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Rent-A-Center (RCII) Incurs Wider-Than-Expected Q4 Loss
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Rent-A-Center, Inc. continued with its dismal performance in the final quarter of 2017 as well, wherein both the top and bottom line fell short of analysts’ expectations. Management hinted that the company is going through a rough phase and announced strategic measures to counter the same.
This rent-to-own company posted loss per share for the third straight quarter. The adjusted loss of 41 cents a share was wider than the Zacks Consensus Estimate of a loss of 7 cents and a loss of 23 cents incurred in the year-ago period. Total revenue of $639 million also fell short of the consensus mark of $659 million, consequently marking the second consecutive quarter of revenue miss.
Total revenue tumbled 6.6% due to decline witnessed across the Core U.S. and Acceptance Now segments. Management hinted that hurricane related disruptions as well as soft comparable-store sales (comps) performance also hurt the results.
We note that investors remain concerned about the company’s waning top and bottom-lines. The reflection of the same is visible from the stock’s dismal run in the bourses. In the past six months, shares of this Plano, TX-based company have declined 27.4%, underperforming the industry’s advance of 7.7%.
Nevertheless, management now intends to focus more on cost containment endeavors, improving traffic trends, refranchising program and augmenting cash flow to bring itself back on growth trajectory.
The company in collaboration with AlixPartners has located annualized cost savings opportunities of $65-$85 million, of which roughly two-third is anticipated to be realized this year. It also identified working capital benefits of $20- $25 million, which is expected to be realized fully this year. Management also stated that the new tax legislation is likely to result in cash tax benefit of about $200 million over the next three years, which it intends to utilize in lowering debt load.
Comparable-Store Sales Performance
Comps for the quarter dropped 2%, reflecting declines of 3.6% and 2.3% in the Core U.S. and Mexico segments, respectively, partly mitigated by 6.7% increase noted at the Acceptance Now segment.
However, it is to be noted that comps for the Core U.S. and Mexico segments have improved 150 and 390 basis points, respectively, while for the Acceptance Now the same has decreased 120 basis points on a sequential basis. Consolidated comps for this Zacks Rank #3 (Hold) stock also portray a sequential improvement of 110 basis points. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rent-A-Center Inc. Price, Consensus and EPS Surprise
Revenues from the Core U.S. segment slumped 6% to $444.7 million due to continued store base rationalization, unprecedented hurricanes and dismal comps performance.
Revenues from the Acceptance Now segment declined 9.1% from the prior-year quarter to $175.8 million on account of closures of Conn’s and HHGregg locations and disruptions caused by hurricanes. These were partly mitigated by healthy comps performance.
Mexico segment’s revenues came in at $11.7 million, up 2.1% but down 2.4% on a constant currency basis attributable to lower comps. Finally, total Franchising revenues grew 7.9% to $6.7 million during the quarter.
Store Update
At the end of the quarter, there were 2,381 Core U.S. locations, 1,106 Acceptance Now Staffed stores, 125 Acceptance Now Direct stores, 131 stores in Mexico and 225 Franchise stores.
Other Financial Aspects
Rent-A-Center, which shares space with McGrath Rentcorp (MGRC - Free Report) , AeroCentury Corp. and Aaron's, Inc. (AAN - Free Report) , ended the quarter with cash and cash equivalents of $73 million, net Senior debt of $134.1 million, net Senior notes of $538.8 million and stockholders' equity of $272.4 million. The company expects to generate free cash flow of at least $130 million in 2018.
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Rent-A-Center (RCII) Incurs Wider-Than-Expected Q4 Loss
Rent-A-Center, Inc. continued with its dismal performance in the final quarter of 2017 as well, wherein both the top and bottom line fell short of analysts’ expectations. Management hinted that the company is going through a rough phase and announced strategic measures to counter the same.
This rent-to-own company posted loss per share for the third straight quarter. The adjusted loss of 41 cents a share was wider than the Zacks Consensus Estimate of a loss of 7 cents and a loss of 23 cents incurred in the year-ago period. Total revenue of $639 million also fell short of the consensus mark of $659 million, consequently marking the second consecutive quarter of revenue miss.
Total revenue tumbled 6.6% due to decline witnessed across the Core U.S. and Acceptance Now segments. Management hinted that hurricane related disruptions as well as soft comparable-store sales (comps) performance also hurt the results.
We note that investors remain concerned about the company’s waning top and bottom-lines. The reflection of the same is visible from the stock’s dismal run in the bourses. In the past six months, shares of this Plano, TX-based company have declined 27.4%, underperforming the industry’s advance of 7.7%.
Nevertheless, management now intends to focus more on cost containment endeavors, improving traffic trends, refranchising program and augmenting cash flow to bring itself back on growth trajectory.
The company in collaboration with AlixPartners has located annualized cost savings opportunities of $65-$85 million, of which roughly two-third is anticipated to be realized this year. It also identified working capital benefits of $20- $25 million, which is expected to be realized fully this year. Management also stated that the new tax legislation is likely to result in cash tax benefit of about $200 million over the next three years, which it intends to utilize in lowering debt load.
Comparable-Store Sales Performance
Comps for the quarter dropped 2%, reflecting declines of 3.6% and 2.3% in the Core U.S. and Mexico segments, respectively, partly mitigated by 6.7% increase noted at the Acceptance Now segment.
However, it is to be noted that comps for the Core U.S. and Mexico segments have improved 150 and 390 basis points, respectively, while for the Acceptance Now the same has decreased 120 basis points on a sequential basis. Consolidated comps for this Zacks Rank #3 (Hold) stock also portray a sequential improvement of 110 basis points. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rent-A-Center Inc. Price, Consensus and EPS Surprise
Rent-A-Center Inc. Price, Consensus and EPS Surprise | Rent-A-Center Inc. Quote
Segment Performance
Revenues from the Core U.S. segment slumped 6% to $444.7 million due to continued store base rationalization, unprecedented hurricanes and dismal comps performance.
Revenues from the Acceptance Now segment declined 9.1% from the prior-year quarter to $175.8 million on account of closures of Conn’s and HHGregg locations and disruptions caused by hurricanes. These were partly mitigated by healthy comps performance.
Mexico segment’s revenues came in at $11.7 million, up 2.1% but down 2.4% on a constant currency basis attributable to lower comps. Finally, total Franchising revenues grew 7.9% to $6.7 million during the quarter.
Store Update
At the end of the quarter, there were 2,381 Core U.S. locations, 1,106 Acceptance Now Staffed stores, 125 Acceptance Now Direct stores, 131 stores in Mexico and 225 Franchise stores.
Other Financial Aspects
Rent-A-Center, which shares space with McGrath Rentcorp (MGRC - Free Report) , AeroCentury Corp. and Aaron's, Inc. (AAN - Free Report) , ended the quarter with cash and cash equivalents of $73 million, net Senior debt of $134.1 million, net Senior notes of $538.8 million and stockholders' equity of $272.4 million. The company expects to generate free cash flow of at least $130 million in 2018.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>