Rent-A-Center's (RCII) Core U.S. Business Gains Ground

Rent-A-Center, Inc. (NASDAQ:RCII) , which has been exploring strategic and financial alternatives, posted preliminary results for the first quarter of 2018. It seems that initiatives undertaken by management to strengthen the performance of Core U.S. segment is bearing results. Meanwhile, the company is optimizing product mix, increasing the average ticket price and focusing on lowering delinquency rates.

This rent-to-own operator stated that preliminary same-store sales growth in the Core U.S. segment inched up 0.3% in the quarter under review. Management was quick to intimate that same-store sales rose 1.6% in March 2018. We note that Core U.S. same-store sales had declined 3.6% in the final quarter of 2017. Notably, the same at the Acceptance Now segment improved 3.3% during the first quarter of 2018.

Earlier this year, Rent-A-Center realized cost-saving opportunities through the collaboration with AlixPartners. Also, the company is rationalizing store base and lowering debt load. The company hinted that sturdy top line and strategic endeavors have lowered debt load by $75 million since the end of 2017.

The company’s cost-containment efforts, working capital initiatives and improving portfolio performance prompted management to raise full year free cash flow guidance to at least $170 million from the previous guidance of at least $130 million.

Meanwhile, the company received bids from different parties for a possible sale. We expect Rent-A-Center to come out with a decision in the second quarter of 2018.

The stock has plunged 14.3% in the past three months, compared with the industry’s decline of 1.5%. Notably, investors are concerned about Rent-A-Center’s waning top and bottom lines. Since the past eight quarters, the company has been witnessing year-over-year decline in earnings and revenues. This Zacks Rank #5 (Strong Sell) company shares space with McGrath Rentcorp (NASDAQ:MGRC) , AeroCentury Corp. (NYSE:ACY) and Aaron's, Inc. (NYSE:AAN) .

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