Good Hair Days at Regis

Haircuts are a growing, profitable business, and Regis (RGS ), the world's top hair-care enterprise, with 9,500 company-owned salons and 4,200 franchised shops, is proof. "It is a low-risk play in retail," says Eric Miller, portfolio manager at Heartland Advisors. "For years, it has produced 12%-to-15% annual earnings growth." A micro-cap value investor, Miller got involved in Regis when in 1996 it acquired Supercuts, in which Heartland had a big stake.

Miller sold the Regis shares from the deal at a big profit and stayed away -- until 2000, when he saw how Regis had turned the troubled Supercuts around. "We were so impressed that we bought into Regis, then at 15," he says. Now at 24, Regis, which started trading on the Big Board on Mar. 27, could hit 32 in a year, says Miller, based on its growth driven by acquisitions and cost-conscious operations. A recent buy was Jean Louis David, which has 1,200 stores in Europe and which Regis is building up in the U.S. Regis CEO Paul Finkelstein says he will add 100 to 200 salons in the New York area in 5 to 10 years.

Although tops in the business, Regis has only a 2% slice of the $135 billion world market. Heartland's Miller sees Regis earning $1.90 a share in 2003 and $2.10 in 2004.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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