Regis On Buying Spree

April 11, 2005
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GRAND RAPIDS — The day Regis Corp. closed its deal with Salon Enterprises for the Panopoulos Salons chain was the same day the world’s largest salon operator took over the 44-year-old business.

New salon managers moved in. A new computer system was installed. And that day — Friday, April 1 — had just begun, as did a new era for a very familiar business with a dozen salons in the region.

The Regis Corp., traded on the NYSE under RGS, started the calendar year with 10,412 hair salons, 91 hair restoration centers and 15 beauty schools under its far-reaching banner. The firm has salons across North America, in eight European countries and in Puerto Rico. Sixty different brand names operate under the Regis umbrella. The company claims to be eight times larger than its nearest competitor and has 4 percent of the domestic market.

Panopoulos Salons, with half of its locations in Grand Rapids and 250 employees overall, was an attractive buy for Regis. Salon Enterprises had massaged the hair, nail, skin and body care salons into a stylish image that led to a reputation for quality work and individualized service, a status that suited Regis Corp.

“The Panopoulos Salons fit the criteria that we have when we buy any salon, and that is that it has a strong and good reputation within the market that it serves, and the Panopoulos Salons certainly fit the bill there,” said Jack Nielsen, director of finance and investor relations with Regis Corp., from his office in Minneapolis.

“We’ve been buying salons rather aggressively, I would say, for the last 10 or 11 years. We buy probably 400 to 500 salons every year. That sounds like a lot but when there are 350,000 salons and barbershops in North America, we’re still rather exclusive in terms of who we buy,” added Nielsen.

Regis Corp. had 1,479 salons in 1994 and has added 8,933 since then. Company CEO and Chairman Paul Finkelstein predicted in January that fiscal year 2005 would be a record year of acquisition activity for Regis, and not just in the salon business.

“We are particularly excited about our two new platforms for growth: beauty schools and hair restoration centers. Entering into these new businesses while continuing to grow our salon base should enable us to achieve low to mid-teens earnings growth in fiscal 2006 and many years thereafter,” said Finkelstein.

Chic University of Cosmetology, owned by Salon Enterprises since 1982, was not part of the local firm’s sale to Regis. And Nielsen said he couldn’t comment on whether Regis was negotiating with Salon Enterprises for its three campuses because of the federal regulations that govern public companies.

As Nielsen noted, the company has been active in acquiring new businesses. Regis added 545 salons during the previous fiscal year and 356 through the first half of the current one. Other recent financial highlights include:

  • Consolidated revenues rose by 14 percent in fiscal year 2004 to $1.92 billion and net income increased by 22 percent to a record $105 million.
  • Consolidated revenues rose by 10 percent in the first quarter of fiscal year 2005 to a record $506 million and net income increased by 2 percent to $25.5 million.
  • Consolidated revenues rose by 14 percent in the second quarter of fiscal year 2005 to a record $537 million, but net income dipped by 3 percent to $26.8 million.
  • Consolidated revenues rose by 14 percent in January, the first month of the third quarter, to $178 million, by 14 percent again in February to $179 million, and by 18 percent in March to a record $199 million.

The company’s third quarter results were to have been released late last week. The firm’s fiscal year ends on June 30.

Nielsen said he wasn’t sure whether the Panopoulos name would remain on the marquee. But he did say that Regis Corp. has a track record of retaining the name of a successful and respected business like Panopoulos.

“It’s not unusual for us to keep the brand name, even on a smaller acquisition like this one,” he said.

Christos Panopoulos started the privately held Panopoulos chain of salons in 1961. The business has grown to a dozen salons, with six located outside of Grand Rapids.

“We do our homework on the salons. We have field personnel in virtually every market and they know which are the good salons out there, and I think Paul Finkelstein, our CEO, has had his eye on the Panopoulos Salons for a some time.”    

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