Supercuts 2010 Annual Report Download - page 26

Table of Contents
Our business and our industry are affected by cyclical and global economic factors, including the risk of a prolonged recession.
Our financial results are substantially dependent upon overall economic conditions in the United States and in Europe. A prolonged or a
deepening recession in the United States, or globally, could further decrease the demand for our products and services substantially below
current levels and adversely affect our business. Our industry has historically been vulnerable to significant declines in consumption and
product and service pricing during prolonged periods of economic downturn such as at present.
Recessions and other periods of economic dislocation typically result in a lower level of discretionary income for consumers. To the
extent discretionary income declines, consumers may be more likely to reduce discretionary spending. This could result in our salon customers
lengthening their visitation patterns, foregoing salon treatments or using home treatments as a substitute. It could also result in our hair
restoration patients decreasing the amount spent on hair restoration treatments.
The current economic conditions have affected our financial results for the fiscal years ended June 30, 2010 and 2009. Our comparable
same-store sales results for the twelve months ended June 30, 2010 declined 3.2 percent compared to the twelve months ended June 30, 2009.
We impaired $35.3 million of goodwill associated with our Regis salon concept during fiscal year 2010. Also, we impaired $41.7 million of
goodwill associated with our salon concepts in the United Kingdom and $25.7 million of our investment in Provalliance during fiscal year
2009. If the economic downturn continues to result in negative same-store sales and we are unable to offset the impact with operational
savings, our financial results may be further affected. We may be required to take additional impairment charges and to impair certain long-
lived assets, goodwill and investments, and such impairments could be material to our consolidated balance sheet and results of operations. The
concepts that have the highest likelihood of impairment are Regis and Promenade.
Changes in the general economic environment may impact our business and results of operations.
Changes to the United States, Canadian, United Kingdom, Asian and other European economies have an impact on our business. General
economic factors that are beyond our control, such as interest rates, recession, inflation, deflation, tax rates and policy, energy costs,
unemployment trends, and other matters that influence consumer confidence and spending, may impact our business. In particular, visitation
patterns to our salons and hair restoration centers can be adversely impacted by increases in unemployment rates and decreases in discretionary
income levels.
If we continue to have negative same
-store sales our business and results of operations may be affected.
Our success depends, in part, upon our ability to improve sales, as well as both gross margins and operating margins. Comparable same-
store sales are affected by average ticket and same-store customer visits. A variety of factors affect same-store customer visits, including
fashion trends, competition, current economic conditions, changes in our product assortment, the success of marketing programs and weather
conditions. These factors may cause our comparable same-store sales results to differ materially from prior periods and from our expectations.
Our comparable same-store sales results for the twelve months ended June 30, 2010 declined 3.2 percent compared to the twelve months ended
June 30, 2009.
If we are unable to improve our comparable same-store sales on a long-term basis or offset the impact with operational savings, our
financial results may be affected. Furthermore, continued declines in same-store sales performance may cause us to be in default of certain
covenants in our financing arrangements.
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