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Why Rent-A-Center, Inc. Stock Lost 30.6% in February

RCII Chart

What happened

Rent-A-Center, Inc. (NASDAQ: RCII) stock lost 30.6% in February, according to data provided by S&P Global Market Intelligence . A lack of progress on a deal to sell the company combined with disappointing fourth-quarter earnings results had investors heading for the exits.

RCII data by YCharts .

So what

Rent-A-Center stock has been volatile over the last year, with much of its share-price movement tied to news of the company potentially being sold. With the business in a state of decline, investors have been hanging their hopes on the rent-to-own retailer being acquired -- and lack of progress on that front has contributed to sell-offs. News at the end of January that a potential buyout deal with Vintage Capital Management would not be moving forward sent the stock on a downward slide that continued through February.

A Rent-A-Center store.

Image source: Rent-A-Center.

Shares continued to fall after the company reported fourth-quarter results on Feb. 20. Sales for the period declined 6.6% year over year and same-store sales fell 2%.

Now what

With sales on the decline, Rent-A-Center is turning to cost-cutting as its primary avenue to improved earnings. As part of this initiative, the company recently announced that it would be laying off 25% of its workforce. Rent-A-Center expects that these moves will result in roughly $28 million in annual expense reductions, and it's still looking for other ways to drive down expenses and improve profitability. All told, management expects to realize between $65 million and $85 million in annual cost-saving opportunities.

Shares trade at less than a fifth of forward sales, a valuation that might look attractive, but the company's dismal business outlook indicates that long-term investors should probably steer clear of Rent-A-Center.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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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