Zacks Initiates Coverage of Regis With Neutral Recommendation

Core Viewpoint - Zacks Investment Research has initiated coverage of Regis Corporation (RGS) with a "Neutral" recommendation, reflecting a mixed outlook for the company amid industry challenges [1] Company Overview - Regis Corporation, based in Minneapolis, MN, operates beauty salons under various trade names including Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters, and Magicuts, offering haircutting, styling, hair coloring services, and professional hair care products [2] Financial Performance - Regis has shown tangible improvement in its earnings profile for the second quarter of fiscal 2026, despite ongoing traffic headwinds. The company has expanded operating income and improved EBITDA through pricing actions, tighter cost controls, and a greater contribution from company-owned salons [3] - The shift towards positive operating cash flow indicates that operational adjustments are leading to stronger internal cash generation, which is crucial for stabilizing RGS' business [3] Growth Drivers - The acquisition of Alline Salon Group in December 2024 has significantly expanded the company-owned salon base and positively impacted operating income, allowing for better control over pricing and labor initiatives [4] - Comparable sales trends have improved, with system-wide results turning positive in the first half of fiscal 2026, and Supercuts showing solid growth [4] - Management's revised stylist compensation models, pricing adjustments, and labor optimization tools are aimed at driving structural margin gains over time [4] Market Positioning - Regis stock has underperformed compared to industry peers and the broader market over the past year, indicating investor skepticism regarding the durability of the turnaround and the company's ability to refinance its debt favorably [6] - The current valuation suggests meaningful upside potential if execution improves and balance sheet risk is reduced [6]