Regis profits surge on Alberto-Culver fee
41 per cent increase in net income after the company benefited by a
$50m payment from Alberto-Culver after it pulled out of a proposed
acquisition deal earlier this year.
But the boost in profits hides an underlying loss for the company, which has been building up in recent quarters, putting it in a precarious position if it is still wishes to attract future investment or a new buyer.
Sales for the quarter were up from $593.47m in the first quarter of 2005 to reach $635.96m (€497.9m) in the company's fourth and final financial quarter. Likewise sales for the full year were up from $2.19bn in 2005 to reach $2.43bn for the financial year 2006.
Taking into account that Alberto-Culver made its payment for pulling out of its proposed deal with Regis earlier on in the year, the company's net income for the quarter helped it avoid going into the red.
Net income for the last three months was $41.51m, compared to $29.50m in the corresponding quarter for 2005. For the full year net income was $109.57m, compared to $64.63m in 2005.
The company said that the main reason for its slack performance is the fact that recently hairstyles have been long, which means that women have been making fewer trips to its salons.
With 11,300 salons based all over the US and Europe, Regis is hoping that the hotly-tipped trend for shorter hair will catch on, encouraging women to visit its salons more frequently, in turn helping to boost the current lack luster performance.
Although the company has benefited from the termination of its merger with Alberto-Culver in the short-term, its long-term future does not seem so bright. Looking to 2007, if sales do no pick up a lack of investment may curtail plans to expand.
Indeed the company has stated that it is unable to include planned acquisitions in its outlook due to uncertainty over their size and timing and will cut back plans to open 466 new corporate salons down to 325.
