Rent-A-Center Plunges Far Below Estimates Due To Several Unexpected Expenses
On Monday, Rent-A-Center (NASDAQ: RCII) announced its fourth quarter earnings. The company reported it had earned $0.25 a share, significantly below the consensus estimate of $0.74 a share. Revenue of $769.6 million missed the consensus estimate by $22.52 million.
The company said that its profit miss was due to several unexpected operating expenses, such as claims paid under its self-funded health insurance program, an adjustment to on-rent merchandise reserves, and severance payable to former executives of the company.
“We continue to face meaningful headwinds in our domestic U.S. rent-to-own business, including a customer under severe economic pressure and an intensified promotional environment,” said Mark E. Speese, the company's chief executive officer in a press release. “These conditions significantly impacted our Core U.S. segment customer agreement growth in December, which was the most challenging in years. While our Acceptance Now segment grew quarterly revenue over 41% year-over-year, this business also faced similar challenges and did not meet our revenue target. As a result, revenue and earnings for the fourth quarter and year ended December 31, 2013 are well below expectations.”
The company's woes doesn't end with its fourth quarter results.
Management is forecasting a 2014 EPS of $2.30 to $2.50 a share, well below the $3.17 consensus estimates. The company also forecasts its revenue to go 4.5 percent to 7.5 percent, which translates to $3.24 billion to $3.34 billion. The consensus estimate for 2014 revenue is $3.32 billion.
Shares of Rent-A-Center plunged 20 percent to new 52-week lows of $24.75. The last time shares were trading below $25 was back in July 2011.
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