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Rent-A-Center (RCII) Q3 Earnings Beat Mark, Revenues Fall Y/Y
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Rent-A-Center, Inc. posted better-than-expected results for third-quarter 2022. Both the top and the bottom line surpassed the Zacks Consensus Estimate but declined on a year-over-year basis. Management issued soft guidance for the fourth quarter.
This currently Zacks Rank #4 (Sell) stock has lost 30.7% over the past three months compared with the industry’s 8% decrease.
Q3 in Detail
Rent-A-Center posted adjusted earnings of 94 cents a share, surpassing the Zacks Consensus Estimate of 88 cents. However, the bottom line decreased significantly from $1.52 earned in the year-ago quarter.
Total revenues of $1,024 million came above the Zacks Consensus Estimate of $1,009 million. However, the metric fell 13.3% year over year, mainly due to lower merchandise sales and a fall in rental revenues in the Acima and the Rent-A-Center Business units. Also, soft sales across all the segments except for Mexico and same-store sales hurt the metric.
Image Source: Zacks Investment Research
Adjusted EBITDA came in at $115 million, down 34.6% from the year-ago period’s level, mainly due to lower revenues and increased loss rates compared with the respective prior-year readings, somewhat offset by reduced costs in the present period. Adjusted EBITDA margin contracted 370 basis points year over year to 11.2%.
Segmental Performance
Revenues at the Rent-A-Center Business segment dipped 5.4% to $473.8 million due to a same-store sales decline of 5.3%. Same-store sales fell due to lower rental and fee revenues. On a two-year stacked basis, same-store sales increased 7%. E-commerce accounted for 23% of the quarterly revenues compared with 21% in the prior-year period. At the end of the reported quarter, the segment’s lease portfolio value slipped 1.7% year over year. As of Sep 30, 2022, the segment had 1,848 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) declined 19.1% from the prior-year quarter’s level to $504.4 million, mainly due to lower rental and fees revenues, and merchandise sales. Also, gross merchandise volume (GMV) declined 23% due to declines in lease applications from the year-ago period’s level.
Mexico segment’s revenues totaled $16 million, up 1.9% on a constant-currency basis. Also, the segment’s same-store sales rose 0.2%. As of Sep 30, the unit had 125 company-operated locations.
Franchising revenues tumbled 27.4% to $29.7 million. As of Sep 30, Rent-A-Center had 452 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $165.6 million, net senior debt of $932 million and a stockholders' equity of $548.2 million. RCII had an outstanding debt of $1.4 billion at the quarter end. RCII ended the quarter with $540 million of liquidity, including $374 million of undrawn revolving credit availability.
During the nine months of 2022, Rent-A-Center generated cash of $412.1 million from operations and a free cash flow of $106.1 million, including acquisitions and divestitures. Capital expenditures totaled $18.5 million in the third quarter.
In the third quarter of 2022, management returned $50.7 million of cash to its shareholders via dividends and share repurchases. In the reported quarter and during October, RCII bought back 3.537 million shares.
Outlook
Management issued guidance for the fourth quarter of 2022. For the same quarter, management anticipates consolidated revenues of $0.975-$1.025 billion. Adjusted EBITDA is projected between $95 million and $110 million, while adjusted earnings per share are envisioned between 65 cents and 85 cents.
In the year-earlier quarter, RCII delivered revenues of $1.17 billion and earnings per share of $1.08.
The Zacks Consensus Estimate for revenues is pegged at $1.03 and earnings per share at 91 cents for the fourth quarter.
The Zacks Consensus Estimate for Designer Brands’ current financial-year revenues and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago reported figures. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
Delta Apparel is a manufacturer of activewear and lifestyle apparel products. DLA has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and EPS suggests growth of 12.6% and 27.4%, respectively, from the year-ago corresponding figures. DLA has a trailing four-quarter earnings surprise of 34.2%, on average.
Caleres, a footwear dealer, has a Zacks Rank of 2 at present. CAL has a trailing four-quarter earnings surprise of 34.9%, on average.
The Zacks Consensus Estimate for Caleres’ current financial-year sales and EPS suggests growth of 5.6% and 0.9%, respectively, from the year-ago corresponding figures.
