Rent-A-Center Inc. (RCII - Analyst Report), in an attempt to expand its operational roots, is all set to entice the residents of Gulfport, Mississippi and New Orleans, Louisiana by opening new stores and providing them additional avenue to own luxury furnishings, electrical devices, electronics and computers.
The new 5,000-square-foot showroom in Gulfport and the 3000-square-foot showroom in New Orleans will offer brands like HP, Ashley, Sony, Serta and Whirlpool. Rent-A-Center operates through 38 and 47 locations in the states of Mississippi and Louisiana, respectively.
Rent-A-Center is one of the largest rent-to-own operators in the U.S. and leverages an extensive network of about 3,000 stores to effectively penetrate into its target markets and gain a competitive advantage over its competitors Aaron’s Inc. (AAN - Snapshot Report) and Advance America.
Rent-A-Center is taking prudent steps to optimize rental merchandise levels in accordance with the sales trends. The company implemented a centralized inventory management system, including automated merchandise replenishment. Moreover, a new centralized purchasing system allows it to better manage the rental merchandise.
Earlier, the company raised its quarterly dividend by a whooping 167% to 16 cents from 6 cents. The increased dividend will be paid on July 20, 2011 to stockholders of record as of July 01, 2011.
Rent-A-Center remains optimistic about its future growth as it opens stores in international markets and accelerates the rollout of RAC Acceptance kiosks. For fiscal 2011, management plans to open approximately 25 domestic rent-to-own stores. The company also hinted that it has been evaluating strategic alternatives for its financial services’ businesses, which may or may not include the divestiture of the segment.
The company’s new business model named RAC Acceptance is gradually gaining traction. When a retailer denies a consumer credit financing for a particular product, Rent-A-Center under its RAC Acceptance program acquires that product from the retailer and offers it to the consumer under a rental-purchase transaction.
Rent-A-Center offers consumer electronics, appliances and furniture products under rental-purchase schemes that allow the customer to own the merchandise on the completion of the rental period. Due to the continued tightening of the credit market, customers witness rent-to-own as a more flexible and viable option compared to credit. However, a sluggish recovery and a fragile job market may make customers reluctant to enter into the new rental purchase deals.
Currently, we have a ‘Neutral’ rating on the stock. However, Rent-A-Center’s shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation.