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Rent-A-Center Stock Tumbles on Bleak Q3 Preliminary Results


Trades from $3

Shares of leading rent-to-own operator in the U.S., Rent-A-Center, Inc. (RCII - Analyst Report) tanked nearly 29% on Oct 11 after the company issued dismal preliminary guidance for third-quarter 2016.

The company expects Core U.S. same store sales to be down nearly 12% in the third- uarter while Acceptance Now same store sales is estimated to be flat. Core U.S. gross profit is likely to be flat year over year. Rent-A-Center anticipates earnings per share both on the GAAP and non-GAAP basis to be in the range of 5 cents to 15 cents per share, well below the Zacks Consensus Estimate of 40 cents.

The technical snags and outages after the execution of new point-of-sale system negatively impacted Core sales. The company further said:  “While we expect it to take several quarters to fully recover from the impact to the Core portfolio, system performance has improved dramatically and we have started to see early indicators of collections improvement.”

Rent-A-Center has been disappointing investors with its top-line performance for the past four consecutive quarters. Accelerated point of sale system rollout, persistent sluggishness across the computers and tablets categories, headwinds across the oil-impacted markets and continued smartphones recast impacted the results.

The Zacks Rank #3 (Hold) company’s new business model called Acceptance Now is gaining traction as it enhances consumers’ shopping experience. When a consumer is denied credit financing for a particular product from a retailer, Rent-A-Center under its Acceptance Now program acquires that product from the retailer and offers it to the consumer under a rental-purchase transaction. The company has moved a step ahead by introducing the Acceptance Now value proposition across retail partner websites.

Stocks to Consider

Better-ranked stocks worth considering include Deckers Outdoor Corp. (DECK - Analyst Report) , Wolverine World Wide Inc. (WWW - Snapshot Report) and Sequential Brands Group, Inc. (SQBG - Snapshot Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Deckers Outdoor has surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters and also has a long-term earnings growth rate of 10.8%.

Wolverine World Wide shares have gained more than 31% in the past six months.

Sequential Brands Group has a long-term earnings growth rate of 17.5%.

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