Rent-A-Center Plunge 14% As Q4 Results Miss Estimates, Issues Weak EPS Outlook

(RTTNews) - Rent-to-own home appliances retailer Rent-A-Center, Inc. (RCII) reported Monday a profit for the fourth quarter that increased from last year, reflecting lower operating expenses and revenue growth.

Adjusted earnings per share and quarterly revenues missed analysts' expectations. The company's shares plunged 14 percent after it provided earnings guidance for the full-year 2015, below Street view.

Rent-A-Center leases household durable goods to customers on a rent-to-own basis. It offers products such as consumer electronics, appliances, and computers.

"During the fourth quarter, Core U.S. same store sales were essentially flat and Acceptance Now continued to deliver strong same store sales growth. This resulted in total company same store sales of approximately 5 percent for the quarter. In addition, Core U.S. operating profit increased year over year for the first time in many quarters," CEO Robert Davis said in a statement.

The Plano, Texas-based company reported net income of $25.55 million or $0.48 per share for the fourth quarter, higher than $13.24 million or $0.25 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $26.5 million or $0.50 per share, compared to $0.25 per share in the year-ago quarter.

On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.63 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter grew to $796.53 million from a revised $766.18 million in the same quarter last year.

Consolidated total revenues, excluding special items, increased 4.0 percent to $797 million and same store sales increased 4.7 percent. Seven Wall Street analysts had a consensus estimate of $804.83 million for the quarter.

Core U.S. same store sales decreased 0.6 percent, while Acceptance Now same store sales increased 28.4 percent, Mexico same store sales improved 17.0 percent. The company also said it opened a net of 47 Acceptance Now locations in the quarter.

Core U.S. revenues for the quarter decreased 2.4 percent to $600.52 million, while Acceptance Now revenues increased 30.8 percent to $169.19 million, Mexico revenues rose 38.5 percent to $19.56 million, and Franchising revenues increased 1.6 percent to $7.28 million from last year.

Operating expenses for the quarter decreased to $497.34 million from $505.28 million in the prior year.

The company said operating profit as a percentage of total revenues, excluding special items, improved 160 basis points from 4.5 percent to 6.1 percent from last year.

The company also declared a dividend of $0.24 per share to be paid in the first quarter of 2015.

Looking ahead to fiscal 2015, the company expects earnings in a range of $2.05 to $2.30 per share, on projected revenue growth of 3 to 6 percent to between $3.25 billion and $3.35 billion and core same store sales between negative one percent and positive one percent.

Street is currently looking for full-year 2015 earnings of $2.48 per share on annual revenues of $3.34 billion.

For the longer Term, the company projects annual revenue growth of 3 to 5 percent, and operating profit margin as a percent of total revenue improvement of 400 basis points by 2017.

RCII closed Monday's regular trading session at $35.03, up $0.75 or 2.19% on a volume of 0.86 million shares. However, the stock lost plunged $5.03 or 14.36% in after-hours trading.