Shares of Rent-A-Center, Inc. have decreased 36.5% in after-hours trading on Feb 23 following fourth-quarter 2021 results. Both the top and the bottom line missed the Zacks Consensus Estimate but improved on a year-over-year basis. Also, weak earnings guidance for 2022 hurt the stock.
The combined effect of lower government pandemic relief, inflation and supply-chain hurdles dented RCII’s target customers’ ability to afford durable goods. This affected the fourth-quarter results. Management expects such issues to persist in the foreseeable future, which is likely to result in year-over-year declines in revenues and earnings for 2022 on a pro forma basis.
Over the past six months, shares of Rent-A-Center have declined 6.9% compared with the industry’s 9.1% decrease.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.08 a share, lagging the Zacks Consensus Estimate of $1.58. Nonetheless, the bottom line rose 4.9% from $1.03 earned in the year-ago quarter.
Consolidated total revenues of $1,171.4 million came below the Zacks Consensus Estimate of $1,201 million. However, the metric surged 63.5% year over year, mainly driven by gains from the buyout of Acima Holdings and solid growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues improved 10.5% on solid organic growth in the Acima and Rent-A-Center Business units.
Adjusted EBITDA came in at $124.4 million, down 22.4% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin contracted 450 basis points to 10.6% due to impacts of higher delinquency and loss rates, supply-chain constraints and inflation rates.
Segmental Performance
Revenues at the Rent-A-Center Business segment rose 9% to $506.2 million owing to same-store sales growth of 10.4%, led by a 17.9% increase in e-commerce sales and a solid lease portfolio performance. However, the increase was partly offset by the impact of refranchising roughly 100 stores in California in the prior-year quarter. As of Dec 31, 2021, the segment had 1,846 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 204.3% from the prior-year quarter’s level to $611.9 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues rose 12.3% and a gross merchandise volume (GMV) improved 5%, driven by growth in merchant partners and lease applications.
Mexico segment’s revenues totaled $15.7 million, up 9.9% on a constant-currency basis. Also, the segment’s same-store sales rose 8.6%. As of Dec 31, the unit had 123 company-operated locations.
Finally, Franchising revenues inched up 2.1% to $37.6 million. This can primarily be attributed to an increased store count from refranchising about 100 California stores in 2020, offset by lower inventory purchases per store. As of Dec 31, Rent-A-Center had 466 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $108.3 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. RCII had an outstanding debt of $1.6 billion at the quarter end. This currently Zacks Rank #3 (Hold) player ended the quarter with $280.9 million of liquidity, including $172.6 million of undrawn revolving credit availability.
During 2021, Rent-A-Center generated cash of $392.3 million from operations and a negative free cash flow including acquisitions and divestitures of $943.7 million. Capital expenditures totaled $62.5 million in the aforementioned period.
In the fourth quarter of 2021, management returned $388.4 million of cash to its shareholders via $18.3 million of dividends and $370.1 million of share repurchases. In 2021, RCII returned $461.6 million of cash to its shareholders.
Outlook
Consolidated revenues are projected in the bracket of $4.450-$4.600 billion for 2022, indicating a rise from $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago. Adjusted earnings per share are envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year.
For the first quarter of 2022, management anticipates revenues of $1.125-$1.155 billion. Adjusted EBITDA is projected between $85 million and $100 million while adjusted earnings per share are envisioned in the band of 65-80 cents.
The Zacks Consensus Estimate is pegged higher at $1.53 for the first quarter and $7.01 for 2022.
Solid Consumer Discretionary Bets
Some better-ranked stocks from the Consumer Discretionary sector are Ralph Lauren (RL - Free Report) , Oxford Industries (OXM - Free Report) and Gildan Activewear (GIL - Free Report) .
Ralph Lauren currently sports a Zacks Rank #1 (Strong Buy). RL has a trailing four-quarter earnings surprise of 94.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ralph Lauren's current financial year’s sales and earnings per share suggests growth of 40% and 374.7%, respectively, from the corresponding year-ago period's reported numbers.
Oxford Industries, an apparel company, currently carries a Zacks Rank of 2. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 2.1% and 4%, respectively, from the corresponding year-ago period's reported numbers.
Gildan Activewear, the manufacturer and marketer of branded basic activewear, presently carries a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 85%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 8.2% and 9.4% each from the respective year-ago period’s reported numbers.
