Rent-A-Center Missing Again Speaks Volumes

Steve Kanaval |

Rent-A-Center (RCII) missed for the second consecutive quarter and the value of shares are down 70% in 1 year. This middle market player leases household durable goods to customers on a rent-to-own basis. The company also provides merchandise on an installment sales basis; and offers the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks within retailer’s locations. These two misses speak volumes about how leveraged the consumer is in 2016, and this stock more than any other is an indicator (barometer) that the air has finally come out of the QE stimulus. Below is a 2 year window showing the falling price of Rent-A-Center:



The important thing to know is that the company operates retail installment sales stores under the Get It Now and Home Choice names; and rent-to-own and franchised rent-to-own stores under the Rent-A-Center names. As of February 26, 2015, the company owned and operated approximately 3,170 stores in the United States, Mexico, Canada, and Puerto Rico; and approximately 1,355 Acceptance Now kiosk locations in the United States and Puerto Rico, as well as franchised approximately 180 rent-to-own stores under the Rent-A-Center, ColorTyme, and RimTyme trade names. This cuts a wide swath for the lower tier consumer market, and they are clearly extended beyond their means.

Rent-A-Center is a well run company and this is all related to revenue misses. This company's value went from $1B + to around $530M today. I think it critically important to watch RCII and a turn in the mindset of the consumer will most likely happen here and will be easily spotted in upcoming quarterly filings on the revenue side of the ledger.



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