Rent-A-Center Inc. (RCII), the largest rent-to-own operator in the U.S. offering consumer durable goods, is all set to entice the residents of Buckhannon by opening a new store and providing them an avenue to own luxury furnishings, electrical devices electronics and computers.
The residents of Buckhannon will get the benefit of acquiring goods with flexible payment options, which will allow them to pay weekly, biweekly or monthly. Further, the company provides a lifetime recall service, which facilitates its customers to re-rent the same or a comparable item and get payments.
The new 4,800 sq. ft. showroom featuring brands like HP, Sony, Ashley, Serta, and Whirlpool, will be inaugurated in the presence of Mayor Kenny Davidson on March 26, 2011. The company will also contribute a $1,000 grant to the StockertYouthCenter, a community-based organization.
In a separate story, the company declared a $0.06 per share cash dividend for the second quarter of 2011 to be paid to the shareholders. The cash dividend will be paid on April 27, 2011 to stockholders of record as of April 6, 2011.
Founded in 1986 and headquartered in Plano, Texas, Rent-A-Center has an extensive network of more than 3,000 stores. Further, the sheer geographic reach enables the company to effectively penetrate its target markets and gain a competitive advantage over its competitors, such as Aaron’s Inc., and Advance America.
The company is taking prudent steps to optimize rental merchandise levels in accordance with sales trends. Rent-A-Center recently implemented a centralized inventory management system, including automated merchandise replenishment. Moreover, a new centralized purchasing system helps to manage rental merchandise better.
The company is witnessing improvement in customer count and deliveries per store due to continued tightening of credit market as customers see rent-to-own as a more flexible and viable option to credit. Some improvement is also being witnessed in comparable-store sales.
However, the company faces intense competition from national chains as well as regional rent-to-own businesses. Furthermore, Rent-A-Center also competes with mass merchandisers and traditional consumer electronics chains such as Wal-Mart Stores Inc. (WMT) and Best Buy Company Inc. (BBY) This may dent the company’s sales and margins.
Followed by a broad evaluation, we prefer to maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, Rent-A-Center holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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