Most salons under Regis Corp. have reopened, but customers have not returned to their normal routines.
The already struggling Regis faced a spring where most of its salons were forced to close to stem the spread of COVID-19, causing revenue to dive 76% during April, May and June and a $73.6 million loss.
“The global pandemic and the government-mandated hibernation of our salon portfolio severely impacted our results in the second half of the year,” said Regis Chief Executive Hugh Sawyer in a news release.
But even as salons open, people are not all coming back or seeking as many services as before.
The company’s fourth quarter and fiscal year, ended on June 30, were also impacted by the company’s continued conversion to an all franchise model.
Regis lost $73.6 million during the quarter on revenue of $60.1 million, compared with a $5.4 million loss on $248.2 million in revenue for the same quarter a year ago.
The adjusted loss for the quarter was $36.2 million, or $1.01 per share, compared with a profit of $24.6 million, or 62 cents per share, in the fourth quarter a year ago.
Among the adjustments to earnings included those related the coronavirus and to the conversion of its company-owned salons to franchises which were expected and part of its long-term strategic plan.
For the year ended June 30 revenue was $669.7 million down 37% from $1.1 billion the previous year, again reflecting the conversion of company-owned stores and effects of the pandemic. Net loss for the year was $171.4 million, compared with a loss of $14.2 million in the previous year.
Adjusted net loss for the 12 months was $21.7 million, compared with a $59.4 million profit from the same period a year ago.
The company was expecting to complete its conversion to an asset-light franchise model by the end of this year, but now expects the process to be completed by the middle of 2021.
During the quarter the company converted an additional 112 company-owned salons and anticipates 800 to 1,000 more salons will be converted to franchisees and its expects to close 600 to 800 salons on or before lease expirations.
At the end of the fiscal year the company said approximately 76% of its salons have been franchised compared to 56% at the end of its previous fiscal year.
At one point in the company’s fourth quarter nearly all of the company’s salon portfolio was closed but the company now reports 82% of the salons are open.
The company expects that salons in California that were mandated to close again during the quarter will reopen based on county-by-country restrictions soon. Excluding its California salons the company says approximately 90% of its salon portfolio is now open.
As the company continues on its asset-light conversion strategy it got important financial flexibility in the quarter by signing a new revolving credit facility. It’s also invested more in technology and rolled out its cloud-based salon management software, OpenSalon Pro, in August and relaunched new mobile apps for its CostCutter and Supercuts brands. It’s even experimented with a new outdoor salon concept in Southern California that it thinks might have longer-term success.
Regis revenue for the quarter and year were above analysts expectations but earnings results fell short of estimates and helped cut Regis share price in early trading Monday, share were trading around $7.35 per share, down 19%. Year-to-date shares are down approximately 60%.