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Rent-A-Center (RCII) Q3 Earnings Beat Mark, Revenues Fall Y/Y
Rent-A-Center, Inc. posted better-than-expected results for third-quarter 2022. Both the top and the bottom line surpassed the Zacks Consensus Estimate but declined on a year-over-year basis. Management issued soft guidance for the fourth quarter.
This currently Zacks Rank #4 (Sell) stock has lost 30.7% over the past three months compared with the industry’s 8% decrease.
Q3 in Detail
Rent-A-Center posted adjusted earnings of 94 cents a share, surpassing the Zacks Consensus Estimate of 88 cents. However, the bottom line decreased significantly from $1.52 earned in the year-ago quarter.
Total revenues of $1,024 million came above the Zacks Consensus Estimate of $1,009 million. However, the metric fell 13.3% year over year, mainly due to lower merchandise sales and a fall in rental revenues in the Acima and the Rent-A-Center Business units. Also, soft sales across all the segments except for Mexico and same-store sales hurt the metric.
Image Source: Zacks Investment Research
Adjusted EBITDA came in at $115 million, down 34.6% from the year-ago period’s level, mainly due to lower revenues and increased loss rates compared with the respective prior-year readings, somewhat offset by reduced costs in the present period. Adjusted EBITDA margin contracted 370 basis points year over year to 11.2%.
Segmental Performance
Revenues at the Rent-A-Center Business segment dipped 5.4% to $473.8 million due to a same-store sales decline of 5.3%. Same-store sales fell due to lower rental and fee revenues. On a two-year stacked basis, same-store sales increased 7%. E-commerce accounted for 23% of the quarterly revenues compared with 21% in the prior-year period. At the end of the reported quarter, the segment’s lease portfolio value slipped 1.7% year over year. As of Sep 30, 2022, the segment had 1,848 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) declined 19.1% from the prior-year quarter’s level to $504.4 million, mainly due to lower rental and fees revenues, and merchandise sales. Also, gross merchandise volume (GMV) declined 23% due to declines in lease applications from the year-ago period’s level.
Mexico segment’s revenues totaled $16 million, up 1.9% on a constant-currency basis. Also, the segment’s same-store sales rose 0.2%. As of Sep 30, the unit had 125 company-operated locations.
Franchising revenues tumbled 27.4% to $29.7 million. As of Sep 30, Rent-A-Center had 452 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $165.6 million, net senior debt of $932 million and a stockholders' equity of $548.2 million. RCII had an outstanding debt of $1.4 billion at the quarter end. RCII ended the quarter with $540 million of liquidity, including $374 million of undrawn revolving credit availability.
During the nine months of 2022, Rent-A-Center generated cash of $412.1 million from operations and a free cash flow of $106.1 million, including acquisitions and divestitures. Capital expenditures totaled $18.5 million in the third quarter.
In the third quarter of 2022, management returned $50.7 million of cash to its shareholders via dividends and share repurchases. In the reported quarter and during October, RCII bought back 3.537 million shares.
Outlook
Management issued guidance for the fourth quarter of 2022. For the same quarter, management anticipates consolidated revenues of $0.975-$1.025 billion. Adjusted EBITDA is projected between $95 million and $110 million, while adjusted earnings per share are envisioned between 65 cents and 85 cents.
In the year-earlier quarter, RCII delivered revenues of $1.17 billion and earnings per share of $1.08.
The Zacks Consensus Estimate for revenues is pegged at $1.03 and earnings per share at 91 cents for the fourth quarter.
Stocks to Consider
Here we highlighted three better-ranked stocks, namely Designer Brands (DBI - Free Report) , Delta Apparel (DLA - Free Report) and Caleres (CAL - Free Report) .
Designer Brands designs, manufactures, and retails footwear and accessories. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Designer Brands’ current financial-year revenues and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago reported figures. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
Delta Apparel is a manufacturer of activewear and lifestyle apparel products. DLA has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and EPS suggests growth of 12.6% and 27.4%, respectively, from the year-ago corresponding figures. DLA has a trailing four-quarter earnings surprise of 34.2%, on average.
Caleres, a footwear dealer, has a Zacks Rank of 2 at present. CAL has a trailing four-quarter earnings surprise of 34.9%, on average.
The Zacks Consensus Estimate for Caleres’ current financial-year sales and EPS suggests growth of 5.6% and 0.9%, respectively, from the year-ago corresponding figures.