PLANO, Texas - May 01, 2017 - (BUSINESS WIRE) - Rent-A-Center, Inc. (the "Company") (NASDAQ/NGS: RCII) today announced results for the quarter ended March 31, 2017.
“During the first quarter, Rent-A-Center delivered solid progress on our near-term strategies to strengthen the Core U.S. business, as demonstrated by our sequential improvement in our key operating metrics and financial results,” said Mark Speese, Chairman of the Rent-A-Center Board and Chief Executive Officer.
“While we are encouraged by our recent efforts, we recognize there is still work to be done and we remain focused on executing our comprehensive strategic plan to restore growth and improve profitability over the long-term. Given the portfolio nature of the business, it will take time for the actions we are implementing to be fully realized in our results; however, the Rent-A-Center Board and management are confident that we are taking the right steps to deliver enhanced value for all Rent-A-Center stockholders,” Mr. Speese concluded.
During the first quarter of 2017, the Company took a number of actions to strengthen the Core U.S. business. A new competitive value proposition was implemented that is intended to increase demand and retention, and improve the customer experience. The Company also identified and began to execute on a new assortment strategy aimed at shifting towards more higher-end aspirational products. There was also a continued heightened focus on improving the quality of the portfolio through best practices and better execution in account management. Lastly, the Company developed and deployed a more focused approach to training and development enabling consistent execution, strengthening of customer relationships, and reducing co-worker turnover.
Consolidated Overview
Explanations of performance are excluding special items and compared to the prior year unless otherwise noted.
On a consolidated basis, total revenues were $742.0 million versus $835.7 million in the first quarter of last year. Consolidated same store sales improved 150 basis points versus the fourth quarter of 2016 due to the progress made on executing the Company’s initiatives. Diluted loss per share, on a GAAP basis, was $0.13 compared to earnings of $0.47 in the first quarter of last year.
Excluding special items, the Company’s diluted earnings per share was $0.04, a $0.27 increase from the fourth quarter of 2016. The Company generated $33.3 million in adjusted EBITDA in the first quarter, a significant improvement of $23.4 million versus the fourth quarter of 2016. In addition, adjusted EBITDA as a percent of revenue increased 300 basis points versus the fourth quarter to 4.5 percent.
The Company generated $59.1 million of cash from operations and ended the first quarter with $58.1 million of cash and cash equivalents. The Company paid on April 20, 2017, a quarterly dividend for the second quarter of 2017 in the amount of $0.08 per share and also reduced its outstanding debt balance by $71.6 million in the first quarter. The Company’s current bank group has waived compliance with certain covenants for the first quarter and the Company is in the process of obtaining an amendment to the existing credit facility.
CORE U.S. first quarter revenues of $490.9 million decreased 16.0 percent primarily due to lower same store sales and the continued rationalization of the Core U.S. store base. Core U.S. same store sales improved 140 basis points sequentially. Gross profit as a percent of total revenue decreased 170 basis points due to targeted pricing actions implemented to right size the inventory mix. However, the held for rent inventory declined 9.5 percent sequentially demonstrating the Company's progress on moving the older, promotional inventory through the system faster and upgrading the inventory assortment. Labor decreased $17.0 million, however, as a percent of store revenue, increased primarily due to sales deleverage. Other store expenses decreased $16.4 million, however, as a percent of store revenue, increased primarily due to sales deleverage.
ACCEPTANCE NOW first quarter revenues of $234.5 million increased 1.8 percent primarily due to the same store sales increase of 2.9 percent. Gross profit as a percent of total revenue versus prior year improved 60 basis points driven by favorable revenue mix. Labor, as a percent of store revenue, improved versus prior year by 30 basis points. Other store expenses, as a percent of store revenue, increased 70 basis points primarily driven by higher skip/stolen losses which increased by 40 basis points.
MEXICO first quarter revenues decreased 19.3 percent driven by currency fluctuations and store closures. Same store sales were down 6.0 percent. Gross profit as a percent of total revenue versus prior year improved 270 basis points driven by higher merchandise sales gross margin due to pricing initiatives. Operating profit improved by $0.4 million.
FRANCHISING first quarter revenues decreased 23.8 percent due to a lower amount of merchandise sold to the Company’s franchise partners and operating profit was flat year over year at $1.4 million.
CORPORATE operating expenses remained flat at $42.0 million compared to prior year as lower general and administrative expenses, due to the recent reductions at our Field Support Center, were offset by higher depreciation brought about by the implementation of the new point of sale system in 2016.
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
Non-GAAP Reconciliation
To supplement the Company's financial results presented on a GAAP basis, Rent-A-Center uses the non-GAAP measures ("special items”) indicated in Table 3 below, which excludes charges in 2017 for the closure of Acceptance Now locations, reductions in our field support center, litigation claims settlement, incremental legal and advisory fees, and discrete income tax items. Gains or charges related to sales of stores, store closures, and discrete adjustments to tax reserves will generally recur with the occurrence of these events in the future. The presentation of these financial measures is not in accordance with, or an alternative for, accounting principles generally accepted in the United States and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Rent-A-Center management believes that excluding special items from the GAAP financial results provides investors a clearer perspective of the Company's ongoing operating performance and a more relevant comparison to prior period results.
Please see the Company's earnings press release dated February 13, 2017 for additional information related to non-GAAP diluted loss per share excluding special items used to calculate the sequential improvements contained in this press release.
