Regis Corp. (NYSE:RGS) Q2 2016 Earnings Conference Call - Final Transcript
Jan 28, 2016 • 10:00 am ET
Thank you, Dan and Steve. The question-and-answer session will begin at this time. [Operator Instructions] Your first question will come from the line of Jeff Stein of Northcoast Research. Please go ahead.
Hey Dan. Good morning. And nice progress on the top line. So my question is this. You're obviously trying to achieve that balance between investing and payroll and driving comps. At what point do you believe you'll reach that balance where we're not going to see such a dramatic impact on your service margin? In other words, you can invest in payroll ahead of comps forever, but at some point there's got to be a leveling off and where do you see that percentage and the timeframe?
Yeah. Good question, Jeff. It actually varies quite a bit and it's not inconsistent with anything that we've seen in our business so far. We've got good leaders, investments that we've been making are already paying off. And you know what, we essentially look at the investment paying off as this, we can grow revenues and hours at the same rate and we look at leverage when we can get revenue to grow faster than hours. And then when hours grow as faster than rate, I mean, there are still for a while there it's still adding value.
But we're seeing it happen with leaders, so I can't give you an exact time that we're going to turn that corner, but our good leaders took those hours invested and turned that into increased contribution at the salon level right away. And we're opening -- so we started to open the door further and further and we're seeing our leaders that are in development and growing also making good progress there and we haven't invested hours at the same rate and our leaders that still need to make a lot of progress that we need to upgrade.
So I can't give any exact date, but I can tell you we've got a laser-like focus on this right down to the salon level and we're being very cautious about doing it. But we do need if we're going to get traffic growth, the guest traffic growth and we're going to get long-term sustainable profitability, we've got to get our hours up. And there's a couple of benefits to that, the biggest being if you can provide more hours to stylists, you're most likely to retain them. And retention, stylist retention is a huge driver of our growth.
Got it. So when you're adding stylists, are you doing it -- I guess, when you're adding payroll hours, are you still doing it profitably but at a lower margin?
Yeah. It depends on the salon. Yeah, I got the question, it's a smart one. It depends on the salon, it depends on the leader. So our objective obviously is to add them profitably. We don't mind at this point seeing our margins go down a little bit because what we'd like to do is see the