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Rent-A-Center (RCII) Beats on Q1 Earnings, Revenues Miss

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Rent-A-Center, Inc. posted first-quarter 2017 adjusted earnings of 4 cents a share that beat the Zacks Consensus Estimate of 1 cent but fell substantially from earnings of 48 cents delivered in the year-ago period. Total revenue of $742 million declined 11.2% year over year and also came below the respective estimate of $744 million, marking the seventh straight quarter of sales miss.

Total revenue tumbled due to decline witnessed across the Core U.S., Mexico and Franchising segments, partially mitigated by growth registered at Acceptance Now segment. The company’s waning top-line and bottom-line have been weighing on the stock’s performance.

Shares of this rent-to-own operator have underperformed the Zacks categorized industry in the past six months. In the period, the stock has increased 3.1%, while the Consumer Services – Miscellaneous industry has advanced 15.7%.

Comparable-store sales (comps) for the quarter dropped 7.8%, reflecting declines of 12.5% and 6% in the Core U.S. and Mexico segments, respectively, partly neutralized by a 2.9% increase noted at the Acceptance Now segment.

We note adjusted earnings per share improved 27 cents, while comps improved 150 basis points on a sequential basis.

Delving Deeper

Revenues from the Acceptance Now segment gained 1.8% from the prior-year quarter figure to $234.5 million attributable to higher comps.

Revenues from the Core U.S. segment slumped 16% to $490.9 million, owing to continued store base rationalization and dismal comps.

The Mexico segment’s revenues came in at $11.1 million, down 19.3% year over year – attributable to foreign currency fluctuations, store closures and lower comps. Finally, total Franchising revenues plunged 23.8% to $5.4 million during the quarter on account of fall in the amount of merchandise sold to the franchise partners.

Rent-A-Center’s adjusted EBITDA declined 52.8% to $33.3 million, while EBITDA margin shriveled 400 basis points to 4.5%.

Rent-A-Center Inc. Price, Consensus and EPS Surprise

 

Rent-A-Center Inc. Price, Consensus and EPS Surprise | Rent-A-Center Inc. Quote

Store Update

At the end of the quarter, there were 2,453 Core U.S. locations, 1,389 Acceptance Now Staffed stores, 96 Acceptance Now Direct stores, 131 stores in Mexico and 229 Franchise stores.

Other Financial Aspects

Rent-A-Center, which shares space with McGrath Rentcorp (MGRC - Free Report) , AeroCentury Corp. and Aaron's, Inc. (AAN - Free Report) , ended the quarter with cash and cash equivalents of $58.1 million and net Senior debt of $115.6 million. The company lowered outstanding debt balance by $71.6 million in the quarter under review. During the quarter, the company generated $59.1 million of cash from operations and incurred capital expenditures of $22 million.

Currently, Rent-A-Center carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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