Reconciliation of net (loss) earnings to net earnings excluding special items:
View Original for Full Data Table
View Original for Full Data Table
The Company is not providing annual guidance as it relates to revenue or diluted earnings per share for 2017. In an effort to enhance transparency regarding the Company’s results and turnaround efforts, the Company has shifted to a monthly report of key operating metrics (Table 2). The Company believes these changes will provide the investment community meaningful insight into the progress the Company is making on its turnaround.
Rent-A-Center, Inc. will host a conference call to discuss the first quarter results, guidance and other operational matters on Tuesday morning, May 2, 2017, at 8:30 a.m. ET. For a live webcast of the call, visit http://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website. Residents of the United States and Canada can listen to the call by dialing (800) 399-0012. International participants can access the call by dialing (404) 665-9632.
A rent-to-own industry leader, Plano, Texas-based, Rent-A-Center, Inc., is focused on improving the quality of life for its customers by providing them the opportunity to obtain ownership of high-quality, durable products such as consumer electronics, appliances, computers, furniture and accessories, under flexible rental purchase agreements with no long-term obligation. The Company owns and operates approximately 2,600 stores in the United States, Mexico, Canada and Puerto Rico, and approximately 1,500 Acceptance Now kiosk locations in the United States and Puerto Rico. Rent-A-Center Franchising International, Inc., a wholly owned subsidiary of the Company, is a national franchiser of approximately 230 rent-to-own stores operating under the trade names of "Rent-A-Center", "ColorTyme", and "RimTyme". For additional information about the Company, please visit our website at www.rentacenter.com.
This press release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "should," "anticipate," "believe," or "confident," or the negative thereof or variations thereon or similar terminology. The Company believes that the expectations reflected in such forward-looking statements are accurate. However, there can be no assurance that such expectations will occur. The Company's actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: the general strength of the economy and other economic conditions affecting consumer preferences and spending; factors affecting the disposable income available to the Company's current and potential customers; changes in the unemployment rate; difficulties encountered in improving the financial and operational performance of the Company's business segments; our chief executive officer and chief financial officer transitions, including our ability to effectively operate and execute our strategies during the interim period and difficulties or delays in identifying and/or attracting a permanent chief financial officer with the required level of experience and expertise; failure to manage the Company's store labor and other store expenses; the Company’s ability to develop and successfully execute strategic initiatives; disruptions, including capacity-related outages, caused by the implementation and operation of the Company's new store information management system, and its transition to more-readily scalable, “cloud-based” solutions; the Company’s ability to successfully market smartphones and related services to its customers; the Company's ability to develop and successfully implement virtual or E-commerce capabilities, including mobile applications; disruptions in the Company's supply chain; limitations of, or disruptions in, the Company's distribution network; rapid inflation or deflation in the prices of the Company's products; the Company's ability to execute and the effectiveness of a store consolidation, including the Company's ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation; the Company's available cash flow; the Company's ability to identify and successfully market products and services that appeal to its customer demographic; consumer preferences and perceptions of the Company's brand; uncertainties regarding the ability to open new locations; the Company's ability to acquire additional stores or customer accounts on favorable terms; the Company's ability to control costs and increase profitability; the Company's ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores; the Company's ability to enter into new and collect on its rental or lease purchase agreements; the passage of legislation adversely affecting the Rent-to-Own industry; the Company's compliance with applicable statutes or regulations governing its transactions; changes in interest rates; adverse changes in the economic conditions of the industries, countries or markets that the Company serves; information technology and data security costs; the impact of any breaches in data security or other disturbances to the Company's information technology and other networks and the Company's ability to protect the integrity and security of individually identifiable data of its customers and employees; changes in the Company's stock price, the number of shares of common stock that it may or may not repurchase, and future dividends, if any; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company's effective tax rate; fluctuations in foreign currency exchange rates; the Company's ability to maintain an effective system of internal controls; the resolution of the Company's litigation; and the other risks detailed from time to time in the Company's SEC reports, including but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2016. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The Company, its directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in connection with the matters to be considered at Rent-A-Center’s 2017 Annual Meeting. On April 27, 2017, the Company filed its definitive proxy statement (as it may be amended from time to time, the “Proxy Statement”) and definitive form of WHITE proxy card with the U.S. Securities and Exchange Commission (the “SEC”) with respect to its 2017 Annual Meeting. The Company’s stockholders are strongly encouraged to read the Proxy Statement, the accompanying WHITE proxy card and other documents filed with the SEC carefully and in their entirety when they become available because they will contain important information. Additional information regarding the identity of participants, and their direct or indirect interests (by security holdings or otherwise) is set forth in the Proxy Statement. Stockholders can obtain the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents filed by the Company with the SEC free of charge at the SEC’s website at www.sec.gov. Copies also will be available free of charge at the Company’s website at www.rentacenter.com, by contacting the Company’s Investor Relations at 972-801-1100 or by contacting the Company’s proxy solicitor, Okapi Partners LLC, toll free at 1-877-259-6290.
Rent-A-Center, Inc. and Subsidiaries
Please see the Company's earnings press release dated February 13, 2017 for the non-GAAP reconciliation of consolidated adjusted EBITDA in the prior quarterly period which was used to calculate the sequential improvements contained in this press release.
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
View Original for Full Data Table
Maureen Short
Interim Chief Financial Officer
Rent-A-Center, Inc.
Investor Relations
Rent-A-Center, Inc.
972-801-1899
maureen.short@rentacenter.com
Joele Frank
Media Relations
Wilkinson Brimmer Katcher
Kelly Sullivan / James Golden / Matt Gross / Aura Reinhard
212-355-4449
Rent-A-Center, Inc., headquartered in Plano, Texas, is the largest rent-to-own operator in North America.