauty schools.

In fiscal 2007, revenues improved by 9% to $1.3 billion reflecting increase in service revenues from salons in North America & international market and higher product sales from beauty schools division & hair restoration centers. North American salons contribute over 80% to revenues.

RC intends to continue with its expansion plans through organic growth and acquisitions. With only about 2% of the worldwide market for hair care service and products, RC believes future growth opportunities are ample. It’s expanding further in North America, the United Kingdom and continental Europe. RC is likely to enter the Japan market through a partnership with Wal-Mart in the next six months. It’s expected to enhance revenues and will enhance its brand awareness in international market. Launch of Intelligent Nutrients with industry legend Horst Rechelbacher will likely provide a small boost to sales.

RC’s large size enables it to enjoy economies of scale. As overall populations continues to focus more on personal health and beauty, demand for salon services, professional products and hair restoration services will continue to increase. Softening of US salon industry will also add to demand. With a 17.06 price earning ratio multiple, well below the industry ratio, the company has endowed with enough opportunities to nurture. But strong expansion plans and operating efficiency will enable it to bridge this gap.

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Member Avatar carcrash7 (92.85) Submitted: 10/9/2006 6:12:18 AM : Outperform Start Price: $34.09 RGS Score: -114.95

have to be a really bad economy for people to stop getting haircuts

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