Rent-A-Center Inc. (RCII), the largest rent-to-own operator in the U.S, leverages an extensive network of stores to effectively penetrate into its target markets, which in turn, facilitates the company to generate healthy sales and gain a competitive advantage over its competitors.
Following its rationale, Rent-A-Center, which competes with Aaron’s Inc. (AAN) and Advance America, announced the opening of its new store in Mableton, Georgia.
The company, through its latest store, will offer furnishings, electrical devices, electronics and computers to the residents of this region. With the inclusion of this new store, Rent-A-Center now operates through 79 locations in Georgia.
The residents of the region will have the benefit of purchasing goods with flexible payment options, facilitating them to pay weekly, biweekly or monthly. Moreover, the company offers a lifetime recall service, which facilitates its customers to re-rent the same or a comparable item and receive payments.
Late last month, Rent-A-Center delivered better-than-expected second-quarter 2012 results. The quarterly earnings of 74 cents a share surpassed the Zacks Consensus Estimate of 71 cents, and increased 8.8% from 68 cents earned in the prior-year quarter, aided by growth on the top line.
The company’s business model, called RAC Acceptance, is gaining traction. When a consumer is denied credit financing for a particular product from the retailer, Rent-A-Center acquires that product from the retailer by virtue of the RAC Acceptance program, and thereby offers it to the consumer under a rental-purchase transaction.
For fiscal 2012, the company continues to expect top-line growth between 7% and 10%, attributable to a low single-digit jump in Core U.S. and more than $300 million contribution from the RAC Acceptance business. Management expects comparable-store sales between 2.5% and 4.5%.
Management maintained its fiscal 2012 earnings projection of $3.00 to $3.20 per share, including a 25-30 cents cost related to its international expansion initiatives.
Currently, we have a long-term Outperform recommendation on the stock. However, the company has a Zacks #2 Rank, which translates into a short-term Buy rating.
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