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The Unkinded Cut Of All at Regis

November 6, 2013

Sales continue to decline for largest hair care retailer.

It's a new fiscal year but the same results for beleagured Regis Corporation, the leading retailer in the US hair care industry. For Q1 ended Sept. 30, 2013, sales fell 7.3% to $468.6 million. Same-store sales declined 5.4%. Same-store service and product sales declined 3.1% and 14.8%, respectively. Despite the decline, management is confident that its investments in new technology will start paying dividends.

"Last quarter, we made significant investments behind three foundational initiatives that were necessary to allow Regis to move along a strategic continuum towards becoming a best in class operator," said Dan Hanrahan, president and chief executive officer. "We rolled out a new point-of-sale system throughout North America, we reorganized our field leadership, and we standardized our retail plan-o-grams. As we discussed in late August, these changes negatively impacted our performance. Our focus over the last two months has been on stabilizing these trends."

The company provided the following progress updates on three strategic initiatives:

Technology. The initial rollout of SuperSalon point-of-sale and salon workstations to our North American salons is essentially complete. Team members are working to become more efficient and effective in using the new system. Significant progress has been made to resolve technical issues, and the number of help desk tickets has fallen significantly. Regis continues to focus on ensuring its stylists are well trained to optimize the use of SuperSalon and associated operating processes. According to the CEO, encouraging the right behaviors that optimize accuracy and consistency of data capture will allow Regis to capitalize on the data capture capabilities of having a standardized point-of-sale platform throughout North America, and further develop management and reporting tools.

Merchandising. Subsequent to standardizing retail plan-o-grams throughout North America, the Company moved quickly to validate assortment assumptions, promotional plans, reset efficacy and guest buying behaviors. The results of this work provided us with useful insights into guest behavior that when recently applied have improved recent retail sales trends. While our retail business is not where we want it to be, it is heading in the right direction.

Organization. Through the field reorganization, Regis moved from a branded to a geographic management structure. Eleven regional vice presidents were put in place to enable more localized management and decision making. Regis is focused on improving execution at the salon level. A new management process has been put in place that focuses our field leaders, salon managers and stylists on growing guest traffic. Training on this process is ongoing, emphasizing development of our associates and instilling effective guest experience behaviors. A weekly goal setting process cascades from the individual stylists to the CEO. The training focuses stylists on behaviors to increase guest counts by delivering a better guest experience and recruiting new guests. It also builds a team atmosphere within each salon and a competitive spirit throughout the field organization and salons. This process makes top performers visible, and enables sharing of winning practices across regions, districts, salons and stylists. Similar to our experience with SuperSalon, it will take time and learning to become efficient.

"Although the transformational changes we implemented have been disruptive, these changes are necessary to turn Regis around. We have taken significant actions to stabilize the business," Hanrahan concluded. "While our sales performance in the first quarter is not where I would like it to be, I am pleased with our efforts to control expenses. We are seeing pockets of revenue improvement, which provide us with confidence that the operational changes we put in place will position Regis to improve over time. The key to our success is continuing to improve our ability to execute at the salon level through the development of our field leaders and salon managers, so we consistently deliver a strong guest experience."


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