Supercuts 2005 Annual Report Download - page 29

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
MANAGEMENT’S OVERVIEW
Regis Corporation (RGS) is the beauty industry’s global leader in beauty salons, hair restoration centers and education. As of June 30,
2005, our worldwide operations included 10,879 system-wide North American and international salons, 90 hair restoration centers and 24
beauty schools. Each of our salon concepts offer generally similar products and services and serves mass-market consumers. Our salon
operations are organized to be managed based on geographical location. Our North American salon operations include 8,861 salons, including
2,310 franchise salons, operating in the United States, Canada and Puerto Rico primarily under the trade names of Regis Salons, MasterCuts,
Trade Secret, SmartStyle, Supercuts and Cost Cutters. Our international salon operations include 2,018 salons, including 1,592 franchise
salons, located throughout Europe, primarily in the United Kingdom, France, Italy and Spain. In December 2004, we purchased Hair Club for
Men and Women. This enterprise includes 90 North American locations, including 41 corporate and 49 franchise locations. Our beauty schools
are managed in aggregate, regardless of geographical location, and include 20 locations in the United States and four locations in the United
Kingdom. During fiscal year 2005, we had approximately 55,000 corporate employees worldwide.
Our growth strategy consists of two primary, but flexible, building blocks. Through a combination of organic and acquisition growth, we
seek to achieve our long-term objective of 10-to-14 percent annual revenue growth. We anticipate that going forward, the mix of organic and
acquisition growth will be roughly equal. However, depending on several factors, including the ability of our salon development program to
keep pace with the availability of real estate for new construction, student enrollment, hair restoration lead generation, the availability of
attractive acquisition candidates and same-store sales trends, this mix will vary from year-to-year. We believe achieving revenue growth of 10-
to-14 percent, including same-store sales increases in excess of two percent, will allow us to increase annual earnings at a low-to-mid teen
percent growth rate. We anticipate expanding our presence in both North America and Europe. Additionally, we desire to enter the Asian
market within the next five years.
Maintaining financial flexibility is a key element in continuing our successful growth. With strong operating cash flow and an investment
grade balance sheet, we are confident that we will be able to financially support our long-term growth objectives.
Salon Business
The strength of our salon business is in the fundamental similarity and broad appeal of our salon concepts that allow flexibility and
multiple salon concept placements in shopping centers and neighborhoods. Each concept generally targets the middle market customer,
however each attracts a different demographic. We anticipate expanding all of our salon concepts. In addition, we anticipate testing and
developing new salon concepts to complement our existing concepts.
We execute our salon growth strategy by focusing on real estate. Our salon real estate strategy is to add new units in convenient locations
with good visibility and customer traffic, as well as appropriate trade demographics. Our various salon and product concepts operate in a wide
range of retailing environments, including regional shopping malls, strip centers and Wal-
Mart Supercenters. We believe that the availability of
real estate will augment our ability to achieve the aforementioned long-term growth objectives. We anticipate that we will add between 800 to
1,100 net salons each year through a combination of organic, acquisition and franchise growth.
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