Alberto-Culver Reviews Regis Warning

Alberto-Culver Co. said that it is reviewing a profit warning from Regis Corp., the hair salon operator in which it intends to buy a majority stake. Alberto-Culver announced that it would sell its retail operations to Regis in a $2.2 billion stock deal. However, the transaction would leave Alberto-Culver shareholders with a 54.5% stake in Regis. Regis, which runs Supercuts and Vidal Sassoon, told Wall Street its fiscal-year profit would fall short of already lowered projections due to weaker-than-expected product margin sales. This warning caused several Wall Street analysts to question if Alberto-Culver would seek to alter the deal, or even terminate it. Alberto-Culver said in a statement that its board is “reviewing recent information regarding Regis’ third-quarter results and revised outlook.” The company said it “may comment further” after its review is completed. The announcement from Regis caused shares of both companies to tumble in trading. Regis shares dropped $3.93 (10.5%) to close at $33.49 and Alberto-Culver shares dropped $1.29 (2.8%), to close at $44.66 (but picked up 24 cents in after-hours electronic trading on the Inet) on the New York Stock Exchange. In addition to the review being led by Alberto-Culver’s board into Regis’ financial situation, the company said its own earnings and sales are expected to hit a record in the second quarter. Alberto-Culver didn’t release specific details but said it expects results will be led by the retail launch of its Nexxus products. The company, which reports results on April 27, said it has had “continued consistent growth” at its Sally Beauty Supply Stores, and its beauty systems group has shown improvement and is on track for a strong year. Analysts, on average, project second-quarter profit of 60 cents per share on $949 million of revenue, according to Thomson Financial.