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Rent-A-Center Records Q4 Loss as Revenues Tumble 13.8%

Rent-A-Center (NASDAQ: RCII), the struggling rent-to-own operator, reported a pre-tax loss of $170.9 million in the fourth quarter as revenues tumbled 13.8%.

The company said the quarter “was more challenging than expected” due to heavy promotional activity, historically high delinquencies and continued problems with a new point-of-sale system that was installed last year.

Total revenues were $684.1 million, down from $793.8 million in the 2015 fourth quarter.

Revenues from its core U.S. rent-to-own stores fell 17.6% to $472.9 million, including a same-store sales decline of 14.2%. Revenues from its Acceptance Now segment, which provides rent-to-own programs at traditional retail stores, fell 1.7% to $193.5 million.

The company didn’t report its after-tax loss, but said its net loss excluding a non-cash write-down of goodwill and other one-time items totaled 23 cents per share. That compared with earnings of 54 cents per share in the 2015 fourth quarter, a figure that also didn’t include a goodwill write-down.

“Today, we are intensely focused on turning the core business around by improving our product mix, delivering a better value proposition for customers, stabilizing our workforce and improving our account management,” said Mark Speese, interim CEO. “Within the Acceptance Now business, we recently signed pilot agreements for the first time with two new national retailers representing a significant scale opportunity. We are leveraging technology investments and new capabilities to enable or accelerate our business strategies and to better serve and engage customers.

“We remain committed to taking all necessary actions to execute our turnaround and are moving forward with urgency to drive improved results and shareholder value.”

He said the initiatives include an approximately 6% reduction in the field support center workforce, but didn’t provide a timetable for the layoffs.

For the 2016 calendar year, Rent-A-Center’s pre-tax loss totaled $113.3 million. Total revenues fell 12.7% to $2.07 billion.

Excluding the goodwill write-down, the company earned 77 cents per share.

The company ended the year with 2,463 Rent-A-Center stores in the U.S., a decline of 209 from the end of 2015. There were also 1,431 staffed Acceptance Now locations – a drop of 13 from the previous year – and 478 unstaffed locations, down 54 from the end of 2015.

The company said it won’t provide revenue and earnings estimates for 2017, but will shift to a monthly report of key operating metrics. The monthly reports will include same-store sales, delinquencies, and the annualized employee turnover compared to the prior year.

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