Rent-A-Center, Inc. (RCII), the largest rent-to-own operator, recently posted fourth-quarter 2009 earnings of 66 cents a share that surpassed the Zacks Consensus Estimate of 57 cents, and climbed 40.4% from 47 cents delivered in the prior-year quarter buoyed by effective cost management, increase in traffic count and improvement in customer in-store experience.
In the last 30 days, the Zacks Consensus Estimate for the quarter had remained stagnant with none of the 9 analysts covering the stock raising their estimates. Rent-A-Center’s quarterly earnings topped the Zacks Consensus Estimate by 15.8%. The company’s earnings surprise history for the preceding four quarters varies between 6.8% and 18.2%, with the average being 12.5%. In the third and second quarters, the company had outperformed the Zacks Consensus Estimate by 10% and 15.1%, respectively.
Management now expects first-quarter 2010 earnings in the range of 64 cents to 70 cents a share. For fiscal 2010, earnings are projected between $2.35 and $2.55 per share. The current Zacks Consensus Estimate for the first quarter and fiscal year are 63 cents and $2.38 per share, respectively.
Total revenue tumbled 3.8% year-over-year to $672.9 million due to a 3.2% decline in comparable-store sales. Management expects comps to fall between 0.5% and 2.5% for first-quarter 2010, and to be up by 1% for fiscal year 2010. Total revenues are expected in the range of $692 million to $712 million for first-quarter 2010 and between $2.7 billion and $2.76 billion for fiscal year 2010.
Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase agreements that allow the customer to own the merchandise on the completion of the rental period.
The company’s operating profit jumped 23% to $74.6 million, whereas operating profit margin expanded 240 basis points to 11.1%. Adjusted EBITDA rose 8.8% to $90.6 million, whereas adjusted EBITDA margin inflated by 160 basis points to 13.5%.
During the quarter, Rent-A-Center opened 9 stores. Management expects to open 5 to 10 company-owned locations during the first quarter and 25 to 35 stores in fiscal 2010. At the end of fiscal year 2009, the company operated 3,007 stores nationwide, and in Canada and Puerto Rico .
Rent-A-Center also provides various financial services, such as short-term secured and unsecured loans, debit cards, and money transfer services under the trade name RAC Financial Services.
During the quarter, Rent-A-Center added financial services to 8 stores. The company expects to add financial services to about 5 rent-to-own store locations during the first quarter and to about 50 stores in fiscal 2010. At the end of fiscal year 2009, financial services were available at 353 stores.
Rent-A-Center ended the fiscal year 2009 with cash and cash equivalents of $101.8 million, senior debt of $711.2 million and shareholders’ equity of $1,247.5 million. The company bought back 472,100 shares for $8.8 million during the quarter.
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