Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

One of the largest rent-to-own operators in the United States, Rent-A-Center Inc. (RCII - Analyst Report), in an effort to enhance the company's financial flexibility and lower its interest expenses, has completed refinancing of its senior credit facility.

The total amount of new credit facility is $750.0 million of which $250.0 million are in the form of a term loan and $500.0 million in a revolving credit facility. The company has already utilized its $250.0 million term loan and $100.0 million revolving credit facility for repaying its existing senior term debt of approximately $358.0 million.

The move, aimed toward making the company more financially flexible, will facilitate the company to focus on future growth prospects. Moreover, it will also result in an interest savings of approximately 100 basis points. As the credit market has normalized and funds are available at cheaper rates, it is very prudent to repay the high cost obligations.

Prior to this, in an attempt to expand its operational roots, the company has opened new stores in Gulfport, Mississippi and New Orleans and is providing them additional avenue to own luxury furnishings, electrical devices, electronics and computers.

The new 5,000-square-foot showroom in Gulfport and the 3,000-square-foot showroom in New Orleans will offer brands like HP, Ashley, Sony, Serta and Whirlpool. Rent-A-Center operates 38 and 47 locations in the states of Mississippi and Louisiana, respectively.

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.

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.

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 offers consumers electronics, appliances and furniture products under rental-purchase schemes that allow them 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, Rent-A-Center's shares maintain a Zacks #3 Rank, which translates into a short-term 'Hold' recommendation. However, we have a long-term 'Neutral' recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
LAKE SHORE G LSG 0.77 +6.05%
QUESTCOR PHA QCOR 80.07 +2.47%
VIPSHOP HOLD VIPS 156.35 +1.82%
ENLINK MIDST ENLC 36.29 +1.60%
BNC BANCORP BNCN 17.33 +1.58%