Rent-A-Center (RCII) Posts Narrower-than-Expected Q4 Loss

Rent-A-Center, Inc.RCII posted fourth-quarter 2016 loss of 23 cents a share that fared a penny better than the Zacks Consensus Estimate but fell substantially from earnings of 54 cents delivered in the year-ago period. Total revenue of $684.1 million declined 13.8% year over year and also came below the respective estimate of $688.2 million, marking the sixth straight quarter of sales miss.

Aggressive promotional activity, high delinquencies and recovery issues from technical snags and outages that occurred in the preceding quarter impacted the company's final quarter results. Total revenue tumbled due to decline witnessed across the Core U.S., Acceptance Now, Mexico, and Franchising segments. 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 declined 33.1%, while the Consumer Services - Miscellaneous industry has decreased 8.9%.

Comparable-store sales (comps) for the quarter dropped 9.6%, reflecting declines of 14.2% and 1.8% in the Core U.S. and Mexico segments, respectively, partly offset by a 1% increase noted at the Acceptance Now segment.

Delving Deeper

Revenue from the Acceptance Now segment dipped 1.7% from the prior-year quarter figure to $193.5 million.

Revenue from the Core U.S. segment slumped 17.6% to $472.9 million, owing to continued store base rationalization and dismal comps.

The Mexico segment's revenue came in at $11.4 million, down 23.9% year over year - attributable to foreign currency headwinds, store closures and lower comps. Finally, total Franchising revenue plunged 23.2% to $6.2 million during the quarter.

Rent-A-Center's adjusted EBITDA margin shriveled 780 basis points to 1.5%.

Store Update

At the end of the quarter, there was 2,463 Core U.S. locations, 1,431 Acceptance Now Staffed stores, 478 Acceptance Now Direct stores, 130 stores in Mexico and 229 Franchise stores.

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

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

Other Financial Aspects

Rent-A-Center, which shares space with McGrath Rentcorp MGRC , AeroCentury Corp. ACY and Aaron's, Inc. AAN , ended the quarter with cash and cash equivalents of $95.4 million and net Senior debt of $186.7 million. The company lowered outstanding debt balance by $233.8 million in 2016. During 2016, the company generated $353.7 million as cash from operations, while incurring capital expenditures of $61.1 million.

Currently, Rent-A-Center carries a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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