Image source: Rent-A-Center.
What: Shares of Rent-A-Center, Inc. (NASDAQ: RCII), one of the largest rent-to-own operators in the U.S. with 2,600 stores nationwide, were hammered 16% Thursday morning after a weak second quarter forced management to revise its full-year outlook.
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So what: Starting on the top line, consolidated total revenue dropped 8.1% to $749.6 million during the second quarter, compared to the prior year. Comparable-store sales for the quarter also moved 4.9% lower. This marks the fourth consecutive sales miss, according to consensus estimates by Zacks, and that poor performance filtered down to disappoint on the bottom line.
Rent-A-Center's earnings per share checked in at $0.19, which was a far cry from last year's $0.43 per share. The company's adjusted earnings were $0.41 per share, which fell 18% short of Zacks' consensus estimates; the result was also below the year-ago figure of $0.50.
Now what:Robert D. Davis, CEO of Rent-A-Center, said in a press release:
That revised outlook calls for core U.S. revenue to decline between 8.5% to 11.5%, which is roughly double what the company previously expected, and earnings per share to fall between $1.65 and $1.85, which is below Zacks' previous estimate of $2.05.
While the company's performance on the top and bottom lines disappointed investors and fell short of expectations, it wasn't all bad. Rent-A-Center did improve gross margins, productivity, and Mexico profitability. But if the company can't reinvigorate its core U.S. revenue, perhaps through e-commerce initiatives, expect a trend of disappointing financial results.
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