Rent-a-Center Slows Expansion of Rent-to-Own Kiosks
Rent-a-Center is slowing expansion of its RAC Acceptance rent-to-own kiosks, slashing the number of planned 2012 openings to 200 from the 445 that were added last year despite expected increased revenue from the format, company officials said in a conference call.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
RAC Acceptance, which is deployed in about 750 stores including those operated by Ashley, Conn’s and Rooms to Go, up from 611 in June, is designed to offer customers turned down for credit the chance anew to rent product. RAC, which launched the format in 2010 and grew the concept quickly with the acquisition of The Rental Store, expects revenue from it to increase to $300 million this year from $192 million in 2011, RAC Chief Financial Officer Robert Davis said. In Q4, RAC Acceptance opened in 86 locations, merged with existing stores in 54 others and closed in three others. Some locations were shut due to the bankruptcy of a furniture chain, President Mitchell Fadel said. The format costs about $10,000 to install and is staffed by RAC employees, company officials have said. RAC has so far encountered no overlap in customers between the new format and its core standalone stores, Fadel said. RAC Acceptance customers typically have credit scores 100 points higher than those at the chain’s standard locations (CED July 27 p1). “We want to make sure we can pause and operate” RAC Acceptance “to our expectation,” CEO Mark Speese said.
Ending its 2011 fiscal year with $88 million in cash and cash equivalents, up from $70.7 million a year earlier, RAC plans to continue expanding its presence in Mexico and Canada. RAC began its push into Mexico about two years ago and opened 28 locations in Q4 to end the year with 52 in seven markets, including Monterrey, Mexico. It plans to add 60 locations this year, including an extension into Guadalajara and the opening in Q1 of a new field office in Monterrey, Fadel said. RAC will open another 10 stores in Canada this year, Fadel said.
RAC’s Q4 profit improved to $50.5 million from $45.6 million despite taking a $1.4 million pre-tax restructuring charge in connection with the purchase in November of 58 rent-to-own stores, only 21 of which remain open, company officials said. It also took a $7.6 million restructuring charge in Q3 to cover the closure of eight Home Choice locations in Illinois. RAC had 18 Home Choice stores in Illinois and Minnesota. The chain also closed 24 RAC Limited locations that were built inside grocery stores as part of a test, Fadel said.
Despite a decline in units of rent and decreases in videogames and home theater-in-a-box (HTIB) categories, RAC posted a 2 percent increase in Q4 same-store sales, as revenue rose to $737.4 million from $677 million. Rentals and fees grew to $646.1 million from $589.1 million, while merchandise sales jumped to $56.7 million from $43.5 million, the company said. Franchise revenue from RAC’s 210 ColorTyme locations improved to $11.2 million from $9.5 million. For 2012, RAC is projecting 7-10 percent growth in sales on 2.5-4.5 percent increase in same-store sales. It forecast full-year earnings of $3 to $3.20, short of analyst estimates for $3.22. The earnings projection includes 20 cents of cost tied to international expansion, the company said. It plans to open 50 standard RAC stores this year.
In the run up to the Super Bowl on Feb. 5, RAC was promoting on its website a 60-inch LG plasma TV with a $29.99 weekly fee on a 104-week contract, while a 50-inch Panasonic plasma set was available at $19.99 with a 91-week agreement. In notebook PCs, an Acer model with a 15.6-inch LCD, AMD processor and 320 GB hard drive was highlighted with a $19.99 weekly fee on a 65-week contract.