Rent-A-Center Isn't Selling, But Softens Blow With Bullish Guidance

Rent-A-Center Inc RCII announced Sunday that its board had completed a review of strategic and financial alternatives.

What Happened

The retailer's board unanimously decided to advance its current plan rather than pursue any sort of transaction.

Management conceded Monday — after receiving an increased takeover offer — that it “would carefully consider any credible proposal” to determine whether such a route would maximize shareholder value.

Why It’s Important

Fortunately, the plan seems to be working. Rent-A-Center provided guidance for a 20-cent to 30-cent bottom line this quarter, which would far surpass last quarter's 8-cent loss per share.

“As demonstrated by our updated financial outlook and key operating metrics for April and May, the company’s strategic plan is already delivering substantial results and Rent-A-Center is well-positioned to generate value for all stockholders,” J.V. Lentell, chairman of the Rent-A-Center board of directors, said in a press release.

Cost reduction initiatives are reportedly “significantly” ahead of schedule, with annual run-rate savings on pace to exceed $100 million against most recent guidance for $75 million to $95 million. Rent-A-Center now expects to achieve about $70 million in 2018 savings against estimates between $50 million and $63 million.

“Our new U.S. pricing model is enabling us to increase loyalty amongst a larger customer base, growing our customer retention and helping customers achieve their goal of ownership faster than before,” CEO Mitch Fadel said in the statement. “We are confident that we have the right plan in place to drive profitability while maintaining lower capital costs, allowing us to create enhanced value for all Rent-A-Center stockholders.”

What’s Next

Rent-A-Center noted that it actively explored a sale but did not receive any proposals that met its objectives. The board committed to reviewing any additional official proposals for a buyout and other such alternatives.

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Photo courtesy of Rent-A-Center.