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Shares of Rent-A-Center, Inc. have decreased 36.5% in after-hours trading on Feb 23 following fourth-quarter 2021 results. Both the top and the bottom line missed the Zacks Consensus Estimate but improved on a year-over-year basis. Also, weak earnings guidance for 2022 hurt the stock.
The combined effect of lower government pandemic relief, inflation and supply-chain hurdles dented RCII’s target customers’ ability to afford durable goods. This affected the fourth-quarter results. Management expects such issues to persist in the foreseeable future, which is likely to result in year-over-year declines in revenues and earnings for 2022 on a pro forma basis.
Over the past six months, shares of Rent-A-Center have declined 6.9% compared with the industry’s 9.1% decrease.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.08 a share, lagging the Zacks Consensus Estimate of $1.58. Nonetheless, the bottom line rose 4.9% from $1.03 earned in the year-ago quarter.
Consolidated total revenues of $1,171.4 million came below the Zacks Consensus Estimate of $1,201 million. However, the metric surged 63.5% year over year, mainly driven by gains from the buyout of Acima Holdings and solid growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues improved 10.5% on solid organic growth in the Acima and Rent-A-Center Business units.
Adjusted EBITDA came in at $124.4 million, down 22.4% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin contracted 450 basis points to 10.6% due to impacts of higher delinquency and loss rates, supply-chain constraints and inflation rates.
Segmental Performance
Revenues at the Rent-A-Center Business segment rose 9% to $506.2 million owing to same-store sales growth of 10.4%, led by a 17.9% increase in e-commerce sales and a solid lease portfolio performance. However, the increase was partly offset by the impact of refranchising roughly 100 stores in California in the prior-year quarter. As of Dec 31, 2021, the segment had 1,846 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 204.3% from the prior-year quarter’s level to $611.9 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues rose 12.3% and a gross merchandise volume (GMV) improved 5%, driven by growth in merchant partners and lease applications.
Mexico segment’s revenues totaled $15.7 million, up 9.9% on a constant-currency basis. Also, the segment’s same-store sales rose 8.6%. As of Dec 31, the unit had 123 company-operated locations.
Finally, Franchising revenues inched up 2.1% to $37.6 million. This can primarily be attributed to an increased store count from refranchising about 100 California stores in 2020, offset by lower inventory purchases per store. As of Dec 31, Rent-A-Center had 466 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $108.3 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. RCII had an outstanding debt of $1.6 billion at the quarter end. This currently Zacks Rank #3 (Hold) player ended the quarter with $280.9 million of liquidity, including $172.6 million of undrawn revolving credit availability.
During 2021, Rent-A-Center generated cash of $392.3 million from operations and a negative free cash flow including acquisitions and divestitures of $943.7 million. Capital expenditures totaled $62.5 million in the aforementioned period.
In the fourth quarter of 2021, management returned $388.4 million of cash to its shareholders via $18.3 million of dividends and $370.1 million of share repurchases. In 2021, RCII returned $461.6 million of cash to its shareholders.
Outlook
Consolidated revenues are projected in the bracket of $4.450-$4.600 billion for 2022, indicating a rise from $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago. Adjusted earnings per share are envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year.
For the first quarter of 2022, management anticipates revenues of $1.125-$1.155 billion. Adjusted EBITDA is projected between $85 million and $100 million while adjusted earnings per share are envisioned in the band of 65-80 cents.
The Zacks Consensus Estimate is pegged higher at $1.53 for the first quarter and $7.01 for 2022.
Solid Consumer Discretionary Bets
Some better-ranked stocks from the Consumer Discretionary sector are Ralph Lauren (RL - Free Report) , Oxford Industries (OXM - Free Report) and Gildan Activewear (GIL - Free Report) .
Ralph Lauren currently sports a Zacks Rank #1 (Strong Buy). RL has a trailing four-quarter earnings surprise of 94.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ralph Lauren's current financial year’s sales and earnings per share suggests growth of 40% and 374.7%, respectively, from the corresponding year-ago period's reported numbers.
Oxford Industries, an apparel company, currently carries a Zacks Rank of 2. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 2.1% and 4%, respectively, from the corresponding year-ago period's reported numbers.
Gildan Activewear, the manufacturer and marketer of branded basic activewear, presently carries a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 85%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 8.2% and 9.4% each from the respective year-ago period’s reported numbers.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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